/raid1/www/Hosts/bankrupt/TCR_Public/160703.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, July 3, 2016, Vol. 20, No. 185
Headlines
ABSC 2005-HE3: Moody's Hikes Rating on Class M5 Debt to B2
ARROWPOINT CLO 2016-5: Moody's Rates Class E Notes 'Ba3'
BANC OF AMERICA 2004-6: S&P Lowers Rating on Cl. E Certs to D
BBSG 2016-MRP: S&P Assigns BB- Rating on Class E Certificates
BEAR STEARNS 2004-FR1: Moody's Cuts Cl. M-2 Debt Rating to B1(sf)
BEAR STEARNS 2004-TOP14: Moody's Hikes Rating on Cl. N Debt to Ba1
BEAR STEARNS 2007-PWR15: Moody's Cuts Cl. X-1 Debt Rating to B3(sf)
CABCO TRUST 2004-101: S&P Affirms BB Rating on $150MM Certificates
CHERRYWOOD SB 2016-1: DBRS Finalizes Prov. B Rating on Cl. B-2 Debt
CIT MARINE TRUST: S&P Cuts 1999-A Certs Rating to CCC
CITIGROUP 2006-C5: Moody's Lowers Rating on Class XC Debt to B1
CITIGROUP 2007-C6: Moody's Affirms B1 Rating on Cl. X Debt
COLT 2016-1: DBRS Finalizes BB(sf) Ratings on Class M-1 Debt
COMM 2012-CCRE2: Moody's Affirms Ba2 Rating on Class F Debt
COMM 2014-LC17: DBRS Confirms B(low) Rating on Class G Debt
FREMF 2013-KF02: Moody's Affirms Ba3 Rating on Class X Debt
GMAC COMMERCIAL 1999-C2: Moody's Affirms Caa3 Rating on Cl. X Debt
GRAYSON CLO: Moody's Affirms Ba2 Rating on Class C Notes
GROSVENOR PLACE III: S&P Raises Rating on Class E Notes to B+
JC PENNEY: S&P Raises Ratings on 8 Cert. Tranches to 'B-'
JP MORGAN 2000-C9: Moody's Affirms Caa3 Rating on Class X Certs
JP MORGAN 2007-LDP10: Moody's Cuts Ratings on 3 Tranches to Caa3
JP MORGAN 2007-LDP12: Moody's Lowers Rating on Cl. X Debt to B2
KKR CLO 14: Moody's Assigns Ba3 Rating on Class D Notes
LB COMMERCIAL 1999-C2: Moody's Affirms Caa3 Rating on Cl. X Debt
MERRILL LYNCH 2006-C1: S&P Lowers Rating on Class B Certs to 'D'
MORGAN STANLEY 2001-TOP3: Moody's Affirms Caa3 Rating on X-1 Debt
MORGAN STANLEY 2004-HE7: Moody's Hikes Rating on Cl. M-2 Debt to B1
MORGAN STANLEY 2006-HQ10: Moody's Affirms Ba2 Rating on A-J Debt
NATIONSTAR HECM 2016-2: Moody's Assigns (P)Ba3 Ratings to M2 Debt
NEWDAY FUNDING 2015-1: DBRS Confirms B Rating on Class F Notes
OCTAGON INVESTMENT 27: Moody's Assigns Ba3 Rating on Class E Notes
REGATTA II FUNDING: S&P Affirms BB Rating on Class D Notes
SAXON 2006-3: Moody's Raises Rating on Cl. A-3 Debt to Ba3
UCFC FUNDING 1997-3: Moody's Hikes Class M Debt Rating to C(sf)
VENTURE VII: Moody's Lowers Rating on Class E Notes to Ba2
VENTURE VIII: Moody's Lowers Rating on Class E Notes to B1
VOYA CLO 2012-1: S&P Raises Rating on Cl. E-R Notes to BB
WFRBS COMMERCIAL 2012-C8: Moody's Affirms Ba2 Rating on Cl. F Certs
[*] Moody's Hikes $709MM of Subprime RMBS Issued 2003-2007
[*] Moody's Hikes Ratings on 15 Tranches From 7 Transactions
[*] Moody's Takes Action on $1.1BB Subprime RMBS Issued 2005-2007
[*] Moody's Takes Action on $543MM of Alt-A/Option ARMS RMBS Deals
[*] S&P Completes Review of 143 Classes From 143 RMBS/ReREMIC Deals
[*] S&P Completes Review of 31 Classes From 10 Re-REMIC RMBS Deals
[*] S&P Cuts Ratings on 112 MBIA-Insured Classes From 58 RMBS Deals
[*] S&P Takes Rating Actions on 51 Classes From 19 RMBS Deals
[*] S&P Takes Ratings on 108 Classes From 19 U.S. RMBS Deals
[*] S&P Takes Ratings on 108 Classes From 20 RMBS Deals
*********
ABSC 2005-HE3: Moody's Hikes Rating on Class M5 Debt to B2
----------------------------------------------------------
Moody's Investors Service has upgraded the rating of one tranche,
from one transaction issued by Asset Backed Securities Corporation
(ABSC) Home Equity Loan Trust 2005-HE3 backed by Subprime mortgage
loans.
Complete rating actions are as follows:
Issuer: Asset Backed Securities Corporation Home Equity Loan Trust
2005-HE3
Cl. M5, Upgraded to B2 (sf); previously on Jul 6, 2015 Upgraded to
B3 (sf)
RATINGS RATIONALE
The upgrade is primarily due to decreasing delinquencies and total
credit enhancement available to the bond. The action reflects the
recent performance of the underlying pools and Moody's updated loss
expectations on the pools.
The principal methodology used in this rating 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 4.7% in May 2016 from 5.5% in May
2015. 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.
ARROWPOINT CLO 2016-5: Moody's Rates Class E Notes 'Ba3'
--------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Arrowpoint CLO 2016-5, Ltd.
Moody's rating action is:
$224,000,000 Class A Senior Secured Floating Rate Notes due
2028, Assigned Aaa (sf)
$38,500,000 Class B Senior Secured Floating Rate Notes due 2028,
Assigned Aa2 (sf)
$21,000,000 Class C Secured Deferrable Floating Rate Notes due
2028, Assigned A2 (sf)
$20,300,000 Class D Secured Deferrable Floating Rate Notes due
2028, Assigned Baa3 (sf)
$18,200,000 Class E Secured Deferrable Floating Rate Notes due
2028, Assigned Ba3 (sf)
The Class A 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."
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.
Arrowpoint 2016-5 is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated first lien
senior secured corporate loans. At least 95.0% of the portfolio
must consist of senior secured loans, cash, and eligible
investments, and up to 5.0% of the portfolio may consist of senior
unsecured loans, second lien loans and first-lien last-out loans.
The portfolio is approximately 80% ramped as of the closing date.
Arrowpoint Asset Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. Thereafter, the Manager may reinvest
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: $350,000,000
Diversity Score: 62
Weighted Average Rating Factor (WARF): 2760
Weighted Average Spread (WAS): 3.85%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.00 years.
Methodology Underlying the Rating Action:
The prinicpal 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 Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
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 2760 to 3174)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: -1
Percentage Change in WARF -- increase of 30% (from 2760 to 3588)
Rating Impact in Rating Notches
Class A Notes: -1
Class B Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
BANC OF AMERICA 2004-6: S&P Lowers Rating on Cl. E Certs to D
-------------------------------------------------------------
S&P Global Ratings lowered its rating to 'D (sf)' from 'CCC- (sf)'
on the class E commercial mortgage pass-through certificates from
Banc of America Commercial Mortgage Inc.'s series 2004-6, a U.S.
commercial mortgage-backed securities (CMBS) transaction. At the
same time, S&P lowered its rating to 'D (sf)' from 'CCC- (sf)' on
the class A-J commercial mortgage pass-through certificates from
LB-UBS Commercial Mortgage Trust 2008-C1, also a U.S. CMBS
transaction.
The downgrades on these two classes reflect principal losses as
detailed in the transactions' respective June 2016 trustee
remittance reports.
BANC OF AMERICA COMMERCIAL MORTGAGE INC. SERIES 2004-6
The June 2016 trustee remittance report, revised on June 14, 2016,
noted $29.2 million in principal losses, which resulted primarily
from the liquidation of the Steeplegate Mall asset that was with
the special servicer, Midland Loan Services. According to the
trustee remittance report, the asset liquidated at a loss severity
of 43.2% of its $68.3 million original balance. Consequently,
class E experienced a 0.7% loss of its $9.6 million original
principal balance.
LB-UBS COMMERCIAL MORTGAGE TRUST 2008-C1
The June 17, 2016, trustee remittance report noted $15.5 million in
principal losses, which resulted primarily from the liquidation of
the Memphis Retail Portfolio asset that was with the special
servicer, CWCapital Asset Management LLC. According to the trustee
remittance report, the asset liquidated at a loss severity of 60.6%
of its $25.6 million original balance. Consequently, class A-J
experienced a 20.2% loss of its $69.2 million original principal
balance.
RATINGS LOWERED
Banc of America Commercial Mortgage Inc. series 2004-6
Commercial mortgage pass-through certificates
Rating
Class To From
E D (sf) CCC- (sf)
LB-UBS Commercial Mortgage Trust 2008-C1
Commercial mortgage pass-through certificates
Rating
Class To From
A-J D (sf) CCC- (sf)
BBSG 2016-MRP: S&P Assigns BB- Rating on Class E Certificates
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to BBSG 2016-MRP Mortgage
Trust's $162.0 million commercial mortgage pass-through
certificates series 2016-MRP.
The note issuance is a CMBS transaction backed by a $162.0 million
trust mortgage loan, which is part of a whole mortgage loan
totaling $262.0 million, secured by a first lien on the borrower's
leasehold interest and the fee interest owned by an affiliate of
the borrower in The Mall at Rockingham Park, a 1.03 million-sq.-ft.
super regional mall located in Salem, N.H. Of the total mall square
footage, 540,867 sq. ft. will serve as the loan's collateral.
The ratings reflect S&P's view of the collateral's historic and
projected performance, the sponsor's and manager's experience, the
trustee-provided liquidity, the loan's terms, and the transaction's
structure.
RATINGS ASSIGNED
BBSG 2016-MRP Mortgage Trust
Class Rating(i) Amount ($)
A AAA (sf) 42,500,000
X AA- (sf) 74,100,000(ii)
B AA- (sf) 31,600,000
C A- (sf) 23,800,000
D BBB- (sf) 29,100,000
E BB- (sf) 35,000,000
(i) The issuer will issue the certificates to qualified
institutional buyers in-line with Rule 144A of the Securities Act
of 1933.
(ii) Notional balance. The notional amount of the class X
certificates will be reduced by the aggregate amount of principal
distributions and realized losses allocated to the class A and B
certificates.
BEAR STEARNS 2004-FR1: Moody's Cuts Cl. M-2 Debt Rating to B1(sf)
-----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of Class M-2
issued by Bear Stearns Asset Backed Securities I Trust 2004-FR1,
which is backed by Subprime mortgage loans.
Complete rating actions are as follows:
Issuer: Bear Stearns Asset Backed Securities I Trust 2004-FR1
Cl. M-2, Downgraded to B1 (sf); previously on Jul 31, 2015
Downgraded to Baa3 (sf)
RATINGS RATIONALE
The downgrade of Bear Stearns Asset Backed Securities I Trust
2004-FR1 Class M-2 is primarily due to recent interest shortfalls
that are unlikely to be recouped. The action reflects the recent
performance of the underlying pools and Moody's updated loss
expectations on the pools.
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 4.7% in May 2016 from 5.5% in May
2015. 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.
BEAR STEARNS 2004-TOP14: Moody's Hikes Rating on Cl. N Debt to Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on five classes,
affirmed the rating on one class and downgraded the rating on one
class in Bear Stearns Commercial Mortgage Securities Trust,
Commercial Mortgage Pass-Through Certificates, Series 2004-TOP14
as:
Cl. J, Affirmed Aaa (sf); previously on Feb. 11, 2016, Upgraded
to Aaa (sf)
Cl. K, Upgraded to Aaa (sf); previously on Feb. 11, 2016,
Upgraded to Aa2 (sf)
Cl. L, Upgraded to Aa2 (sf); previously on Feb. 11, 2016,
Upgraded to Baa1 (sf)
Cl. M, Upgraded to A2 (sf); previously on Feb. 11, 2016,
Upgraded to Ba1 (sf)
Cl. N, Upgraded to Ba1 (sf); previously on Feb. 11, 2016,
Upgraded to B2 (sf)
Cl. O, Upgraded to B1 (sf); previously on Feb. 11, 2016,
Upgraded to Caa1 (sf)
Cl. X-1, Downgraded to Caa1 (sf); previously on Feb. 11, 2016,
Affirmed B3 (sf)
RATINGS RATIONALE
The ratings on five P&I classes were upgraded based primarily on an
increase in credit support resulting from loan paydowns and
amortization. The deal has paid down 33% since Moody's last
review.
The rating on one P&I class was affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the transaction's
Herfindahl Index (Herf), are within acceptable ranges.
The rating on one IO Class (Class X-1) was downgraded due to the
decline in the credit performance of its reference classes
resulting from principal paydowns of higher quality reference
classes.
Moody's rating action reflects a base expected loss of 0.7% of the
current balance, compared to 0.8% at Moody's last review. Moody's
base expected loss plus realized losses is now 0.4% of the original
pooled balance, compared to 0.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in December 2014 and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 10, compared to a Herf of seven at Moody's last
review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan-level proceeds
derived from Moody's loan-level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type and sponsorship. Moody's also further adjusts these
aggregated proceeds for any pooling benefits associated with loan
level diversity and other concentrations and correlations.
DEAL PERFORMANCE
As of the June 13, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $19 million
from $895 million at securitization. The certificates are
collateralized by 15 mortgage loans ranging in size from 2% to 17%
of the pool.
Five loans, constituting 26% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $3.8 million (for an average loss
severity of 2.7%).
Moody's received full year 2015 operating results for 100% of the
pool and partial year 2016 operating results for 19% of the pool.
Moody's weighted average conduit LTV is 38%, compared to 55% at
Moody's last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 12% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10%.
Moody's actual and stressed conduit DSCRs are 1.54X and 3.30X,
respectively, compared to 1.40X and 2.49X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 39% of the pool balance. The
largest loan is the Shops at Thoroughbred Square VI Loan ($3.3
million -- 16.7% of the pool), which is secured by a three building
strip center, shadow anchored by a 20-screen movie theater and
located in Franklin, Tennessee. The property was 100% leased as of
December 2015 compared to 89% leased as of December 2014. The loan
is fully amortizing and has amortized by 45% since securitization.
Moody's LTV and stressed DSCR are 56% and 2.04X, respectively,
compared to 60% and 1.88X at the last review.
The second largest loan is the Modesto Office Park Loan ($2.5
million -- 12.9% of the pool), which is secured by five buildings
comprising 88,000 square feet (SF) of a suburban office park in
Modesto, California. The property was 95% leased as of March 2016,
compared to 96% leased at year-end 2014. The loan is fully
amortizing and has amortized by 49% since securitization. Moody's
LTV and stressed DSCR are 26% and 4.00X, respectively, compared to
28% and 3.74X at the last review.
The third largest loan is the Scarborough Lane Shoppes Loan
($1.9 million -- 9.8% of the pool), which is secured by a retail
property located in Duck, North Carolina. The property was 92%
leased as of January 2016. The loan fully amortizing and has
amortized by 45% since securitization. Moody's LTV and stressed
DSCR are 45% and 2.38X, respectively, compared to 48% and 2.27X at
the last review.
BEAR STEARNS 2007-PWR15: Moody's Cuts Cl. X-1 Debt Rating to B3(sf)
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
and downgraded the ratings on four classes in Bear Stearns
Commercial Mortgage Securities Trust, Commercial Mortgage
Pass-Through Certificates, Series 2007-PWR15 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Aug 27, 2015 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Aug 27, 2015 Affirmed Aaa
(sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on Aug 27, 2015 Affirmed
Aaa (sf)
Cl. A-MFL, Affirmed Baa3 (sf); previously on Aug 27, 2015 Affirmed
Baa3 (sf)
Cl. A-M, Affirmed Baa3 (sf); previously on Aug 27, 2015 Affirmed
Baa3 (sf)
Cl. A-MFX, Affirmed Baa3 (sf); previously on Aug 27, 2015 Affirmed
Baa3 (sf)
Cl. A-J, Downgraded to C (sf); previously on Aug 27, 2015 Affirmed
Caa3 (sf)
Cl. A-JFL, Downgraded to C (sf); previously on Aug 27, 2015
Affirmed Caa3 (sf)
Cl. A-JFX, Downgraded to C (sf); previously on Aug 27, 2015
Affirmed Caa3 (sf)
Cl. X-1, Downgraded to B3 (sf); previously on Aug 27, 2015 Affirmed
B2 (sf)
RATINGS RATIONALE
The ratings on six P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on three P&I classes were downgraded due to realized
and anticipated losses from specially serviced and troubled loans
that are higher than Moody's had previously expected.
The rating on the IO Class (Class X-1) was downgraded due to a
decline in the credit performance (or the weighted average rating
factor or WARF) of its referenced classes.
Moody's rating action reflects a base expected loss of 9.1% of the
current balance, compared to 8.0% at Moody's last review. Moody's
base expected loss plus realized losses is now 17.6% of the
original pooled balance, compared to 16.5% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 13, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 44% to $1.56 billion
from $2.81 billion at securitization. The certificates are
collateralized by 148 mortgage loans ranging in size from less than
1% to 6% of the pool, with the top ten loans constituting 33.2% of
the pool. Fifteen loans, constituting 14.3 % of the pool, have
defeased and are secured by US government securities.
Forty-three loans, constituting 27.4% of the pool, are on the
master servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Twenty-nine loans have been liquidated from the pool, resulting in
an aggregate realized loss of $351 million (for an average loss
severity of 57.1%). Seven loans, constituting 14.9% of the pool,
are currently in special servicing. The largest specially serviced
loans are the four Scudders Mill and Nassau Park loans ($213
million -- 13.6% of the pool), which are secured by four single
tenant office buildings (872,551 SF) located in West Windsor, NJ
and are all occupied by the same tenant (E R Squibb & Sons LLC).
The tenant is planning on vacating the properties over the next
year and the loan was transferred to special servicing in March
2016 seeking modification of terms. The properties are being
actively marketed for lease.
The remaining three specially serviced loans are secured by a mix
of property types. Moody's estimates an aggregate $89.5 million
loss for the specially serviced loans (50.5% expected loss on
average).
Moody's has assumed a high default probability for 14 poorly
performing loans, constituting 9% of the pool, and has estimated an
aggregate loss of $21.1 million (a 15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's received full year 2015 operating results for 99% of the
pool, and full or partial year 2016 operating results for 24% of
the pool. Moody's weighted average conduit LTV is 101%, compared to
97% at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 11% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9%.
Moody's actual and stressed conduit DSCRs are 1.30X and 1.05X,
respectively, compared to 1.37X and 1.11X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 13.1% of the pool balance.
The largest loan is the Cherry Hill Town Center Loan ($88 million
-- 5.6% of the pool), which is secured by an approximately 511,000
SF retail property located in Cherry Hill, NJ, a suburb of
Philadelphia. The property was 100% leased as of December 31, 2015.
Moody's LTV and stressed DSCR are 102% and 0.87X, respectively, the
same as at last review.
The second largest loan is the Summit Place Office Loan
($69.2million -- 4.4% of the pool), which is secured by four office
buildings located six miles west of Milwaukee containing
approximately 647,000 SF. One property was constructed in 2003 and
the other three were former industrial properties that were
converted to office buildings in 2003. The properties were 97%
leased in aggregate as of December 2015. Moody's LTV and stressed
DSCR are 119.6% and 0.84X, respectively, compared to 121% and 0.82X
at the last review.
The third largest loan is the Northampton Crossing Loan ($48.1
million -- 3.1% of the pool), which is secured by an approximately
535,000 SF anchored retail center located in Easton, PA. It has
been 100% occupied for the last three years and performance has
been stable. Moody's LTV and stressed DSCR are 111.0% and 0.83X,
respectively, compared to 111.9% and 0.82X at the last review.
CABCO TRUST 2004-101: S&P Affirms BB Rating on $150MM Certificates
------------------------------------------------------------------
S&P Global Ratings affirmed its 'BB' ratings on CABCO Series
2004-101 Trust's (Goldman Sachs Capital I) $150 million callable
certificates series 2004-101. At the same time, S&P affirmed its
'BBB+' rating on Cabco Series 2004-102 Trust's (SBC Communications
Inc.) $32.5 million callable certificates series 2004-102.
For series 2004-101, S&P's rating on the certificates is dependent
on the lower of its rating on the underlying security, Goldman
Sachs Capital I's 6.345% capital securities ('BB'), and S&P's
long-term rating on the swap counterparty, UBS AG, London Branch
('A+').
For series 2004-102, our rating on the certificates is dependent on
the lower of our rating on the underlying security, AT&T Inc.'s
6.45% global notes due June 15, 2034 ('BBB+'), and S&P's long-term
rating on the swap counterparty, UBS AG, London Branch.
The rating actions follow the June 6, 2016, raising of S&P's
long-term rating on UBS AG, London Branch, to 'A+' from 'A'. S&P
may take subsequent rating actions on the certificates due to
changes in our ratings assigned to the underlying securities or
swap counterparty.
CHERRYWOOD SB 2016-1: DBRS Finalizes Prov. B Rating on Cl. B-2 Debt
-------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2016-1 (the Certificates) to be issued by Cherrywood SB Commercial
Mortgage Loan Trust 2016-1. The trends are Stable.
-- Class A-FL at AAA (sf)
-- Class A-FX at AAA (sf)
-- Class M-1 at AA (sf)
-- Class M-2 at A (sf)
-- Class M-3 at BBB (sf)
-- Class M-4 at BBB (low) (sf)
-- Class B-1 at BB (sf)
-- Class B-2 at B (sf)
Classes B-1 and B-2 will be privately placed.
The collateral consists of 151 individual loans, of which 136 are
secured by individual properties, and 15 of which are
cross-collateralized borrowing groups that DBRS treats as six
loans, secured by 205 (estimated by DBRS) commercial and
multifamily properties. Furthermore, one of the crossed loans (2.7%
of the pool) is backed by the interest in 37 single-family rental
homes and one medical office building. The conduit pool was
analyzed to determine the ratings, reflecting the long-term
probability of loan default within the term and, if applicable, its
liquidity at maturity. Of the 141 individual loans, 148 have a
fixed interest rate for the first five years of the loan term, two
have a fixed interest rate for the first seven years of the loan
term and one has a fixed interest rate for the first 15 years of
the loan term. After the fixed period, the interest rate floats
over the six-month LIBOR index and resets every six months. The
loans are structured with interest rate floors ranging from 5.75%
to 9.25% with a weighted-average (WA) of 7.64% and interest rate
caps ranging from 11.75% to 15.25% with a WA of 13.64%. DBRS
applied a stress to the index (six-month LIBOR) that corresponded
to the remaining fully extended term of the loans and added the
respective contractual loan spread to determine a stressed interest
rate over the loan term. DBRS looked to the greater of the interest
rate floor or the DBRS stressed index rate when calculating
stressed debt service. The loans all amortize on a 360-month basis
with term lengths ranging from 15 to 30 years. When the cut-off
loan balances were measured against the DBRS net cash flow and
their respective actual constants or stressed interest rates, there
were 76 loans, representing 59.5% of the pool, with term DSCRs
below 1.15x, a threshold indicative of a higher likelihood of term
default.
The pool is relatively diverse based on loan size, with an average
balance of $744,407 or $791,588, based on the DBRS 136 individual
and six portfolio loans, and a concentration profile equivalent to
that of a pool of 78 equal-sized loans, which helps to insulate the
higher-rated classes from event risk. Furthermore, the loans are
secured by traditional property types (i.e., retail, multifamily,
office and industrial), with no exposure to higher-volatility
property types, such as hotels. The pool also has a relatively high
concentration of properties located in urban markets, given the
small balance of the loans. DBRS identified 24 loans, representing
16.1% of the pool, as being located in urban markets, including the
second-largest loan, representing 3.5% of the pool.
The sponsors are generally less sophisticated operators of
commercial real estate with limited real estate portfolios and
experience, but all loans are structured with full recourse to the
sponsor. Of the 34 loans DBRS sampled, DBRS identified 20 loans
(57.9% of the DBRS sample, based on loan balance) with sponsors
reporting derogatory credit history, bankruptcies or other negative
financial concerns, which were modeled with an increased
probability of default (POD). Furthermore, five loans (4.9% of the
pool balance) have had a delinquent pay history in the last 12
months, which were modeled with a significant increased POD. Thirty
loans were identified as occupied by a single tenant,
owner-occupied or both, representing 16.7% of the pool. Loans
secured by properties occupied by single tenants or by the owner
have been found to have higher losses in the event of default. As
such, DBRS modeled single-tenant properties with a higher POD and
cash flow volatility compared with multi-tenant properties.
The DBRS sample included 34 of the 142 DBRS aggregated loans in the
pool. Site inspections were performed on 47 of the 205 properties
in the pool (35.9% of the pool by allocated loan balance). DBRS
conducted meetings with the on-site property manager, leasing agent
or representative of the borrowing entity for 21.1% of the pool.
DBRS identified 28 loans, representing 21.5% of the pool, as being
located in rural or tertiary markets. Properties located in
tertiary and rural markets are modeled with significantly higher
loss severities than those located in urban and suburban markets.
Furthermore, DBRS classified ten loans in the sample (33.8% of the
DBRS sample by loan balance) as having Below Average or Poor
property quality. Lower-quality properties are less likely to
retain existing tenants, resulting in less stable performance. DBRS
increased the POD for the loans identified with less than Average
property quality.
CIT MARINE TRUST: S&P Cuts 1999-A Certs Rating to CCC
-----------------------------------------------------
S&P Global Ratings lowered its ratings on 13 U.S. asset-backed
securities (ABS) classes that benefit from monoline insurance
policies from MBIA Insurance Corp.
The lowered rating actions, which affect 12 manufactured
housing-backed classes and one marine-backed class, follow S&P's
June 16, 2016, downgrade on MBIA Insurance Corp. (CCC/Negative/--).
MBIA Insurance Corp. provides a full financial guarantee insurance
policy guaranteeing full payments of principal and interest to the
noteholders of the downgraded classes. Under S&P's criteria, the
issue credit rating on a fully credit-enhanced bond issue is the
higher of the rating on the credit enhancer or the Standard &
Poor's underlying rating (SPUR) on the class. A SPUR is S&P's
opinion of the stand-alone creditworthiness of an obligation, i.e.,
the capacity to pay debt service on a debt issue in accordance with
its terms without considering an otherwise applicable bond
insurance policy.
RATINGS LOWERED
CIT Marine Trust 1999-A
Rating
Collateral Series Class To From
Marine 1999-A Certs CCC (sf) B (sf)
GreenPoint Credit Manufactured Housing Contract Trust
Rating
Collateral Series Class To From
Manufactured housing 1999-4 A-2 CCC (sf) B (sf)
Manufactured housing 1998-1 I A CCC (sf) B (sf)
Manufactured housing 1998-1 II A CCC (sf) B (sf)
Manufactured housing 1999-1 A-5 CCC (sf) B (sf)
Manufactured housing 1999-2 A-2 CCC (sf) B (sf)
Manufactured housing 1999-3 IA7 CCC (sf) B (sf)
Manufactured housing 1999-3 IIA2 CCC (sf) B (sf)
Manufactured housing 2000-2 A-2 CCC (sf) B (sf)
Manufactured Housing Contract Trust Pass-Thru Certificates
Rating
Collateral Series Class To From
Manufactured housing 1999-6 A-2 CCC (sf) B (sf)
Manufactured housing 2000-3 IIA-2 CCC (sf) B (sf
Manufactured housing 2000-5 A-3 CCC (sf) B (sf)
Manufactured housing 2000-7 A-2 CCC (sf) B (sf)
CITIGROUP 2006-C5: Moody's Lowers Rating on Class XC Debt to B1
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
and downgraded the ratings on four classes in Citigroup Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2006-C5 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Jul 8, 2015 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul 8, 2015 Affirmed Aaa
(sf)
Cl. A-M, Affirmed Aa2 (sf); previously on Jul 8, 2015 Affirmed Aa2
(sf)
Cl. A-J, Downgraded to B2 (sf); previously on Jul 8, 2015 Affirmed
B1 (sf)
Cl. B, Downgraded to Caa3 (sf); previously on Jul 8, 2015 Affirmed
Caa2 (sf)
Cl. C, Downgraded to C (sf); previously on Jul 8, 2015 Affirmed
Caa3 (sf)
Cl. D, Affirmed C (sf); previously on Jul 8, 2015 Affirmed C (sf)
Cl. E, Affirmed C (sf); previously on Jul 8, 2015 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Jul 8, 2015 Affirmed C (sf)
Cl. XC, Downgraded to B1 (sf); previously on Jul 8, 2015 Affirmed
Ba3 (sf)
RATINGS RATIONALE
The ratings on the P&I classes A-4, A-1A, and A-M were affirmed
because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on the P&I classes D, E and F were affirmed because the
ratings are consistent with Moody's expected loss.
The ratings on the P&I classes A-J, B, and C were downgraded due to
realized and anticipated losses from specially serviced and
troubled loans that were higher than Moody's had previously
expected.
The rating on the IO Class (Class XC) was downgraded due to the
decline in the credit performance of its reference classes
resulting from principal paydowns of higher quality reference
classes.
Moody's rating action reflects a base expected loss of 13.3% of the
current balance, compared to 10.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 13.5% of the
original pooled balance, compared to 12.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 17, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 42% to $1.2 billion
from $2.1 billion at securitization. The certificates are
collateralized by 149 mortgage loans ranging in size from less than
1% to 9.9% of the pool, with the top ten loans constituting 32% of
the pool. Fourteen loans, constituting 15% of the pool, have
defeased and are secured by US government securities.
Sixty-two loans, constituting 33% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty-four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $123 million (for an average loss
severity of 39%). Twenty loans, constituting 23% of the pool, are
currently in special servicing. The largest specially serviced loan
is the IRET Portfolio Loan ($123 million -- 9.9% of the pool),
which is comprised of nine office properties located in Minnesota,
Missouri, Nebraska, and Kansas. The portfolio totals approximately
937,000 square feet (SF). The portfolio was 88% leased as of
December 2014, compared to 86% leased as of October 2013. The loan
transferred into special servicing on November 17, 2014, and became
REO in January 2016.
The remaining 19 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $131 million loss
for the specially serviced loans (46% expected loss on average).
Moody's has assumed a high default probability for 12 poorly
performing loans, constituting 5% of the pool, and has estimated an
aggregate loss of $11.2 million (a 20% expected loss based on a 50%
probability default) from these troubled loans.
Moody's received full year 2014 operating results for 99% of the
pool, and full or partial year 2015 operating results for 89% of
the pool. Moody's weighted average conduit LTV is 92%, compared to
93% at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 12% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.6%.
Moody's actual and stressed conduit DSCRs are 1.54X and 1.34X,
respectively, compared to 1.42X and 1.21X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 9% of the pool balance. The
largest loan is the Tri City Plaza Loan ($40.0 million -- 3% of the
pool), which is secured by an approximately 300,000 SF grocery
anchored retail property located in Vernon, Connecticut. The
property was 91% leased as of December 2015, compared to 81% leased
at last review. Moody's LTV and stressed DSCR are 126% and 0.78X,
respectively, compared to 125% and 0.78X at the last review.
The second largest loan is the 909 Poydras Office Building Loan
($34.1 million -- 3% of the pool), which is secured by an
approximately 540,000 SF class A office property located in the New
Orleans central business district (CBD). The property was 80%
occupied as of February 2016. The largest tenant, First Bank and
Trust, recently renewed their lease extending through 2016. Moody's
LTV and stressed DSCR are 96% and 1.1X, respectively, compared to
110% and 0.96X at the last review.
The third largest loan is the Kent Station Loan ($33.4 million --
3% of the pool), which is secured by a movie theater anchored
retail property located in Kent, Washington. The property was 91%
leased as of June 2016. The largest tenant is AMC Theaters,
occupying 43% of the net rentable area (NRA). Moody's LTV and
stressed DSCR are 95% and 1.02X, respectively, compared to 94% and
1.03X at the last review.
CITIGROUP 2007-C6: Moody's Affirms B1 Rating on Cl. X Debt
----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
in Citigroup Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2007-C6 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Jul 24, 2015 Affirmed
Aaa (sf)
Cl. A-3B, Affirmed Aaa (sf); previously on Jul 24, 2015 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul 24, 2015 Affirmed Aaa
(sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on Jul 24, 2015 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul 24, 2015 Affirmed
Aaa (sf)
Cl. X, Affirmed B1 (sf); previously on Jul 24, 2015 Downgraded to
B1 (sf)
RATINGS RATIONALE
The ratings on five P&I class, classes A-3B, A-SB, A-4, A-4FL, A-1A
were affirmed because the transaction's key metrics, including
Moody's loan-to-value (LTV) ratio, Moody's stressed debt service
coverage ratio (DSCR) and the transaction's Herfindahl Index
(Herf), are within acceptable ranges.
The rating on the IO class was affirmed based on the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes.
Moody's rating action reflects a base expected loss of 15.1% of the
current balance, compared to 17.6% at Moody's last review. Moody's
base expected loss plus realized losses is now 14.1% of the
original pooled balance, compared to 15.6% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 10, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 24.8% to $3.6
billion from $4.8 billion at securitization. The certificates are
collateralized by 261 mortgage loans ranging in size from less than
1% to 12.3% of the pool, with the top ten loans constituting 33% of
the pool. Fifteen loans, constituting 6.2% of the pool, have
defeased and are secured by US government securities.
Fifty loans, constituting 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty-four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $134 million (for an average loss
severity of 42%). 34 loans, constituting 16.9% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Moreno Valley Mall Loan ($78.3 million -- 2.2% of the pool),
which is secured by a portion of a larger 1.1 million square foot
(SF), enclosed regional mall in Moreno Valley, California. The
mall's anchors include Macy's, JC Penney, Sears, and Harkins
Theaters. The mall is REO and was acquired by the trust via a
deed-in-lieu of foreclosure in February 2011 from GGP, the former
sponsor. The servicer has since embarked on a stabilization program
targeting leasing and deferred maintenance. Inline occupancy was
93% as of May 2016. Temporary tenants account for 27% of the inline
occupancy. Total occupancy is up to 97% from 81% at year-end 2013.
The servicer has recognized an appraisal reduction of $50.9
million, representing approximately 65% of the outstanding loan
balance.
The remaining 33 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $303.7 million loss
for the specially serviced loans (50.3% expected loss on average).
Moody's has assumed a high default probability for 40 poorly
performing loans, constituting 23.5% of the pool, and has estimated
an aggregate loss of $150.5 million (a 17.9% expected loss based on
a 34.5% probability default) from these troubled loans.
Moody's received full year 2014 operating results for 96% of the
pool, and full or partial year 2015 operating results for 85% of
the pool. Moody's weighted average conduit LTV is 103.1%, compared
to 110.8% at Moody's last review. Moody's conduit component
excludes loans with structured credit assessments, defeased and CTL
loans, and specially serviced and troubled loans. Moody's net cash
flow (NCF) reflects a weighted average haircut of 12.1% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.9%.
Moody's actual and stressed conduit DSCRs are 1.45X and 1.09X,
respectively, compared to 1.37X and 1.00X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 19.1% of the pool balance.
The largest loan is the DDR Southeast Pool Loan ($440.9 million --
12.3% of the pool), which represents a 50% pari passu interest in a
$883.5 million loan. The loan is secured by a portfolio of 52
anchored retail properties located across ten U.S. states.
Approximately three-quarters of the properties are
grocery-anchored. As per the March 2016 rent roll, the portfolio
was 88.4% occupied, compared to 89% occupied in February 2014.
Moody's LTV and stressed DSCR are 121.1% and 0.76X, respectively,
the same as at the last review.
The second largest loan is the Greensboro Corporate Center ($123.5
million -- 5.0% of the pool). The loan is secured by a 439,000
square foot (SF), two-building office property located in the
Tysons Corner section of McLean, Virginia, a suburb of Washington,
DC. The loan is on the watchlist. The former largest tenant, which
had occupied approximately 20% of the property's net rentable area
(NRA) vacated at lease expiration in September 2014, bringing the
property's occupancy down to 74%. The current second largest
tenant, Watt, Tieder, Fitzgerald, which occupies 16% of the
property's NRA under a lease set to expire in June 2016, will not
be renewing their lease. The property occupancy will decline to 57%
upon their departure. Moody's identifies this as a troubled loan
and our analysis incorporates a loss from this loan.
The third largest loan is the Wachovia Capitol Center Loan ($120.3
million -- 3.4% of the pool), which is secured by a 560,000 square
foot (SF), Class A, office property located in downtown Raleigh,
North Carolina. The property is currently known as Wells Fargo
Capitol Center. As per the March 2016 rent roll the property was
74% occupied, compared to 84% as of March 2015, and 94% in June
2014. The former fourth-largest tenant, Parker, Poe, Adams &
Bernstein (55K SF; 10% NRA), vacated at lease expiration in
November 2014 and the former third-largest tenant, Womble Carlyle
Sandridge, (12% of property NRA) vacated upon lease expiration at
the end of 2015. Moody's identifies this as a troubled loan and
Moody's analysis incorporates a small loss from this loan.
COLT 2016-1: DBRS Finalizes BB(sf) Ratings on Class M-1 Debt
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the Mortgage
Pass-Through Certificates, Series 2016-1 (the Certificates) issued
by COLT 2016-1 Mortgage Loan Trust:
-- $89.4 million Class A-1 at A (sf)
-- $48.4 million Class A-2 at BBB (sf)
-- $9.1 million Class M-1 at BB (sf)
-- $89.4 million Class A-1X at A (sf)
-- $48.4 million Class A-2X at BBB (sf)
Classes A-1X and A-2X are interest-only certificates. The class
balances represent notional amounts.
The A (sf) ratings on the Certificates reflect the 44.70% of credit
enhancement provided by subordinated Certificates in the pool. The
BBB (sf) and BB (sf) ratings reflect 14.80% and 9.20% of credit
enhancement, respectively.
Other than the specified classes above, DBRS does not rate any
other classes in this transaction.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate, prime and non-prime, first-lien residential
mortgages. The Certificates are backed by 368 loans with a total
principal balance of $161,708,660 as of the Cut-Off Date (June 1,
2016).
Caliber Home Loans, Inc. (Caliber) is the originator and servicer
for all loans in the portfolio. The mortgages were originated under
the following five programs:
(1) Jumbo Alternative (34.8%) – These loans are generally made
to
borrowers with unblemished credit seeking larger balance mortgages.
These loans may have interest-only features, higher debt-to-income
(DTI) and loan-to-value (LTV) ratios, or lower credit scores as
compared with those in traditional prime jumbo securitizations.
(2) Homeowner's Access (50.1%) – These loans are made to
borrowers who do not qualify for agency or prime jumbo mortgages
for various reasons, such as loan size in excess of government
limits, alternative or insufficient credit, or prior derogatory
credit events that occurred more than two years prior to
origination.
(3) Fresh Start (10.5%) – These loans are made to borrowers with
lower credit and significant recent credit events within the past
24 months.
(4) Investor (4.2%) – These loans are made to borrowers who
finance investor properties where the mortgage loan would not meet
agency or government guidelines because of such factors as property
type, number of financed properties, lower borrower credit score or
a seasoned credit event.
(5) Foreign national (0.4%) – These loans are made to
non-resident borrowers holding certain types of visas who may not
have a credit score.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau (CFPB) ability to repay (ATR) rules,
they were made to borrowers who generally do not qualify for
agency, government or private label non-agency prime jumbo products
for various reasons described above. In accordance with the CFPB
Qualified Mortgage (QM) rules, 2.6% of the loans are designated as
QM Safe Harbor, 41.4% as QM Rebuttable Presumption and 51.8% as
non-QM. Approximately 4.2% of the loans are not subject to the QM
rules.
Wells Fargo Bank, N.A. (Wells Fargo) will act as the Master
Servicer, Securities Administrator and Certificate Registrar. U.S.
Bank National Association will serve as Trustee.
There will not be any advancing of delinquent principal or interest
on any mortgages that become 180 days delinquent by the servicer;
however, the servicer is obligated to make advances in respect of
taxes and insurance, reasonable costs and expenses incurred in the
course of servicing and disposing of properties.
On or after the two year anniversary of the Closing Date, the
Depositor has the option to terminate the Issuing Entity by
purchasing all of the mortgage loans (or REO properties), at a
price equal to the outstanding class balance plus accrued and
unpaid interest (or fair market value of the REO properties), as
well as any related fees and expenses of the transaction parties.
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the senior tranches.
Principal proceeds can be used to cover interest shortfalls on the
Certificates as the outstanding senior Certificates are paid in
full.
The ratings reflect transactional strengths that include the
following:
(1) ATR Rules and Appendix Q Compliance: All of the mortgage loans
were underwritten in accordance with the eight underwriting factors
of the ATR rules. In addition, the originator’s underwriting
standards comply with the Standards for Determining Monthly Debt
and Income as set forth in Appendix Q of Regulation Z with respect
to income verification and the calculation of DTI ratios.
(2) Strong Underwriting Standards: Whether for prime or non-prime
mortgages, underwriting standards have improved significantly from
the pre-crisis era. Substantially all of the loans were
underwritten to a full documentation standard with respect to
verification of income (generally through two years of W-2s or tax
returns), employment and asset. Fully executed 4506-Ts are
obtained, and tax returns are verified with IRS transcripts if
applicable.
(3) Robust Loan Attributes and Pool Composition:
-- The mortgage loans in this portfolio generally have robust
loan attributes as reflected in combined LTV ratios, borrower
household income and liquid reserves, including the loans in
Homeowner's Access and Fresh Start, the two programs with
weaker borrower credit.
-- The pool contains low proportions of cash-out and investor
properties.
-- LTVs gradually reduce as the programs move down the credit
spectrum, suggesting the consideration of compensating factors
for riskier pools.
-- The hybrid adjustable-rate mortgages (ARMs) have an initial
fixed period of five years as opposed to two or three years
pre-crisis, allowing borrowers sufficient time to credit cure
before rates reset.
(4) Satisfactory Third-Party Due Diligence Review: A third-party
due diligence firm conducted property valuation, credit and
compliance reviews on 100% of the loans in the pool. Data integrity
checks were also performed on the pool.
(5) Satisfactory Loan Performance to Date (Albeit Short): Caliber
began originating loans under the five programs in Q4 2014. Of the
approximately 1,349 mortgages originated to date, only 14 were ever
30 days delinquent, which generally self-cured shortly after. Every
loan in the COLT 2016-1 portfolio has been current since
origination. In addition, voluntary prepayment rates have been
relatively high, as these borrowers tend to credit cure and
refinance into lower-cost mortgages.
The transaction also includes the following challenges and
mitigating factors:
(1) Representations and Warranties (R&W) Framework and Provider:
The R&W framework is considerably weaker as compared with that of a
post-crisis prime jumbo securitization. Instead of an automatic
review when a loan becomes seriously delinquent, this transaction
employs an optional review only when realized losses occur (unless
the alleged breach relates to an ATR or TRID violation). In
addition, rather than engaging a third-party due diligence firm to
perform the R&W review, the Controlling Holder (initially the
Sponsor or a majority-owned affiliate of the Sponsor) has the
option to perform the review in house, or uses a third-party
reviewer. Finally, the R&W provider Caliber, an unrated entity, has
limited performance history of non-prime, non-QM securitizations
and may potentially experience financial stress that could result
in the inability to fulfill repurchase obligations. DBRS notes the
following mitigating factors:
-- The Sponsor or an affiliate of the Sponsor will retain not
only the residual first loss residual interest, but also the
M-1 and M-2 mezzanine tranches initially, aligning Sponsor and
investor interest in the capital structure.
-- The holders of Certificates representing 25% interest in the
Certificates may direct the Trustee, to commence a separate
review of the related mortgage loan, to the extent they
disagree with the Controlling Holder’s determination of a
breach.
-- Third-party due diligence was conducted on 100% of the loans
included in the pool. A comprehensive due diligence review
mitigates the risk of future R&W violations.
-- DBRS conducted an on-site originator (and servicer) review of
Caliber and deems it to be operationally sound.
-- Notwithstanding the above, DBRS adjusted Caliber’s originator
score downward to account for the potential inability to
fulfill repurchase obligations, the lack of performance
history as well as the weaker R&W framework. A lower
originator score results in increased default and loss
assumptions and provides additional cushions for the rated
securities.
(2) Non-Prime, QM-Rebuttable Presumption or Non-QM Loans: As
compared with post-crisis prime jumbo transactions, this portfolio
contains some mortgages originated to borrowers with weaker credit
and prior derogatory credit events, as well as QM-rebuttable
presumption or non-QM loans.
-- All loans were originated to meet the eight underwriting
factors as required by the ATR rules as well as Appendix Q.
-- Underwriting standards have improved substantially since the
pre-crisis era.
-- DBRS RMBS Insight model incorporates loss severity penalties
for non-QM and QM Rebuttable Presumption loans, as explained
further in the Key Loss Severity Drivers section of this
report.
-- For loans in this portfolio that were originated through the
Homeowner's Access and Fresh Start programs, borrower credit
events had generally happened, on average, 27 months and 39
months, respectively, prior to origination.
(3) Servicer Advances of Delinquent Principal and Interest: The
servicer will advance scheduled principal and interest on
delinquent mortgages until such loans become 180 days delinquent.
This will likely result in lower loss severities to the transaction
because advanced principal and interest will not have to be
reimbursed from the trust upon the liquidation of the mortgages,
but will increase the possibility of periodic interest shortfalls
to the Certificateholders. Mitigating factors include that
principal proceeds can be used to pay interest shortfalls to the
Certificates as the outstanding senior bonds Certificates are paid
in full, as well as the fact that subordination levels are greater
than expected losses, which may provide for payment of interest to
the Certificates. DBRS ran cash flow scenarios that incorporated
principal and interest advancing up to 180 days for delinquent
loans; the cash flow scenarios are discussed in more detail in the
Cash Flow Analysis section of this report.
(4) Servicer's Financial Capability: In this transaction, the
Servicer, Caliber, is responsible for funding advances to the
extent required. Caliber is an unrated entity and may face
financial difficulties in fulfilling its servicing advance
obligation in the future. Consequently, the transaction employs
Wells Fargo, rated AA (high) by DBRS, as the Master Servicer. If
the Servicer fails in its obligation to make advances, Wells Fargo
will be obligated to fund such servicing advances.
The DBRS ratings of the Certificates address the ultimate payment
of interest and full payment of principal (excluding interest-only
classes) by the legal final maturity date in accordance with the
terms and conditions of the related Certificates.
COMM 2012-CCRE2: Moody's Affirms Ba2 Rating on Class F Debt
-----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seventeen
classes in COMM 2012-CCRE2 Mortgage Trust as:
Cl. A-2, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. A-M-PEZ, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on July 10, 2015, Affirmed
Aa2 (sf)
Cl. B-PEZ, Affirmed Aa2 (sf); previously on July 10, 2015,
Affirmed Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on July 10, 2015, Affirmed
A2 (sf)
Cl. C-PEZ, Affirmed A2 (sf); previously on July 10, 2015,
Affirmed A2 (sf)
Cl. D, Affirmed Baa1 (sf); previously on July 10, 2015, Affirmed
Baa1 (sf)
Cl. E, Affirmed Baa3 (sf); previously on July 10, 2015, Affirmed
Baa3 (sf)
Cl. F, Affirmed Ba2 (sf); previously on July 10, 2015, Affirmed
Ba2 (sf)
Cl. G, Affirmed B2 (sf); previously on July 10, 2015, Affirmed
B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on July 10, 2015,
Affirmed Aaa (sf)
Cl. X-B, Affirmed Ba3 (sf); previously on July 10, 2015,
Affirmed Ba3 (sf)
Cl. PEZ, Affirmed A1 (sf); previously on July 10, 2015, Affirmed
A1 (sf)
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the IO classes were affirmed based on the credit
performance (or the weighted average rating factor) of the
referenced classes.
The ratings on class PEZ was affirmed due to the credit performance
(or the weighted average rating factor) of the exchangeable
classes.
Moody's rating action reflects a base expected loss of 1.7% of the
current balance, compared to 1.8% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.5% of the original
pooled balance, compared to 1.8% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in December
2014.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 20, compared to 22 at Moody's last review.
DEAL PERFORMANCE
As of the June 17, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 11% to
$1.18 billion from $1.32 billion at securitization. The
certificates are collateralized by 51 mortgage loans ranging in
size from less than 1% to 9.4% of the pool, with the top ten loans
constituting 62% of the pool. One loan, constituting 8.3% of the
pool, has an investment-grade structured credit assessment. One
loan, constituting 0.3% of the pool, has defeased and is secured by
US government securities.
Nine loans, constituting 19.1% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Moody's received full year 2015 operating results for 96% of the
pool, and full year 2014 operating results for 98% of the pool.
Moody's weighted average conduit LTV is 92%, unchanged from Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 12% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.61X and 1.13X,
respectively, compared to 1.64X and 1.13X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the 520 Eighth
Avenue Loan ($97.5 million -- 8.3% of the pool), which is secured
by three adjacent and interconnected office buildings that have
been combined into a single office property. The properties are
located at 520 8th Avenue, 266 West 37th Street and 261 West 36th
Street, totaling 758,000 square feet (SF). The buildings are
occupied by a diverse mix of tenants including not-for-profit
associations, professional services firms, media and entertainment
services companies. As of April 2016, the property was 99% leased,
essentially unchanged from December 2014 and securitization.
Moody's structured credit assessment and stressed DSCR are a2
(sca.pd) and 1.4X, respectively, compared to baa3 (sca.pd) and
1.37X at the last review.
The top three conduit loans represent 28% of the pool balance. The
largest loan is the 1055 West 7th Street Loan ($111.1 million
-- 9.4% of the pool), which is secured by a 616,000 SF office
Class-A property located in downtown Los Angeles, California. The
property was built in 1987 and is 32 stories high. The building is
located just west of Interstate 110, one block away from the 7th
Street Metro Station, and a few blocks from the Staples Convention
Center. As of December 2015, the property was 96% leased, up from
94% in December 2014 and 85% at securitization. Performance dropped
in 2015 due to an increase in expenses; over the past two years
expenses have increased by 12%. Moody's LTV and stressed DSCR are
106% and 0.94X, respectively, compared to 105% and 0.95X at the
last review.
The second largest loan is the 77 K Street Loan ($110 million --
9.3% of the pool), which is secured by 327,000 SF Class-A office
building located in the Capitol Hill submarket of Washington, D.C.
The property was built in 2008 for a total cost of $113 million.
The property was 100% leased as of December 2015, unchanged from
December 2014 and up from 93% at securitization. Performance has
increased due to free rent periods burning off. Moody's LTV and
stressed DSCR are 96% and 1.02X, respectively, compared to 97% and
1.01X at the last review.
The third largest loan is the 260 and 261 Madison Avenue Loan ($105
million -- 8.9% of the pool), which is secured by two Class-B
office towers located in midtown Manhattan on Madison Avenue
between 36th and 37th Street. The properties total 840,000 SF of
office space, 37,000 SF of retail space, and a 46,000 SF parking
garage. This loan represents a pari passu interest in a $231
million loan. As of December 2015, the properties had a combined
occupancy of approximately 91%, up slightly from 90% in December
2014 and securitization. However, a tenant recently vacated its
space that would decrease occupancy to roughly 88%. Moody's LTV
and stressed DSCR are 97% and 0.98X, respectively, compared to 98%
and 0.97X at the last review.
COMM 2014-LC17: DBRS Confirms B(low) Rating on Class G Debt
-----------------------------------------------------------
DBRS Limited confirmed all classes of Commercial Mortgage
Pass-Through Certificates, Series 2014-LC17 (the Certificates),
issued by COMM 2014-LC17 Mortgage Trust as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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 X-F at AAA (sf)
-- Class X-G at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class PEZ at A (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)
All trends are Stable, with the exception of Class G, which has
been assigned a Negative trend given the uncertainty surrounding
loans currently in special servicing, which are discussed further
below. DBRS does not rate the first loss piece, Class H. The Class
PEZ certificates are exchangeable for the Class A-M, Class B and
Class C certificates (and vice versa).
The rating confirmations reflect the current performance of the
transaction, which has experienced a collateral reduction of 2.3%
as a result of scheduled loan amortization since issuance. The
collateral consists of 71 fixed-rate loans secured by 207
commercial and multifamily properties. At issuance, the transaction
had a DBRS weighted-average (WA) debt service coverage ratio (DSCR)
and a DBRS WA debt yield of 1.45 times (x) and 8.9%, respectively.
As of the May 2016 remittance, all 71 loans remain in the pool,
with an aggregate outstanding principle balance of approximately
$1.21 billion. To date, six loans (6.0% of the pool) reported
partial-year 2015 cash flows (most being Q3 2015), 28 loans (40.3%
of the pool) reported YE2015 cash flows, while 36 loans reported
partial-year 2016 cash flows (most being Q1 2016). The Cincinnati
Portfolio Pool B loan (0.4% of the pool), which transferred to
special servicing in December 2015 due to imminent default, has not
reported updated financials since closing. At this time, a receiver
is in place and the servicer is proceeding with foreclosure.
Based on the most recent available cash flows for the Top 15 loans
(57.1% of the pool), the WA amortizing DSCR was 1.80x, compared
with the DBRS UW figure of 1.66x, reflective of a WA NCF growth of
7.7% compared with the DBRS UW figures. There are five loans in the
Top 15, representing 18.5% of the pool, exhibiting NCF declines
compared with the DBRS UW figures, with declines ranging from 0.7%
to 28.7%. These five loans include 80 and 90 Maiden Lane
(Prospectus ID#3, 7.4% of the pool), Myrtle Beach Marriott Resort &
Spa (Prospectus ID#4, 4.4% of the pool), SRC Multifamily Portfolio
2 (Prospectus ID#10, 2.4% of the pool), SRC Multifamily Portfolio 3
(Prospectus ID#11, 2.3% of the pool) and the Bartlett Flex
Portfolio (Prospectus ID#12, 1.9% of the pool). Based on the YE2015
and annualized 2016 cash flows for these loans, the WA amortizing
DSCR was 1.31x, compared to the DBRS UW figure of 1.45x, reflective
of a WA NCF decline of 17.2% compared to DBRS UW figures.
As of the May 2016 remittance, there are three loans in special
servicing and eight loans on the servicer’s watchlist,
representing 2.7% and 11.4% of the pool, respectively. Four of the
loans (9.9% of the pool) currently on the servicer’s watchlist
were flagged due to performance-related reasons, while two loans
(0.5% of the pool) were flagged because of upcoming tenant
rollover. Based on the YE2015 and annualized 2016 cash flows for
these six loans, the WA amortizing DSCR was 1.32x, compared to the
DBRS UW figure of 1.49x, reflective of a WA NCF decline of 16.2%
compared with DBRS UW figures. In addition, two loans (1.0% of the
pool) were flagged due to non-performance-related items of deferred
maintenance. The two largest loans in special servicing and the
largest loan on the servicer's watchlist are discussed.
The Eagle Ford loan (Prospectus ID#17, 1.5% of the pool) is secured
by three cross-collateralized limited-service hotel properties, all
of which are located south/southwest of San Antonio, situated near
the Eagle Ford Shale. The hotels comprise 202 keys and were all
built between 2012 and 2013. As of Q3 2015 (most recent
financials), the loan reported an annualized DSCR of 0.80x,
compared to the DBRS UW figure of 1.61x. The loan transferred to
special servicing in February 2016 due to monetary default. To
date, two loan modification requests from the borrower have been
rejected and the servicer is proceeding with foreclosure. As of Q1
2016, the portfolio reported a T-12 occupancy of 54.3%, an average
daily rate (ADR) of $100.60 and a revenue per available room
(RevPAR) figure of $54.99, compared with the prior year’s T-12
figures of 68.4%, $126.25 and $78.97, respectively. The updated
figures are representative of percentage declines of 26.0%, 25.5%
and 43.6%, respectively, from the prior year’s T-12 figures.
During the same period (Q1 2016), the portfolio’s competitive set
reported an occupancy rate of 48.4%, ADR of $92.82 and RevPAR of
$46.20, respectively. Although the portfolio is operating above its
local competitors, it is evident that the hotels’ dependence on
the energy industry has drastically hampered performance. A recent
broker opinion of value (BOV) of $10.5 million obtained by the
servicer estimates that the property’s as-is value has fallen
significantly since the issuance value of $27.2 million. Given the
projected value decline since issuance and current outstanding
advances of $1.05 million, DBRS anticipates the loss severity at
disposition could exceed 65.0%.
The Georgia Multifamily Portfolio loan (Prospectus ID#35, 0.9% of
the pool) is secured by five one-story Class C garden-style
properties, totaling 386 units, located in smaller cities
surrounding Atlanta, Georgia. The five properties were constructed
between 1985 and 1986, offering similar layouts and minimal amenity
packages, as well as on-site leasing office and laundry rooms. The
loan transferred to special servicing in November 2015 due to
monetary default. To date, the servicer is dual-tracking the
foreclosure process, while holding conversations with the borrower
on alternative resolutions. According to the servicer, the borrower
has advised that they are planning on improving loan performance,
ultimately in an attempt to bring the loan current.
As of YE2015 financials, the loan had a DSCR of 0.71x, compared to
the DBRS UW figure of 1.09x. The decline in performance comes as a
result of a significant decline in occupancy portfolio-wide. As of
April 2016, the portfolio had an average occupancy rate of 72.2%,
well below the portfolio's competitive set occupancy rate of 94.4%
during the same time period and the portfolio's occupancy rate of
92.5% at issuance. Although the portfolio’s average rental rate
during the same time period grew from $510 per unit to $544 per
unit, the decline in occupancy resulted in nearly a 25.0% decline
in the EGI. Occupancy across the portfolio was impacted primarily
by two of the properties: Shannon Woods and Oakley Shoals, which
had the most significant occupancy declines. The properties are
situated within a one-mile proximity of one another, located in
Union City, Georgia, approximately 18.0 miles southwest of Atlanta.
As of April 2016, these two properties had an average occupancy
rate of 45.3%, well below the local competitive set’s occupancy
rate of 94.6% during the same time period and the average occupancy
rate of 88.8% achieved by the properties at issuance. According to
the April 2016 appraisals, both properties were observed to be of
average quality, but in below-average condition after reportedly
being under-managed. According to the appraiser, a number of
deferred maintenance items and capital improvements were noted,
with an estimated cost of approximately $700,000. The two
properties consist of approximately 73.8% one-bedroom units, with
an average unit size of 570 sf per unit, compared to the South
Fulton submarket’s average one-bedroom size of 762 sf. The two
properties account for 53.1% of the allocated loan balance. All
five properties are managed by the Strategic Management Partners, a
third-party management company, which appears to have local
expertise in the market, managing a number of properties in the
Atlanta MSA. The company specializes in increasing profitability
primarily for Class B/C apartment communities.
Utilizing a sales comparison approach, the appraiser found the
portfolio to have an as-is value of $9.42 million ($24,404 per
unit) as of April 2016, indicative of a LTV of 113.6%. This
compares negatively with the $13.39 million ($34,689 per unit) at
issuance, indicative of 77.5% LTV. DBRS has modeled this loan with
an elevated probability of default given the recent decline in
performance, as well as the sharp drop in value since issuance.
The 80 and 90 Maiden Lane loan is secured by two adjacent mixed-use
office properties located in the financial district of New York
City, which together total 552,064 sf. Originally constructed in
1921, 80 Maiden Lane is a 25-story office building (524,292 sf),
whereas 90 Maiden Lane is a four-story office building constructed
in 1810 (27,772 sf), with the most recent renovations occurring in
2004. The five-year interest-only loan represents the $90 million
pari passu, A-1 controlling share of a $145 million whole loan; the
A-2 non-controlling note is securitized in the COMM 2014-CCRE20
transaction, also rated by DBRS. The loan is sponsored by Paul
Wasserman (40.5% interest), a joint venture between Normandy Real
Estate Fund III, LP and Kushner Companies (40.5% interest) and
Robert Wolf (19.0% interest). Collectively, the sponsor is an
experienced owner and operator with institutional knowledge, which
contributed $30.5 million of fresh equity behind the $145 million
whole loan at issuance.
The loan was placed on the servicer's watchlist in October 2015 as
a result of a low Q2 2015 annualized DSCR of 1.03x, compared to the
DBRS UW figure of 1.54x. At the time, the decline in performance
was a result of increased vacancy (up 3.5%), decreased expense
reimbursements (down 50.8%) and increased operating expenses (up
16.5%), primarily driven by increased Utilities (up 32.0%), R&M (up
21.0%) and Payroll & Benefits (up 86.0%) costs. As of Q1 2016,
operating expenses remained 15.9% above the DBRS UW figures;
however, the loan’s performance improved, reporting an annualized
DSCR of 1.34x, as a result of increased expense reimbursements,
compared with the previous figures. Expense reimbursements still
remain 18.2% below the DBRS UW figure. The servicer has contacted
the borrower regarding the reported decline in reimbursements and
is still waiting for a response. The servicer noted that a number
of non-reoccurring expenses have recently been incurred, including
permits and licenses, electrical work, unanticipated inspections
and life safety implementation.
According to the March 2016 rent roll, the property was 91.1%
occupied, up from 90.6% in June 2015, but down from 94.1% at
issuance. The office is currently occupied by 70 tenants, of which
the largest three include the New York Department of Investigation
(19.5% of the net rentable area (NRA)), the Office of Children &
Family (8.3% of the NRA) and United Cerebral Palsy (5.5% of the
NRA), with lease expirations in July 2025, December 2020 and August
2023, respectively. Within the next 12 months, 14 tenants,
representing approximately 15.2% of the NRA, have upcoming lease
expirations. The largest three tenants with near-term upcoming
rollover include the State of New York – Department of Health
(3.0% of the NRA), the Lower East Side Service Center (2.8% of the
NRA) and the Association of Junior Leagues (2.1% of the NRA), with
lease expirations in July 2016, December 2016 and August 2017,
respectively. As of Q1 2016, CoStar reported that Class B office
buildings in the Financial District submarket had an average triple
net (NNN) rental rate of $47.55 psf NNN, with a vacancy rate of
8.9%. The subject’s current average rental rate of $42.97 psf NNN
indicates that there may be potential rental revenue upside as
leases roll.
FREMF 2013-KF02: Moody's Affirms Ba3 Rating on Class X Debt
-----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on five classes
in FREMF 2013-KF02 Mortgage Trust as:
CMBS Classes
Cl. A-1, Affirmed Aaa (sf); previously on July 8, 2015, Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aa2 (sf); previously on July 8, 2015, Affirmed
Aa2 (sf)
Cl. A-3, Affirmed A2 (sf); previously on July 8, 2015, Affirmed
A2 (sf)
Cl. B, Affirmed Baa3 (sf); previously on July 8, 2015, Affirmed
Baa3 (sf)
Cl. X, Affirmed Ba3 (sf); previously on July 8, 2015, Affirmed
Ba3 (sf)
SPCs Classes**
Cl. A-1, Affirmed Aaa (sf); previously on July 8, 2015, Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aa2 (sf); previously on July 8, 2015, Affirmed
Aa2 (sf)
Cl. A-3, Affirmed A2 (sf); previously on July 8, 2015, Affirmed
A2 (sf)
Cl. X, Affirmed Ba3 (sf); previously on July 8, 2015, Affirmed
Ba3 (sf)
**Each of the SPC Classes represents a pass-through interest in its
associated underlying CMBS Class. SPC Class A-1 represents a
pass-through interest in underlying CMBS Class A-1, SPC Class A-2
represents a pass-through interest in underlying CMBS A-2, SPC
Class A-3 represents a pass-through interest in underlying CMBS
A-3, and SPC Class X represents a pass-through interest in
underlying CMBS Class X.
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The rating on the IO class were affirmed based on the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes.
Moody's rating action reflects a base expected loss of 4.2% of the
current balance, compared to 4.4% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.0% of the original
pooled balance, compared to 2.0% at the last review. Moody's
provides a current list of base expected losses for conduit and
fusion CMBS transactions on moodys.com at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in December 2014, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 11, compared to 24 at Moody's last review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan-level proceeds
derived from Moody's loan-level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type and sponsorship. Moody's also further adjusts these
aggregated proceeds for any pooling benefits associated with loan
level diversity and other concentrations and correlations.
DEAL PERFORMANCE
As of the May 25, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 77% to $352.7
million from $1.54 billion at securitization. The certificates are
collateralized by 16 mortgage loans ranging in size from less than
1% to 33% of the pool, with the top ten loans constituting 84% of
the pool. Seventy-one loans have pre-paid in full since
securitization.
No loans are on the master servicer's watchlist. The watchlist
includes loans that meet certain portfolio review guidelines
established as part of the CRE Finance Council (CREFC) monthly
reporting package. As part of Moody's ongoing monitoring of a
transaction, the agency reviews the watchlist to assess which loans
have material issues that could affect performance.
No loans have been liquidated from the pool and there are currently
no loans in special servicing.
Moody's has assumed a high default probability for two poorly
performing loans, constituting 5% of the pool, and has estimated an
aggregate loss of $2.3 million (a 12% expected loss based on a 40%
probability default) from these troubled loans.
The deal is structured as initially having a pro rata payment
priority, whereby principal payments with respect to the trust
assets will be distributed pursuant to the following allocation --
71.75% to Class A-1, 7.0% to Class A-2, 6.25% to Class A-3, 5.0% to
Class B, 2.5 % to Class C, and 7.5% to Class D. However, all
recoveries via loan defaults will be allocated sequentially. All
realized losses will be allocated reverse sequentially. Relative
to a traditional senior sequential structure, pro rata pay
increases expected loss for senior rated tranches, but
incrementally reduces expected loss for junior rated tranches.
If a Waterfall Trigger Event has occurred and is continuing, the
Class A-1, A-2, A-3, B, C and D will be entitled, in that
sequential order, to principal collected or advanced with respect
to performing loans, in each case until their respective
outstanding principal balances have been reduced to zero. With
respect to any distribution date, Waterfall Trigger Event means (i)
the number of underlying mortgage loans (other than Specially
Serviced Mortgage Loans) held by the issuing entity as of the
related determination date is less than or equal to 10, or (ii) the
aggregate stated principal balance of the underlying mortgage loans
(other than Specially Serviced Mortgage Loans) as of the related
determination date is less than or equal to 15% of the initial
mortgage pool balance.
Moody's received full year 2014 operating results for 100% of the
pool, and full year 2015 operating results for 75% of the pool.
Moody's weighted average conduit LTV is 102%, compared to 105% at
Moody's last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average positive haircut of less than 1% to the
most recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 8.6%.
Moody's actual and stressed conduit DSCRs are 1.71X and 0.94X,
respectively, compared to 1.75X and 0.91X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 42% of the pool balance. The
largest loan is the 597 Westport Loan ($64.9 million -- 18.4% of
the pool), which is secured by a 235 unit Class-A multifamily
complex located in Norwalk, Connecticut. The property was 94%
leased as of December 2015, compared to 92% at last review and
compared to 97% at securitization. Property performance increased
since last review due to an increase in average rental rates at the
property. Moody's LTV and stressed DSCR are 109% and 0.81X,
respectively, compared to 112% and 0.80X at last review.
The second largest loan is the Northcreek Apartments Loan ($50.8
million -- 14.4% of the pool), which is secured by a 524 unit
apartment complex located in Bothell, Washington (approximately 22
miles north of the Seattle CBD). The property includes Section 8
voucher units as well as a 5-10% student tenant concentration. The
property was 96% leased as of December 2015, compared to 93% at
last review and 97% at securitization. Performance improved
significantly in 2015 due an increase in average rental rates at
the property. Moody's LTV and stressed DSCR are 83% and 1.07X,
respectively, compared to 85% and 1.05X at last review.
The third largest loan is the Campbell Run Apartments Loan ($32.7
million -- 9.3% of the pool), which is secured by a 360 unit
multifamily property located in Woodinville, Washington. The
property consists of 17 three-story apartment buildings as well as
a leasing/clubhouse building. The property was 95% leased as of
December 2015, compared to 93% at last review and at
securitization. Performance improved significantly in 2015 due an
increase in average rental rates at the property. Moody's LTV and
stressed DSCR are 78% and 1.17X, respectively, compared to 100% and
0.92X at last review.
GMAC COMMERCIAL 1999-C2: Moody's Affirms Caa3 Rating on Cl. X Debt
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
and upgraded the ratings on one class in GMAC Commercial Mortgage
Securities, Inc., Commercial Mortgage Pass-Through Certificates,
Series 1999-C2 as follows:
Cl. H, Affirmed Aaa (sf); previously on Jul 30, 2015 Affirmed Aaa
(sf)
Cl. J, Upgraded to Aa1 (sf); previously on Jul 30, 2015 Upgraded to
A2 (sf)
Cl. K, Affirmed Caa3 (sf); previously on Jul 30, 2015 Affirmed Caa3
(sf)
Cl. L, Affirmed C (sf); previously on Jul 30, 2015 Affirmed C (sf)
Cl. X, Affirmed Caa3 (sf); previously on Jul 30, 2015 Downgraded to
Caa3 (sf)
RATINGS RATIONALE
The rating on the P&I class H was affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the P&I classes K and L were affirmed because the
ratings are consistent with Moody's expected loss.
The rating on the P&I class J was upgraded based primarily on an
increase in credit support resulting from loan paydowns and
amortization. The deal has paid down 8% since Moody's last review.
The rating on the IO class X was affirmed based on the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes.
Moody's rating action reflects a base expected loss of 11.4% of the
current balance, compared to 6.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.5% of the original
pooled balance, compared to 2.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 15, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $30 million
from $975 million at securitization. The certificates are
collateralized by 10 mortgage loans ranging in size from less than
1% to 39% of the pool. Four loans, constituting 33% of the pool,
have defeased and are secured by US government securities.
One loan, constituting 6% of the pool, is on the master servicer's
watchlist. The watchlist includes loans that meet certain portfolio
review guidelines established as part of the CRE Finance Council
(CREFC) monthly reporting package. As part of Moody's ongoing
monitoring of a transaction, the agency reviews the watchlist to
assess which loans have material issues that could affect
performance.
Sixteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $21 million (for an average loss
severity of 16%). Currently, there are no loans in special
servicing.
Moody's received full year 2015 operating results for 100% of the
pool and partial year 2016 operating results for 46% of the pool.
Moody's weighted average conduit LTV is 50%, compared to 61% at
Moody's last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 36% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.0%.
Moody's actual and stressed conduit DSCRs are 1.09X and 2.38X,
respectively, compared to 1.05X and 2.09X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The three remaining conduit loans represent 23% of the pool
balance. The largest loan is the Bal Seal Engineering Loan ($3.8
million -- 13% of the pool), which is secured by a 125,000 square
foot (SF) industrial property located in Foothill Ranch,
California. The property is 100% leased to Bal Seal Engineering
Company through January 2019. Due to single tenant exposure risk, a
lit/dark analysis was applied. Moody's LTV and stressed DSCR are
37% and 2.96X, respectively, compared to 41% and 2.62X at last
review.
The second largest loan is the Dendrite Office Building Loan ($1.7
million -- 6% of the pool), which is secured by a 26,280 SF office
complex located in Basking Ridge, New Jersey. The property was 100%
leased as of April 2016, compared to 87% at last review. The loan
is on the servicer's watchlist due to low DSCR. Moody's LTV and
stressed DSCR are 79% and 1.36X, respectively, compared to 108% and
1.0X at last review.
The third largest loan is the 30 Executive Avenue Loan ($1.4
million -- 5% of the pool), which is secured by an 89,178 SF
industrial property located in Edison, New Jersey. The property is
100% leased to Skekia Group through December 2018. Due to the
single tenant exposure a lit/dark analysis was applied. Moody's LTV
and stressed DSCR are 52% and 2.08X, respectively, compared to 56%
and 1.92X at last review.
The CTL component consists of 3 loans, constituting 44% of the
pool, secured by properties leased to 3 tenants. The largest
exposures are CarMax, Inc. ($11.9 million -- 39% of the pool), Rite
Aid Corporation ($1.1 million -- 4% of the pool); and CVS Health
($0.4 million -- 1% of the pool). The bottom-dollar weighted
average rating factor (WARF) for the CTL component is 1,594
compared to 1,606 at last review. WARF is a measure of the overall
quality of a pool of diverse credits. The bottom-dollar WARF is a
measure of the default probability.
GRAYSON CLO: Moody's Affirms Ba2 Rating on Class C Notes
--------------------------------------------------------
Moody's Investors Service announced that it has upgraded these
ratings of these notes issued by Grayson CLO, Ltd.:
$68,000,000 Class A-2 Floating Rate Senior Secured Extendable
Notes Due 2021, Upgraded to Aaa (sf); previously on March 10,
2015, Upgraded to Aa1 (sf)
$72,000,000 Class B Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2021, Upgraded to A1 (sf);
previously on March 10, 2015, Upgraded to A2 (sf)
Moody's also affirmed the ratings of these notes:
$1,015,000,000 Class A-1a Floating Rate Senior Secured
Extendable Notes Due 2021 (current outstanding balance of
403,604,879), Affirmed Aaa (sf); previously on March 10, 2015,
Affirmed Aaa (sf)
$111,500,000 Class A-1b Floating Rate Senior Secured Extendable
Notes Due 2021, Affirmed Aaa (sf); previously on March 10,
2015, Upgraded to Aaa (sf)
$75,000,000 Class C Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2021, Affirmed Ba2 (sf); z
previously on March 10, 2015, Upgraded to Ba2 (sf)
$31,000,000 Class D Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2021 (current outstanding balance
of $18,075,526), Affirmed Ba3 (sf); previously on March 10,
2015, Upgraded to Ba3 (sf)
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization ratios since July 2015. The Class A-1a
notes have been paid down by approximately 37.9% or $246.4 million
since that time. Based on the trustee's May 2016 report, the
over-collateralization (OC) ratios for the Class A, Class B, Class
C and Class D notes are reported at 131.61%, 117.15%, 105.11%, and
102.57%, respectively, versus July 2015 levels of 123.42%, 113.56%
,104.84%, and 102.93%, 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 Ratings:
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) 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
$24 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% (2050)
Class A-1a: 0
Class A-1b: 0
Class A-2: 0
Class B: +2
Class C: +1
Class D: +1
Moody's Adjusted WARF + 20% (3076)
Class A-1a: 0
Class A-1b: 0
Class A-2: -1
Class B: -2
Class C: -1
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 $758.7 million, defaulted par
of $74.6 million, a weighted average default probability of 15.75%
(implying a WARF of 2563), a weighted average recovery rate upon
default of 45.69%, a diversity score of 33 and a weighted average
spread of 3.21% (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.
GROSVENOR PLACE III: S&P Raises Rating on Class E Notes to B+
-------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Grosvenor Place CLO
III B.V.'s class B, C, D, and E notes. At the same time, S&P has
affirmed its rating on the class A-3 notes.
The rating actions follow S&P's analysis of the transaction using
data from the trustee report dated April 18, 2016, and the
application of S&P's relevant criteria.
Since S&P's Feb. 26, 2015 review, the rated notes have benefited
from a significant level of repayment, leading to an increase in
available credit enhancement, and from a decrease in the
weighted-average life of the portfolio.
S&P subjected the capital structure to its cash flow analysis to
determine the break-even default rate (BDR) for each class of notes
at each rating level. BDRs represent S&P's estimate of the level
of asset defaults that the notes can withstand and still fully pay
interest and principal to the noteholders. As a result of the
above developments, S&P believes the rated notes are now able to
withstand a larger amount of as set defaults.
In S&P's analysis, it considered that the portfolio currently
includes British pound sterling-denominated and U.S.
dollar-denominated assets, with no hedging mechanism in place. In
addition, in the calculation of our supplemental tests, S&P gave
benefit to calculated excess spread. S&P has estimated future
defaults in the portfolio in each rating scenario by applying its
criteria.
S&P's analysis shows that the available credit enhancement for the
class B, C, D, and E notes is now commensurate with higher ratings
than previously assigned. Therefore, S&P has raised its ratings on
the class B, C, D, and E notes. At the same time, S&P has affirmed
its 'AAA (sf)' rating on the class A3 notes.
Grosvenor Place CLO III is a cash flow collateralized loan
obligation (CLO) transaction managed by CQS Cayman Limited
Partnership. A portfolio of loans to speculative-grade corporate
firms backs the transaction. Grosvenor Place CLO III closed in
August 2007 and its reinvestment period ended in October 2013.
RATINGS LIST
Class Rating
To From
Grosvenor Place CLO III B.V.
EUR450 Million Senior-Secured Floating-Rate Notes
Rating Affirmed
A-3 AAA (sf)
Ratings Raised
B AAA (sf) A+ (sf)
C AA (sf) BBB+ (sf)
D BB+ (sf) B+ (sf)
E B+ (sf) B- (sf)
JC PENNEY: S&P Raises Ratings on 8 Cert. Tranches to 'B-'
---------------------------------------------------------
S&P Global Ratings raised its ratings on eight classes of
certificates linked to J.C. Penney Co. Inc. debentures to 'B-' from
'CCC+'.
S&P's ratings on the eight classes are dependent on its rating on
the underlying security, J.C. Penny Co. Inc.'s 7.625% debentures
due March 1, 2097 ('B-').
The rating actions reflect the June 7, 2016, raising of S&P's
rating on the underlying security to 'B-' from 'CCC+'. S&P may
take additional rating actions on these transactions due to
subsequent changes in our rating assigned to the underlying
security.
RATINGS RAISED
CABCO Trust for JC Penney Debentures
US$52.65 million series trust certificates due 03/01/2097
Class To From
Certs. B- CCC+
CorTS Trust For J.C. Penney Debentures
US$100 million corporate-backed trust securities (CorTS)
certificates
Class To From
Certs B- CCC+
Corporate Backed Callable Trust Certificates J C Penney
Debenture-Backed
Series 2006-1
US$27.5 million
Class To From
A-1 B- CCC+
A-2 B- CCC+
Corporate Backed Callable Trust Certificates J.C. Penney Debenture
Backed
Series 2007-1 Trust
US$55 million corporate-backed callable trust certificates J.C.
Penney
debentures-backed series 2007-1
Class To From
A-1 B- CCC+
A-2 B- CCC+
Structured Asset Trust Unit Repackaging (SATURNS) J.C. Penny Co.
US$54.5 million units series 2007-1
Class To From
A B- CCC+
B B- CCC+
JP MORGAN 2000-C9: Moody's Affirms Caa3 Rating on Class X Certs
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on two classes
in J.P. Morgan Commercial Mortgage Finance Corp., Pass-Through
Certificates, Series 2000-C9 as follows:
Cl. J, Affirmed C (sf); previously on Aug 21, 2015 Affirmed C (sf)
Cl. X, Affirmed Caa3 (sf); previously on Aug 21, 2015 Affirmed Caa3
(sf)
RATINGS RATIONALE
The rating on Class J was affirmed because it is consistent with
Moody's expected loss. Class J has already experienced a 66%
realized loss as result of previously liquidated loans.
The rating on the IO class, Class X, was affirmed based on the
credit performance of its referenced classes.
Moody's said, "Our rating action reflects a base expected loss of
0% of the current balance, compared to 24.4% at Moody's last
review. Moody's does not anticipate losses from the remaining
collateral in the current environment. However, over the remaining
life of the transaction, losses may emerge from macro stresses to
the environment and changes in collateral performance. Our ratings
reflect the potential for future losses under varying levels of
stress. Moody's base expected loss plus realized losses is now 4.7%
of the original pooled balance, the same as at the last review."
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 15, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $2.9 million
from $814 million at securitization. The pool has paid down 7%
since last review. The certificates are collateralized by two
mortgage loans.
One loan, constituting 87% of the pool, is on the master servicer's
watchlist. The watchlist includes loans that meet certain portfolio
review guidelines established as part of the CRE Finance Council
(CREFC) monthly reporting package. As part of Moody's ongoing
monitoring of a transaction, the agency reviews the watchlist to
assess which loans have material issues that could affect
performance.
Twenty-four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $37.8 million (an average loss
severity of 38%). No loans are currently in special servicing.
Moody's received full year 2014 operating results for 100% of the
pool, and full or partial year 2015 operating results for 100% of
the pool.
The largest loan is the Kmart - Baltimore Loan ($2.5 million -- 87%
of the pool), which is secured by a single story retail building in
Baltimore, Maryland. The anchor tenant, Kmart, leases 79% of
property through November 2017. Current occupancy is 92%, the same
as at prior review. The loan passed its December 2009 anticipated
Repayment Date (ARD). Moody's LTV and stressed DSCR are 97% and
1.14X, respectively, compared to 102% and 1.09X at the last
review.
The second largest loan is the RiteAid - Dayton Loan ($365,994 --
13% of the pool), which is secured by a single tenant, RiteAid. The
loan is fully-amortizing and the lease term scheduled to expire in
2018 (which coincides with the loan maturity date). Moody's LTV and
stressed DSCR are 25% and greater than 4.00X, respectively,
compared to 33% and 3.25X at the last review.
JP MORGAN 2007-LDP10: Moody's Cuts Ratings on 3 Tranches to Caa3
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and downgraded the ratings on four classes in J.P. Morgan Chase
Commercial Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates, Series 2007-LDP10 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Jul 30, 2015 Affirmed
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Jul 30, 2015 Affirmed Aaa
(sf)
Cl. A-M, Affirmed Baa2 (sf); previously on Jul 30, 2015 Affirmed
Baa2 (sf)
Cl. A-J, Downgraded to Caa3 (sf); previously on Jul 30, 2015
Downgraded to Caa2 (sf)
Cl. A-JFX, Downgraded to Caa3 (sf); previously on Jul 30, 2015
Downgraded to Caa2 (sf)
Cl. A-JS, Downgraded to Caa3 (sf); previously on Jul 30, 2015
Downgraded to Caa2 (sf)
Cl. B, Affirmed C (sf); previously on Jul 30, 2015 Affirmed C (sf)
Cl. B-S, Affirmed C (sf); previously on Jul 30, 2015 Affirmed C
(sf)
Cl. C, Affirmed C (sf); previously on Jul 30, 2015 Affirmed C (sf)
Cl. C-S, Affirmed C (sf); previously on Jul 30, 2015 Affirmed C
(sf)
Cl. X, Downgraded to B3 (sf); previously on Jul 30, 2015 Affirmed
B2 (sf)
RATINGS RATIONALE
The ratings on three P&I classes, classes A-3, A-1A and A-M, were
affirmed because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on three P&I classes, classes A-J, A-JFX and A-JS, were
downgraded due to anticipated losses from specially serviced and
troubled loans that are higher than Moody's had previously
expected.
The ratings on three P&I classes, classes B, B-S, C and C-S, were
affirmed because the ratings are consistent with Moody's expected
loss.
The rating on the IO Class was downgraded due to a decline in the
credit performance (or the weighted average rating factor or WARF)
of its referenced classes.
Moody's rating action reflects a base expected loss of 16.8% of the
current balance, compared to 13.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 17.9% of the
original pooled balance, compared to 16.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 15, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 48% to $2.8 billion
from $5.3 billion at securitization. The certificates are
collateralized by 134 mortgage loans ranging in size from less than
1% to 8.3% of the pool, with the top ten loans constituting 48.2%
of the pool. Fifteen loans, constituting 7% of the pool, have
defeased and are secured by US government securities.
Thirty-three loans, constituting 15% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Fifty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $486.8 million (for an average loss
severity of 41%). Seven loans, constituting 17% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Lafayette Property Trust Loan ($203.3 million -- 7.3% of the
pool), which is secured by nine cross-collateralized and
cross-defaulted office properties containing approximately 840,000
square feet (SF) and located in Alexandria, Virginia. The loan
transferred to special servicing in November 2014 due to imminent
default associated with an August 2015 tenant lease expiration. As
per the December 2015 rent roll, the weighted average occupancy of
the portfolio was 65%, compared to 73% as of February 2015.
The remaining 6 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $340.9 million loss
for the specially serviced loans (72.3% expected loss on average).
Moody's has assumed a high default probability for 21 poorly
performing loans, constituting 18.2% of the pool, and has estimated
an aggregate loss of $90.4 million (an 18% expected loss based on a
52.7% probability default) from these troubled loans.
Moody's received full year 2014 operating results for 95% of the
pool and full or partial year 2015 operating results for 92% of the
pool. Moody's weighted average conduit LTV is 111.6%, compared to
112.7% at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 8.6% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.32X and 0.95X,
respectively, compared to 1.35X and 0.94X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 20.0% of the pool balance.
The largest loan is the Coconut Point Loan ($230 million -- 8.3% of
the pool), which is secured by an 835,000 square foot (SF) retail
center located near Fort Meyers in Estero, Florida. The collateral
consists of three retail components: a cinema-anchored village, a
community center primarily consisting of big box retail and a
lakefront portion composed of casual restaurants. As per the March
2016 rent roll, the shopping center was 96% leased, the same as of
March 2015. Moody's LTV and stressed DSCR are 129.1% and 0.71X,
respectively, compared to 127.6% and 0.72X at the last review.
The second largest loan is the 599 Lexington Avenue Loan ($225
million -- 8.1% of the pool), which is secured by a 50-story, 1.03
million square foot (SF) office building located in Midtown
Manhattan. The building has nine street level retail / restaurant
tenants which surround the perimeter of the building. The loan
represents a 30% pari passu interest in a $750 million loan. As per
the March 2016 rent roll, the property was 97.6% leased, compared
to 99% leased as of December 2014. Moody's LTV and stressed DSCR
are 132.4% and 0.69X, respectively, compared to 128.6% and 0.71X at
the last review.
The third largest loan is the Orchard at Saddleback Loan ($100
million -- 3.6% of the pool), which is secured by an open shopping
mall totaling 278,312 square feet (SF) with approximately 41
stores, and located in the Orange County submarket. As per the
March 2016 rent roll, the property was 96.5% occupied. Moody's LTV
and stressed DSCR are 131.3% and 0.74X, respectively, compared to
135.3% and 0.72X at the last review.
JP MORGAN 2007-LDP12: Moody's Lowers Rating on Cl. X Debt to B2
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on five classes
and downgraded the rating on one class in J.P. Morgan Chase
Commercial Mortgage Securities Trust 2007-LDP12, Commercial
Mortgage Pass-Through Certificates, Series 2007-LDP12 as:
Cl. A-3, Affirmed Aaa (sf); previously on July 31, 2015,
Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on July 31, 2015,
Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on July 31, 2015,
Affirmed Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on July 31, 2015,
Affirmed Aaa (sf)
Cl. A-M, Affirmed A2 (sf); previously on July 31, 2015, Upgraded
to A2 (sf)
Cl. X, Downgraded to B2 (sf); previously on July 31, 2015,
Affirmed B1 (sf)
RATINGS RATIONALE
The ratings on five P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The rating on the IO Class was downgraded due to the decline in the
credit performance of its reference classes resulting from
principal paydowns of higher quality reference classes.
Moody's rating action reflects a base expected loss of 11.8% of the
current balance, compared to 10.3% at Moody's last review. Moody's
base expected loss plus realized losses is now 12.6% of the
original pooled balance, compared to 11.9% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in December
2014.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28, compared to 31 at Moody's last review.
DEAL PERFORMANCE
As of the June 15, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 44% to $1.39 billion
from $2.50 billion at securitization. The certificates are
collateralized by 118 mortgage loans ranging in size from less than
1% to 12% of the pool, with the top ten loans constituting 44% of
the pool. Twelve loans, constituting 6.4% of the pool, have
defeased and are secured by US government securities.
Eighteen loans, constituting 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty-one loans have been liquidated from the pool, resulting in
an aggregate realized loss of $151 million (for an average loss
severity of 30%). Twelve loans, constituting 11% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Liberty Plaza Loan ($43 million -- 3.1% of the pool),
which is secured by a 372,000 square foot (SF) power center in
northeast Philadelphia, Pennsylvania. The loan transferred to
special servicing in January 2013 for imminent default. The
property became REO via a deed-in-lieu of foreclosure accepted in
July 2013. In 2015 the property lost two major tenants, Walmart
and Pathmark. As of March 2016, the property was 45% leased,
compared to 62% at yearend 2015 and 94% at yearend 2014. A
December 2015 appraisal valued the property at $13 million.
The remaining eleven specially serviced loans are secured by a mix
of property types. Moody's estimates an aggregate $82.2 million
loss for the specially serviced loans (54% expected loss on
average).
Moody's has assumed a high default probability for fourteen poorly
performing loans, constituting 10% of the pool, and has estimated
an aggregate loss of $24.3 million (a 17% expected loss based on a
50% probability default) from these troubled loans.
Moody's received full year 2015 operating results for 80% of the
pool, and full or partial year 2016 operating results for 20% of
the pool. Moody's weighted average conduit LTV is 102%, compared
to 106% at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 11.5% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.2%.
Moody's actual and stressed conduit DSCRs are 1.43X and 1.06X,
respectively, compared to 1.37X and 1.01X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 22% of the pool balance. The
largest loan is the Plaza El Segundo Loan ($162 million -- 12% of
the pool), which is secured by a 382,000 SF retail power/lifestyle
center in El Segundo, California. Retailers at the center include
Whole Foods, Dick's Sporting Goods, Best Buy and The Container
Store. The property was 97% leased as of March 2016, compared to
98% at yearend 2015 and 99% at yearend 2014. Moody's LTV and
stressed DSCR are 124% and 0.76X, respectively, compared to 115%
and 0.82X at the last review.
The second largest loan is the 111 Massachusetts Avenue Loan ($85.6
million -- 6.1% of the pool), which is secured by an eight story,
Class A office building in downtown Washington, DC. In May 2015,
two General Services Administration leases comprising 98.5% of the
Net Rentable Area (NRA) renewed for five years through 2019. As of
December 2015, the property was 95% leased, unchanged from the
prior three years. Moody's LTV and stressed DSCR are 99% and
0.93X, respectively, compared to 103% and 0.89X at the last
review.
The third largest loan is the Summit Mall Loan ($65 million -- 4.7%
of the pool), which is secured by a 529,000 SF collateral portion
of a 765,000 SF regional mall located in Fairlawn, Ohio. The
property is anchored by Macy's and two Dillards' stores. In May
2015, Macy's renewed their lease for five years. Other tenants
include Gap, Express, Victorias Secret and Apple. As of December
2015, the property was 92% leased, compared to 95% at yearend 2014.
Moody's LTV and stressed DSCR are 59% and 1.80X, respectively,
compared to 67% and 1.59X at the last review.
KKR CLO 14: Moody's Assigns Ba3 Rating on Class D Notes
-------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by KKR CLO 14 Ltd.
Moody's rating action is:
$310,000,000 Class A-1A Senior Secured Floating Rate Notes due
2028, Definitive Rating Assigned Aaa (sf)
$10,000,000 Class A-1B Senior Secured Fixed Rate Notes due 2028,
Definitive Rating Assigned Aaa (sf)
$56,300,000 Class A-2 Senior Secured Floating Rate Notes due
2028, Definitive Rating Assigned Aa2 (sf)
$30,500,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned A2 (sf)
$28,400,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned Baa3 (sf)
$22,500,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2028, Definitive Rating Assigned Ba3 (sf)
The Class A-1A Notes, the Class A-1B Notes, the Class A-2 Notes,
the Class B Notes, the Class C Notes and the Class D 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.
KKR CLO 14 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is approximately 85% ramped as of
the closing date.
KKR Financial Advisors II, 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 four year reinvestment period.
Thereafter, the Manager may reinvest 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: $500,200,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.85%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 49.0%
Weighted Average Life (WAL): 8 years.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2015.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
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 2850 to 3278)
Rating Impact in Rating Notches
Class A-1A Notes: 0
Class A-1B Notes: 0
Class A-2 Notes: -1
Class B Notes: -2
Class C Notes: -1
Class D Notes: 0
Percentage Change in WARF -- increase of 30% (from 2850 to 3705)
Rating Impact in Rating Notches
Class A-1A Notes: -1
Class A-1B Notes: -1
Class A-2 Notes: -3
Class B Notes: -4
Class C Notes: -2
Class D Notes: -1
LB COMMERCIAL 1999-C2: Moody's Affirms Caa3 Rating on Cl. X Debt
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
in LB Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 1999-C2 as follows
Cl. J, Affirmed Aaa (sf); previously on Jun 25, 2015 Upgraded to
Aaa (sf)
Cl. K, Affirmed Caa2 (sf); previously on Jun 25, 2015 Upgraded to
Caa2 (sf)
Cl. X, Affirmed Caa3 (sf); previously on Jun 25, 2015 Affirmed Caa3
(sf)
RATINGS RATIONALE
The rating on Class J was affirmed due to the credit performance
(or the weighted average rating factor or WARF) of the remaining
CTL loans, the sufficient credit enhancement level, and defeasance
which currently fully covers the outstanding bond balance.
The rating on Class K was affirmed because the rating is consistent
with Moody's expected loss.
The rating on the IO Class, Class X, was affirmed based on the
credit performance (or the weighted average rating factor or WARF)
of its referenced classes.
Moody's rating action reflects a base expected loss of 1.5% of the
current balance, compared to 3.0% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.5% of the original
pooled balance, the same as the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Currently, the transaction is secured by 12 Credit Tenant Lease
(CTL) loans with two loans being defeased. CTL pools' ratings are
primarily based on the senior unsecured debt rating (or the
corporate family rating) of the tenants leasing the real estate
collateral supporting the bonds. Other factors that are also
considered are Moody's dark value of the collateral (value based on
the property being vacant or dark), which is used to determine a
recovery rate upon a loan's default and the rating of the residual
insurance provider, if applicable. Factors that may cause an
upgrade of the ratings include an upgrade in the rating of the
corporate tenant or significant loan paydowns or amortization which
results in a higher dark loan to value. Factors that may cause a
downgrade of the ratings include a downgrade in the rating of the
corporate tenant or the residual insurance provider.
DEAL PERFORMANCE
As of the June 15, 2016 payment date, the transaction's aggregate
certificate balance has decreased by approximately 99% to $8.7
million from $892.4 million at securitization. The Certificates are
collateralized by 12 mortgage loans ranging in size from less than
3% to 13% of the pool. The pool originally included two loans with
structured credit assessments, 110 conduit loans and 12 CTL loans.
Due to paydowns, the entirety of the pool now consists of 12 CTL
loans. Two CTL loans, representing 22% of the pool, have defeased
and are secured by US Government Securities.
Twenty-six loans have been liquidated from the pool, resulting in
an aggregate realized loss of $22 million (22% loss severity on
average). Due to realized losses, classes L, M, N and P have been
eliminated entirely and class K has experienced a 8% principal
loss. There are currently no loans on the watchlist or in special
servicing.
The CTL loans are secured by 10 properties leased to three tenants.
The exposures are CVS Heath (Moody's senior unsecured rating Baa1 -
stable outlook; 63.4% of the pool), Rite Aid Corporation (Moody's
senior unsecured rating B3/Caa1 -- rating under review for possible
upgrade; 11.4% of the pool) and McDonald's Corporation (Moody's
senior unsecured rating Baa1 - stable outlook; 3.0% of the pool).
The bottom-dollar WARF for this pool, including defeasance, is 715
compared to 803 at last review. WARF is a measure of the overall
quality of a pool of diverse credits. The bottom-dollar WARF is a
measure of the default probability within the pool.
MERRILL LYNCH 2006-C1: S&P Lowers Rating on Class B Certs to 'D'
----------------------------------------------------------------
S&P Global Ratings lowered its rating on the class B commercial
mortgage pass-through certificates from Merrill Lynch Mortgage
Trust 2006-C1, a U.S. commercial mortgage-backed securities (CMBS)
transaction, to 'D (sf)'. In addition, S&P affirmed its 'B+ (sf)'
rating on class AJ from the same transaction.
S&P's rating actions on the 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 loans in the pool,
the transaction's structure, and the liquidity available to the
trust.
The downgrade on class B reflects accumulated interest shortfalls
that S&P expects will remain outstanding in the near term. S&P's
analysis also considered the credit support erosion that it
anticipate will occur upon the eventual resolution of the 12 loans
($115.8 million, 45.7%) with the special servicer.
According to the June 13, 2016, trustee remittance report, the
current monthly interest shortfalls totaled $373,028 and resulted
primarily from:
-- Scheduled interest not advanced totaling $293,310;
-- Net appraisal subordinate entitlement reduction amounts
totaling $67,955; and
-- Special servicing fees totaling $18,193.
The current interest shortfalls affected classes subordinate to and
including class B.
The affirmation on class AJ reflects S&P's expectation that the
available credit enhancement for the class will be within its
estimate of the necessary credit enhancement required for the
current rating, as well as S&P's views regarding the current and
future performance of the transaction's collateral.
While the available credit enhancement levels may suggest positive
rating movement on class AJ, S&P's rating action also considered
the certificates's susceptibility to potential future interest
shortfalls from the loans currently with the special servicer.
Based on the June 13, 2016, trustee remittance report, interest
proceeds from the collateral were not sufficient to pay full
interest due on class AJ, resulting in also using principal
proceeds from the collateral to pay interest on class AJ. If
interest shortfalls increase because of the specially serviced
loans or loans on the master servicers' combined watchlist, S&P may
further adjust the ratings accordingly on class AJ.
TRANSACTION SUMMARY
As of the June 13, 2016, trustee remittance report, the collateral
pool balance was $253.4 million, which is 10.2% of the pool balance
at issuance. The pool currently includes 18 loans, down from 244
loans at issuance. Twelve of these loans are with the special
servicer, and three ($25.2 million, 9.9%) are on the master
servicers' combined watchlist. The master servicers, Wells Fargo
Bank N.A. and Midland Loan Services, reported financial information
for 99.0% of the loans in the pool, of which 89.9% was partial- or
year-end 2015 data, and the remainder was year-end 2014 data.
Excluding the 12 specially serviced loans, S&P calculated a 2.69x
S&P Global Ratings' weighted average debt service coverage (DSC)
and 45.4% S&P Global Ratings' weighted average loan-to-value (LTV)
ratio using a 6.99% S&P Global Ratings' weighted average
capitalization rate. The top 10 loans have an aggregate
outstanding pool trust balance of $225.5 million (89.0%). Excluding
the seven specially serviced loans and using servicer-reported
numbers, S&P calculated a S&P Global Ratings' weighted average DSC
and LTV of 2.84x and 40.9%, respectively, for the three performing
top 10 loans.
To date, the transaction has experienced $202.2 million in
principal losses, or 8.1% of the original pool trust balance. S&P
expects losses to reach approximately 9.1% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses S&P expects upon the eventual resolution of
the 12 specially serviced loans.
CREDIT CONSIDERATIONS
As of the June 13, 2016, trustee remittance report, 12 loans in the
pool were with the special servicer, LNR Partners LLC (LNR). Of the
12 loans with the special servicer, seven ($59.0 million, 23.3%)
have been deemed nonrecoverable by the master servicers because the
master servicers are no longer advancing debt service and
property-related expenses on the properties. Appraisal reduction
amounts (ARAs) total $14.2 million on the remaining five specially
serviced loans.
Details of the two largest specially serviced loans, both of which
are top 10 loans, are.
The Gateway One loan ($46.3 million, 18.3%) is the second-largest
loan in the pool and has a total reported exposure of $46.5
million. The loan is secured by a 409,920-sq.-ft. office property
in St. Louis, Mo. The loan was transferred to the special servicer
on May 4, 2016, because of maturity default. The loan matured on
March 1, 2016. The reported DSC and occupancy as of year-end 2015
were 1.12x and 94.1%, respectively. A $11.6 million ARA is in
effect against this loan. S&P expects a minimal loss upon this
loan's eventual resolution.
The Lantern Plaza loan ($11.5 million, 4.5%) is the fifth-largest
loan in the pool and has a total reported exposure of $11.6
million. The loan is secured by a 71,297-sq.-ft. retail property
in North Attleboro, Mass. The loan was transferred to the special
servicer on April 18, 2016, because of imminent maturity default.
The loan matured on May 1, 2016. The reported DSC and occupancy as
of year-end 2015 were 1.30x and 100.0%, respectively. The loan has
been deemed nonrecoverable by the master servicer. There is no ARA
in effect against the loan. S&P expects a minimal loss upon this
loan's eventual resolution.
The 10 remaining loans with the special servicer have individual
balances that represent less than 4.0% of the total pool trust
balance. S&P estimated losses for the 12 specially serviced loans,
arriving at a weighted average loss severity of 20.2%.
With respect to the specially serviced loans noted above, a minimal
loss is less than 25%, a moderate loss is 26%-59%, and a
significant loss is 60% or greater.
RATINGS LIST
Merrill Lynch Mortgage Trust 2006-C1
Commercial mortgage pass-through certificates series 2006-C1
Rating
Class Identifier To From
AJ 59023BAH7 B+ (sf) B+ (sf)
B 59023BAJ3 D (sf) CCC- (sf)
MORGAN STANLEY 2001-TOP3: Moody's Affirms Caa3 Rating on X-1 Debt
-----------------------------------------------------------------
Moody's Investors Service has upgraded the rating on one class and
affirmed the ratings on two classes in Morgan Stanley Dean Witter
Capital I Inc., Commercial Mortgage Pass-Through Certificates,
Series 2001-TOP3, as follows:
Cl. E, Upgraded to Baa1 (sf); previously on Jan 28, 2016 Upgraded
to Baa3 (sf)
Cl. F, Affirmed Ca (sf); previously on Jan 28, 2016 Affirmed Ca
(sf)
Cl. X-1, Affirmed Caa3 (sf); previously on Jan 28, 2016 Affirmed
Caa3 (sf)
RATINGS RATIONALE
The rating on Class E was upgraded based primarily on an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 19% since Moody's last review.
The rating on Class F was affirmed because the ratings are
consistent with Moody's expected loss. Class F has already
experienced a 39% realized loss as result of previously liquidated
loans.
The rating on the IO class, Class X-1, was affirmed based on the
credit performance (or the weighted average rating factor or WARF)
of its referenced classes.
Moody's rating action reflects a base expected loss of 0.2% of the
current balance, compared to 1.1% at Moody's last review. Moody's
base expected loss plus realized losses is now 5.6% of the original
pooled balance, the same as at Moody's last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the June 15th 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $22 million
from $1.03 billion at securitization. The certificates are
collateralized by eleven mortgage loans ranging in size from less
than 1% to 24% of the pool. One loan, constituting 3.6% of the
pool, has defeased and is secured by US government securities.
Two loans, constituting 39% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Twenty-six loans have been liquidated from the pool, resulting in
an aggregate realized loss of $57.2 million (for an average loss
severity of 38%). There are currently no loans in special
servicing.
Moody's received full year 2015 operating results for 100% of the
pool. Moody's weighted average conduit LTV is 60%, compared to 57%
at Moody's last review. Moody's conduit component excludes loans
with structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 29% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.31X and 3.27X,
respectively, compared to 1.39X and 3.48X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 62% of the pool balance. The
largest loan is the former A & P (Waldbaums) Belle Harbor Loan
($5.4 million -- 24.2% of the pool), which is secured by a 57,000
SF retail property in Belle Harbor, New York. The property was
originally 100% leased to Waldbaum's through May 2021. However, the
company's parent company, Atlantic & Pacific Tea Company Inc.
(A&P), filed for bankruptcy in July 2015 and announced it would be
closing this location as part of its bankruptcy. Stop & Shop has
since taken over the lease. Due to the single tenant risk, Moody's
valuation reflects a lit/dark analysis. Moody's LTV and stressed
DSCR are 85% and 1.23X, respectively, compared to 87% and 1.21X at
the last review.
The second largest loan is the Marsh's Supermarket Store Loan ($5.1
million -- 22.9% of the pool), which is secured by a 57,000 SF
retail property in Indianapolis, Indiana. The property is 100%
leased to Marsh Supermarket through February 2021. Due to the
single tenant risk, Moody's valuation reflects a lit/dark analysis.
Moody's LTV and stressed DSCR are 74% and 1.42X, respectively,
compared to 76% and 1.39X at the last review.
The third largest loan is the former Kash N' Karry Grocery Store
Loan ($3.3 million -- 15.1% of the pool), which is secured by a
48,119 SF retail building built in 2000 located in Tampa, Florida.
The property was 100% leased to Kash N. Karry Grocery Store (later
re-branded as Sweetbay Supermarket) through September 2020. The
tenant closed the store in February 2013 but is still paying the
rent. Due to single tenant risk, Moody's valuation reflects a
lit/dark analysis. Moody's LTV and stressed DSCR are 86% and 1.22X,
respectively.
MORGAN STANLEY 2004-HE7: Moody's Hikes Rating on Cl. M-2 Debt to B1
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two tranches
from two transactions backed by Subprime RMBS loans, and issued by
Morgan Stanley.
Complete rating actions are:
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2004-HE7
Cl. M-2, Upgraded to B1 (sf); previously on April 1, 2013,
Affirmed B2 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2004-HE9
Cl. M-2, Upgraded to B2 (sf); previously on April 1, 2013,
Affirmed B3 (sf)
RATINGS RATIONALE
The ratings upgraded are due to the total credit enhancement
available to the bonds. The rating actions are a result of the
recent performance of the underlying pools and reflects Moody's
updated loss expectation on these 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 ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
MORGAN STANLEY 2006-HQ10: Moody's Affirms Ba2 Rating on A-J Debt
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on one class,
affirmed the ratings on ten classes, and downgraded the ratings on
one class in Morgan Stanley Capital I Trust 2006-HQ10 as:
Cl. A-1A, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-4FX, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-M, Upgraded to Aa1 (sf); previously on June 25, 2015,
Upgraded to Aa3 (sf)
Cl. A-J, Affirmed Ba2 (sf); previously on June 25, 2015,
Upgraded to Ba2 (sf)
Cl. B, Affirmed Caa1 (sf); previously on June 25, 2015, Affirmed
Caa1 (sf)
Cl. C, Affirmed Caa3 (sf); previously on June 25, 2015, Affirmed
Caa3 (sf)
Cl. D, Affirmed C (sf); previously on June 25, 2015, Affirmed
C (sf)
Cl. E, Affirmed C (sf); previously on June 25, 2015, Affirmed
C (sf)
Cl. F, Affirmed C (sf); previously on June 25, 2015, Affirmed
C (sf)
Cl. X-1, Downgraded to B2 (sf); previously on June 25, 2015,
Affirmed Ba3 (sf)
RATINGS RATIONALE
The rating on Class A-M was upgraded primarily due to an increase
in credit support since Moody's last review, resulting from
paydowns and amortization, as well as Moody's expectation of
additional increases in credit support resulting from the payoff of
loans approaching maturity that are well positioned for refinance.
The pool has paid down by 43% since Moody's last review. In
addition, loans constituting 48% of the pool have either defeased
or have debt yields exceeding 10% and are scheduled to mature
within the next six months.
The ratings on five P&I classes, Class A-1A through A-J, were
affirmed because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on the remaining five P&I classes were affirmed because
the ratings are consistent with Moody's expected loss.
The rating on the IO Class (Class X-1) was downgraded due to the
decline in the credit performance of its reference classes
resulting from principal paydowns of higher quality reference
classes.
Moody's rating action reflects a base expected loss of 11.1% of the
current balance, compared to 5.8% at Moody's last review. Moody's
base expected loss plus realized losses is now 10.4% of the
original pooled balance, compared to 10.0% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published
in October 2015, and "Approach to Rating US and Canadian
Conduit/Fusion CMBS" published in December 2014.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 10, compared to 19 at last review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan-level proceeds
derived from Moody's loan-level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure and property
type. Moody's also further adjusts these aggregated proceeds for
any pooling benefits associated with loan level diversity and other
concentrations and correlations.
DEAL PERFORMANCE
As of the June 14, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 58% to $624 million
from $1.5 billion at securitization. The certificates are
collateralized by 53 mortgage loans ranging in size from less than
1% to 16% of the pool, with the top ten loans (excluding
defeasance) constituting 54% of the pool. Nine loans, constituting
28% of the pool, have defeased and are secured by US government
securities.
Thirty-one loans, constituting 33% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Twenty-six loans have been liquidated from the pool, resulting in
an aggregate realized loss of $85 million (for an average loss
severity of 38%). Three loans, constituting 18% of the pool, are
currently in special servicing. The largest specially serviced
loan and largest loan in the pool is the PPG Portfolio loan ($97.6
million -- 15.6% of the pool), which is secured by a portfolio of
seven office properties totaling 435,000 square feet. The
properties are located in Colorado (4 properties), Indiana (2) and
Arizona (1). The loan transferred to special servicing in May 2016
due to imminent maturity default. The loan is scheduled to mature
in October 2016 and is paid thru the May 2016 payment date. The
properties face significant tenant rollover in 2017, which is
impeding the borrower's ability to refinance. The remaining two
loans in special servicing each make up less than 2% of the pool.
Moody's estimates an aggregate $38 million loss for the specially
serviced loans (34% expected loss on average).
Moody's has assumed a high default probability for four poorly
performing loans, constituting 13% of the pool, and has estimated
an aggregate loss of $22 million (a 28% expected loss on average)
from these troubled loans.
Moody's received full year 2015 operating results for 95% of the
pool, and full year 2014 operating results for 100% of the pool.
Moody's weighted average conduit LTV is 95.5%, compared to 100.7%
at the previous review. Moody's conduit component excludes loans
with structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 7.4% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.41X and 1.16X,
respectively, compared to 1.33X and 1.09X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three performing conduit loans represent 24.6% of the pool.
The largest loan is the AZ Office / Retail Portfolio Loan ($72
million -- 11.5% of the pool). The loan is secured by a portfolio
of two retail properties and one office property in Scottsdale,
Arizona. The loan is currently on the master servicer's watchlist
for low DSCR, although property performance has improved in 2015.
As of March 2015, the portfolio was 90% leased, compared to 86%
leased in December 2014 and 77% in March 2014. The loan is
schedule to mature in October 2016. Moody's has identified this as
a troubled loan.
The second largest loan is the One Bethesda Center loan ($53
million -- 8.5% of the pool), which is secured by a 181,000 square
foot office property located in Bethesda, Maryland approximately 8
miles northwest of the Washington D.C. central business district.
The property was 97% occupied as of December 2015 and has
maintained occupancy above 91% since securitization. The loan is
scheduled to mature in October 2016. Moody's LTV and stressed DSCR
are 113.5% and 0.90X, respectively, unchanged from the last
review.
The third largest loan is the Fort Roc Portfolio loan ($28.7
million -- 4.6% of the pool), which is secured by a portfolio of 7
cross collateralized and cross defaulted office properties located
in Pennsylvania, New York, Tennessee and Delaware. The average
occupancy for the portfolio was 98% as of December 2015. The loan
is scheduled to mature in September 2016 and was placed on the
master servicer's due to its upcoming maturity. Moody's LTV and
stressed DSCR are 108% and 0.96X, respectively, compared to 107%
and 0.96X at the last review.
NATIONSTAR HECM 2016-2: Moody's Assigns (P)Ba3 Ratings to M2 Debt
-----------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to three
classes of residential mortgage-backed securities (RMBS) issued by
Nationstar HECM Loan Trust 2016-2 (NHLT 2016-2). The ratings range
from (P)Aaa (sf) to (P)Ba3 (sf).
The certificates are backed by a pool that includes 859 inactive
home equity conversion mortgages (HECMs) and 179 real estate owned
(REO) properties. The servicer for the deal is Nationstar Mortgage
LLC. The complete rating actions are as follows:
Issuer: Nationstar HECM Loan Trust 2016-2
Cl. A, Assigned (P)Aaa (sf)
Cl. M1, Assigned (P)A3 (sf)
Cl. M2, Assigned (P)Ba3 (sf)
RATINGS RATIONALE
The collateral in Nationstar HECM Loan Trust 2016-2 consists of
first-lien inactive HECMs covered by Federal Housing Administration
(FHA) insurance secured by properties in the US along with REO
properties acquired through conversion of ownership of reverse
mortgage loans that are covered by FHA insurance. Nationstar
acquired the mortgage assets from Ginnie Mae sponsored HECM
mortgage backed (HMBS) securitizations. All of the mortgage assets
are covered by FHA insurance for the repayment of principal up to
certain amounts. If a borrower or their estate fails to pay the
amount due upon maturity or otherwise defaults, sale of the
property is used to recover the amount owed.
There are 1,038 mortgage assets with a balance of approximately
$221,171,823. Loans are in either default, due and payable,
referred, foreclosure or REO status. Loans that are in default may
move to due and payable; due and payable loans may move to
foreclosure; and foreclosure loans may move to REO.
Of the mortgage assets in default (13.02% of total pool), 2.39% are
in default due to non-occupancy, 10.33% are in default due taxes
and insurance and 0.30% are in default for other reasons. 14.61% of
the mortgage assets are due and payable. 2.11% of the mortgage
assets are referred loans. 56.23% of the mortgage assets are in
foreclosure. Finally, 14.03% of the mortgage assets are REO and
were acquired through foreclosure or deed-in-lieu of foreclosure on
the associated loan. The pool includes 859 loans with an aggregate
balance of approximately $190,143,070 and 179 REO properties with
an aggregate balance of approximately $31,028,753. If the value of
the related mortgaged property is greater than the loan amount,
some of these loans may be settled by the borrower or their
estate.
Transaction Structure
The securitization has a sequential liability structure amongst
three classes of notes with overcollateralization. All funds
collected, prior to an acceleration event, are used to make
interest payments to the notes, then principal payments to the
Class A notes, then to a redemption account until the amount on
deposit in the redemption account is sufficient to cover future
principal and interest payments for the subordinate notes up to
their mandatory call dates. The subordinate notes will not receive
principal until the beginning of their target amortization periods
(in the absence of an acceleration event). The notes also benefit
from overcollateralization as credit enhancement and an interest
reserve account funded with cash received from the initial
purchasers of the notes for liquidity and credit enhancement.
The transaction is callable on or after six months with a 1.0%
premium and on or after 12 months without a premium. The mandatory
call date for the Class A notes is in June 2018. For the Class M1
notes, the mandatory call date is in December 2018. Finally, for
the Class M2 notes, the mandatory call date is in June 2019. For
each of the subordinate notes, there are six month target
amortization periods that conclude on the respective mandatory call
dates. The legal final maturity of the transaction is 10 years.
Available funds to the transaction are expected to come from the
liquidation of REO properties and receipt of FHA insurance claims.
These funds will be received with irregular timing. In the event
that there are not adequate funds to pay interest in a given
period, the interest reserve fund may be utilized. Additionally,
any shortage in interest will be classified as an available funds
cap shortfall. These available funds cap carryover amounts will
have priority of payments in the waterfall and will also accrue
interest at the respective note rate.
Certain aspects of the waterfall are dependent upon Nationstar
remaining as servicer. Servicing fees and servicer related
reimbursements are subordinated to interest and principal payments
while Nationstar is servicer. However, servicing advances will
instead have priority over interest and principal payments in the
event that Nationstar defaults. Also, while Nationstar is required
to pay to the trust any debenture interest due, a replacement
servicer will only remit debenture interest actually received.
Third-Party Review
A third party firm conducted a review of certain characteristics of
the mortgage assets on behalf of Nationstar. The review focused on
the presence of FHA insurance coverage, accurate recordation of
appraisals, accurate recording of occupancy status, borrower age
documentation, identification of loans in which foreclosure and
bankruptcy attorney fees, or property preservation fees have
exceeded FHA allowable limits, and identification of tax liens with
first priority in Texas. Also, broker price opinions (BPOs) were
ordered for 126 properties that had appraisals that were over one
year old.
Moody's said, "The results of the third-party review were weaker
compared to previous NHLT HECM securitizations, indicating a
significant number of exceptions related to the accuracy of updated
appraisals, corporate advances exceeding FHA reimbursement
thresholds, and pre-existing liens. NHLT 2016-2's TPR results
showed approximately 4.12% exceptions related to valuation, 9.26%
exceptions related to excessive corporate advances, and 48.15%
exceptions related to tax liens. This compares to 0.75%, 3.61% and
13.04% for NHLT 2016-1. The scope of the review was also narrower
compared to the previous securitizations. The scope did not include
a data integrity review of the preliminary loan tape to the final
loan tape, and did not check for the presence of non-borrowing
spouses. However, the TPR firm did conduct a data integrity check
on the loan tape versus Nationstar's servicing system. We adjusted
our collateral pool assumptions to account for the weaker TPR
results and scope."
Reps & Warranties (R&W)
"Nationstar is the loan-level R&W provider and is rated B2 (Stable)
and thus relatively weak from a credit perspective. Given the
nascent nature of their securitization program, we have limited
insight as to their ability to serve in this capacity. This risk is
mitigated by the fact that Nationstar is the equity holder in the
transaction and there is therefore a significant alignment of
interests. Another factor mitigating this risk is that a
third-party due diligence firm conducted a review on the loans for
evidence of FHA insurance," said Moody's.
Nationstar represents that the mortgage loans are covered by FHA
insurance that is in full force and effect. Nationstar provides
further R&Ws including those for title, first lien position,
enforceability of the lien, and the condition of the property.
Although Nationstar provides a no fraud R&W covering the
origination of the mortgage loans, determination of value of the
mortgaged properties, and the sale and servicing of the mortgage
loans, the no fraud R&W is qualified and is made only as to the
initial mortgage loans. Aside from the no fraud R&W, Nationstar
does not provide any other R&W in connection with the origination
of the mortgage loans, including whether the mortgage loans were
originated in compliance with applicable federal, state and local
laws.
"Upon the identification of a breach in R&W, Nationstar has to cure
the breach. If Nationstar is unable to cure the breach, Nationstar
must repurchase the loan within 90 days from receiving the
notification. Moody's beleives the absence of an independent third
party reviewer who can identify any breaches to the R&W makes the
enforcement mechanism weak in this transaction.
Trustee & Master Servicer
The acquisition and owner trustee for the NHLT 2016-2 transaction
is Wilmington Savings Fund Society, FSB. The paying agent and cash
management functions will be performed by Citibank, N.A.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody’s said, "Levels of credit protection that are higher than
necessary to protect investors against current expectations of
stress could drive the ratings up. Transaction performance depends
greatly on the US macro economy and housing market. Property
markets could improve from our original expectations resulting in
appreciation in the value of the mortgaged property and faster
property sales.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of stresses could drive the
ratings down. Transaction performance depends greatly on the US
macro economy and housing market. Property markets could
deteriorate from Moody's original expectations resulting in
depreciation in the value of the mortgaged property and slower
property sales.
NEWDAY FUNDING 2015-1: DBRS Confirms B Rating on Class F Notes
--------------------------------------------------------------
DBRS Ratings Limited confirmed the ratings on the Notes issued by
NewDay Funding 2015-1 Plc (NewDay 2015-1), NewDay Funding 2015-2
Plc (NewDay 2015-2), and NewDay Funding Loan Note Issuer Ltd (Loan
Note Issuer) as follows:
NewDay 2015-1:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)
-- Class C Notes at A (high) (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BB (high) (sf)
-- Class F Notes at B (high) (sf)
NewDay 2015-2:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)
-- Class C Notes at A (high) (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BB (high) (sf)
-- Class F Notes at B (high) (sf)
Loan Note Issuer:
-- Series 2015-VFN Loan Note at BBB (high) (sf)
The rating actions are based on the following analytical
considerations:
-- Portfolio performance, in terms of delinquencies and charge-
offs, is within DBRS’s expectations.
-- Current credit enhancement (CE) available to the Notes to
cover the expected losses at each tranche’s respective rating
levels.
The Notes are backed by a portfolio of credit card receivables in
the United Kingdom originated or acquired and serviced by NewDay
Ltd. All series are currently in a revolving period.
As of May 31, 2016, the portfolio is performing within DBRS'
expectations. Receivables more than 90 days delinquent as a
percentage of the portfolio balance are 3.65%. Gross charge-off
rate is 13.06% and the gross portfolio yield is 33.75%. DBRS has
maintained the same portfolio assumptions in this rating review as
in the last rating action.
As all series are in a revolving period, the CE to each rated Class
of Notes remains the same as the last rating action. As of the June
2016 Payment Date, for NewDay 2015-1, the available CE is 50.9% for
the Class A Notes, 43.7% for the Class B Notes, 33.1% for the Class
C Notes, 18.4% for the Class D Notes, 10.8% for the Class E Notes,
and 5.7% for the Class F Notes. For NewDay 2015-2, the available CE
is 51.1% for the Class A Notes, 44.0% for the Class B Notes, 33.5%
for the Class C Notes, 18.8% for the Class D Notes, 11.2% for the
Class E Notes, and 6.0% for the Class F Notes. The CE to the Series
2015-VFN Loan Note is 18.3%.
HSBC Bank Plc acts as Account Bank to all series.
OCTAGON INVESTMENT 27: Moody's Assigns Ba3 Rating on Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Octagon Investment Partners 27, Ltd.
Moody's rating action is:
$310,000,000 Class A Senior Secured Floating Rate Notes due
2027, Definitive Rating Assigned Aaa (sf)
$70,000,000 Class B Senior Secured Floating Rate Notes due 2027,
Definitive Rating Assigned Aa1 (sf)
$35,000,000 Class C Secured Deferrable Floating Rate Notes due
2027, Definitive Rating Assigned A2 (sf)
$25,000,000 Class D Secured Deferrable Floating Rate Notes due
2027, Definitive Rating Assigned Baa3 (sf)
$20,000,000 Class E Secured Deferrable Floating Rate Notes due
2027, Definitive Rating Assigned Ba3 (sf)
The Class A 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."
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.
Octagon 27 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 7.5% of the portfolio may consist of second lien loans
and unsecured loans. The portfolio is approximately 90% ramped as
of the closing date.
Octagon Credit Investors, 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 4.5 year reinvestment period.
Thereafter, the Manager may reinvest 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 the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2610
Weighted Average Spread (WAS): 3.90%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.75%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2015.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
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 2610 to 3002)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2610 to 3393)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -3
Class C Notes: -3
Class D Notes: -2
Class E Notes: -1
REGATTA II FUNDING: S&P Affirms BB Rating on Class D Notes
----------------------------------------------------------
S&P Global Ratings raised its rating on the class A-2 notes and
affirmed its ratings on the class A-1, B, C, and D notes from
Regatta II Funding L.P., a U.S. collateralized loan obligation
(CLO) transaction that closed in February 2013 and is managed by
Napier Park Global Capital LLC.
The rating actions follow S&P's review of the transaction's
performance using data from the May 2016 trustee report. The
transaction is scheduled to remain in its reinvestment period until
January 2017, and S&P anticipates that the manager will continue to
reinvest principal proceeds in line with the transaction
documents.
The upgrade primarily reflects credit quality improvement in the
underlying collateral since S&P's effective date rating
affirmations in October 2013. Collateral with an S&P Global
Ratings' credit rating of 'BB-' or higher has increased
significantly from the May 2013 effective date report used in S&P's
previous affirmations. The purchasing of this higher-rated
collateral has caused the weighted average rating of the portfolio
to rise to 'B+' from 'B'.
The transaction has also benefited from collateral seasoning, with
the reported weighted average life decreasing to 4.78 years from
5.62 years in May 2013. Because time horizon factors heavily into
default probability, a shorter weighted average life positively
affects the creditworthiness of the collateral pool. This
seasoning, combined with the improved credit quality, has decreased
the overall credit risk profile, which in turn provided more
cushion to the tranche ratings. In addition, the number of
obligors in the portfolio has increased during this period, which
contributed to the portfolio's increased diversification.
The transaction has experienced an increase in both defaults and
assets rated 'CCC+' and below since the May 2013 effective date
report. Specifically, the amount of defaulted assets increased to
$11.75 million (2.93% of the aggregate principal balance) as of May
2016 from zero as of the effective date report. The level of
assets rated 'CCC+' and below increased to $19.79 million (4.94% of
the aggregate principal balance) from zero over the same period.
The increase in defaulted assets, as well as other factors, has
affected the level of credit support available to all tranches, as
seen by the mild decline in the overcollateralization (O/C)
ratios:
-- The class A O/C ratio was 134.60%, down from the 135.40%
reported in May 2013.
-- The class B O/C ratio was 121.60%, down from the 122.40%
reported in May 2013. The class C O/C ratio was 114.70%,
down from the 115.40% reported in May 2013.
-- The class D O/C ratio was 108.70%, down from the 109.30%
reported in May 2013.
Even with the decline in credit support, all coverage tests are
currently passing and are above the minimum requirements.
Overall, the increase in defaulted assets has been largely offset
by the decline in the weighted average life and positive credit
migration of the collateral portfolio. The affirmed ratings
reflect S&P's belief that the credit support available is
commensurate with the current rating levels.
Although S&P's cash flow analysis points to higher ratings for the
class B, C, and D notes, its rating actions take into account
additional sensitivity runs that considered the exposure to
specific distressed industries and allowed for volatility in the
underlying portfolio given that the transaction is still in its
reinvestment period.
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and S&P will take rating actions as it
deems necessary.
CASH FLOW RESULTS AND SENSITIVITY ANALYSIS
Regatta II Funding L.P.
Cash flow
Previous implied Cash flow Final
Class rating rating(i) cushion(ii) rating
A-1 AAA (sf) AAA (sf) 10.51% AAA (sf)
A-2 AA (sf) AA+ (sf) 13.34% AA+ (sf)
B A (sf) AA- (sf) 1.43% A (sf)
C BBB (sf) BBB+ (sf) 7.31% BBB (sf)
D BB (sf) BB+ (sf) 1.33% BB (sf)
(i) The cash flow implied rating considers the actual spread,
coupon, and recovery of the underlying collateral.
(ii) The cash flow cushion is the excess of the tranche break-even
default rate above the scenario default rate at the assigned rating
for a given class of rated notes using the actual spread, coupon,
and recovery.
RECOVERY RATE AND CORRELATION SENSITIVITY
In addition to S&P's base-case analysis, it generated additional
scenarios in which it made negative adjustments of 10% to the
current collateral pool's recovery rates relative to each tranche's
weighted average recovery rate.
S&P also generated other scenarios by adjusting the intra- and
inter-industry correlations to assess the current portfolio's
sensitivity to different correlation assumptions assuming the
correlation scenarios outlined below.
Correlation
Scenario Within industry (%) Between industries (%)
Below base case 15.0 5.0
Base case 20.0 7.5
Above base case 25.0 10.0
Recovery Correlation Correlation
Cash flow decrease increase decrease
implied implied implied implied Final
Class rating rating rating rating rating
A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf)
A-2 AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf)
B AA- (sf) A+ (sf) A+ (sf) AA+ (sf) A (sf)
C BBB+ (sf) BBB+ (sf) BBB+ (sf) A (sf) BBB (sf)
D BB+ (sf) B+ (sf) BB (sf) BB+ (sf) BB (sf)
DEFAULT BIASING SENSITIVITY
To assess whether the current portfolio has sufficient diversity,
S&P biased defaults on the assets in the current collateral pool
with the highest spread and lowest base-case recoveries.
Spread Recovery
Cash flow compression compression
implied implied implied Final
Class rating rating rating rating
A-1 AAA (sf) AAA (sf) AA+ (sf) AAA (sf)
A-2 AA+ (sf) AA+ (sf) AA (sf) AA+ (sf)
B AA- (sf) A+ (sf) BBB+ (sf) A (sf)
C BBB+ (sf) BBB+ (sf) BB+ (sf) BBB (sf)
D BB+ (sf) B+ (sf) B- (sf) BB (sf)
RATING RAISED
Regatta II Funding L.P.
Rating
Class To From
A-2 AA+ (sf) AA (sf)
RATINGS AFFIRMED
Regatta II Funding L.P.
Class Rating
A-1 AAA (sf)
B A (sf)
C BBB (sf)
D BB (sf)
SAXON 2006-3: Moody's Raises Rating on Cl. A-3 Debt to Ba3
----------------------------------------------------------
Moody's Investors Service has upgraded the rating of Class A-3
tranche issued by Saxon 2006-3, which is backed by Subprime
mortgage loans.
Complete rating actions are:
Issuer: Saxon Asset Securities Trust 2006-3
Cl. A-3, Upgraded to Ba3 (sf); previously on July 16, 2010,
Downgraded to Caa2 (sf)
RATINGS RATIONALE
The upgrade primarily reflects the impact of a model correction.
Instead of following the terms of the governing document, the
senior classes were previously modeled under the terms of the
offering document as paying principal on a pro-rata basis if the
balance of the mortgage pool were to become less than the balance
of the senior classes. Moody's has received confirmation from the
trustee that it will follow the principal allocation rules set
forth in the governing document. The senior classes will now be
modeled to pay sequentially as directed by the governing document,
and today's rating action reflects this correction.
The principal methodology used in this rating 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 4.7% in May 2016 from 5.5% in May
2015. 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.
UCFC FUNDING 1997-3: Moody's Hikes Class M Debt Rating to C(sf)
---------------------------------------------------------------
Moody's Investors Service has downgraded the rating of one tranche
and upgraded the ratings of three tranches in three transactions
issued in 1997 and 1998. The collateral backing these transactions
consists primarily of manufactured housing units.
Complete rating action follows:
Issuer: Green Tree Financial Corporation MH 1998-01
Cl. A-5, Upgraded to Aa3 (sf); previously on Aug 7, 2015 Upgraded
to A1 (sf)
Cl. A-6, Upgraded to Aa3 (sf); previously on Aug 7, 2015 Upgraded
to A1 (sf)
Issuer: UCFC Funding Corporation 1997-3
Cl. M, Downgraded to C (sf); previously on Sep 28, 2004 Downgraded
to Ca (sf)
Issuer: UCFC Funding Corporation 1998-1
Cl. A-3, Upgraded to Aa3 (sf); previously on Jul 24, 2015 Upgraded
to A1 (sf)
RATINGS RATIONALE
The actions are a result of the recent performance of manufactured
housing loans backed pools and reflect Moody's updated loss
expectations on the pools. The tranches upgraded are primarily due
to the build-up in credit enhancement. UCFC Funding Corporation
1997-3 M tranche is not expected to receive its full principal
payments primarily due to the outstanding interest shortfalls,
prompting its downgrade to C.
Factors that would lead to an upgrade or downgrade of the ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
VENTURE VII: Moody's Lowers Rating on Class E Notes to Ba2
----------------------------------------------------------
Moody's Investors Service has downgraded the ratings on these notes
issued by Venture VII CDO Limited:
$23,700,000 Class D Secured Deferrable Floating Rate Notes Due
Jan. 20, 2022, Downgraded to Baa3 (sf); previously on Oct. 6,
2015, Upgraded to Baa2 (sf)
$11,400,000 Class E Secured Deferrable Floating Rate Notes Due
Jan. 20, 2022, Downgraded to Ba2 (sf); previously on Oct. 6,
2015, Upgraded to Ba1 (sf)
Moody's also affirmed the ratings on these notes:
$388,000,000 Class A-1A Senior Secured Floating Rate Notes Due
Jan. 20, 2022, (current outstanding balance of $254,128,015),
Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed
Aaa (sf)
$90,000,000 Class A-1AR Senior Secured Floating Rate Revolving
Notes Due Jan. 20, 2022 (current outstanding balance of
$58,947,220), Affirmed Aaa (sf); previously on Oct. 6, 2015,
Affirmed Aaa (sf)
$53,125,000 Class A-1B Senior Secured Floating Rate Notes Due
Jan. 20, 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015,
Affirmed Aaa (sf)
$49,775,000 Class A-2 Senior Secured Floating Rate Notes Due
Jan. 20, 2022 (current outstanding balance of $34,318,883),
Affirmed Aaa (sf); previously on Oct. 6, 2015, Affirmed
Aaa (sf)
$31,250,000 Class B Senior Secured Floating Rate Notes Due
Jan. 20, 2022, Affirmed Aaa (sf); previously on Oct. 6, 2015,
Upgraded to Aaa (sf)
$32,350,000 Class C Secured Deferrable Floating Rate Notes Due
Jan. 20, 2022, Affirmed A2 (sf); previously on Oct. 2, 2014,
Upgraded to A2 (sf)
Venture VII CDO Limited, issued in December 2006, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period ended in January 2014.
RATINGS RATIONALE
These rating actions are primarily a result of an increase in
defaulted assets and a decrease in the transaction's mezzanine and
junior over-collateralization (OC) ratios since October 2015. Based
on Moody's calculations, collateral defaults have increased to
$28.1 million, compared to $14.4 million in October 2015. Based on
the trustee's May 2016 report, the OC ratios for the Class A/B,
Class C, Class D and Class E notes are reported at 125.12%,
116.40%, 110.74% and 108.21%, respectively, versus October 2015
levels of 127.46%, 118.69%, 112.99% and 110.44%, respectively.
Additionally, the percentage of CLO collateral with lowest credit
quality, or Caa1 and below rated collateral (Caa collateral), has
increased since October 2015. Based on Moody's calculations, which
include adjustments for ratings with a negative outlook and ratings
on watch for downgrade, Caa collateral has increased to 14.1%,
compared to 12.2% in October 2015.
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 Ratings:
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. Realization
of higher than assumed recoveries would positively impact the
CLO.
6) 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 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% (2278)
Class A-1A: 0
Class A-1AR: 0
Class A-1B: 0
Class A-2: 0
Class B: 0
Class C: +2
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (3417)
Class A-1A: 0
Class A-1AR: 0
Class A-1B: 0
Class A-2: 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 $530.9 million, defaulted par
of $28.1 million, a weighted average default probability of 16.68%
(implying a WARF of 2847), a weighted average recovery rate upon
default of 49.18%, a diversity score of 86 and a weighted average
spread of 3.72%(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. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
VENTURE VIII: Moody's Lowers Rating on Class E Notes to B1
----------------------------------------------------------
Moody's Investors Service has downgraded the ratings on these notes
issued by Venture VIII CDO, Limited:
$32,500,000 Class D Deferrable Mezzanine Notes Due 2021,
Downgraded to Ba1 (sf); previously on Nov. 16, 2015, Upgraded
to Baa3 (sf)
$24,000,000 Class E Deferrable Junior Notes Due 2021, Downgraded
to B1 (sf); previously on Nov. 16, 2015, Upgraded to Ba2 (sf)
Moody's also affirmed the ratings on these notes:
$106,250,000 Class A-1A Senior Revolving Notes Due 2021 (current
outstanding balance of $66,359,488), Affirmed Aaa (sf);
previously on Nov. 16, 2015, Affirmed Aaa (sf)
$4,500,000 Class A-1B Senior Notes Due 2021, Affirmed Aaa (sf);
previously on Nov. 16, 2015 Affirmed Aaa (sf)
$429,075,000 Class A-2A Senior Notes Due 2021 (current
outstanding balance of $257,356,700), Affirmed Aaa (sf);
previously on November 16, 2015 Affirmed Aaa (sf)
$47,675,000 Class A-2B Senior Notes Due 2021, Affirmed Aaa (sf);
previously on Nov. 16, 2015 Affirmed Aaa (sf)
$50,000,000 Class A-3 Senior Notes Due 2021 (current outstanding
balance of $31,990,739), Affirmed Aaa (sf); previously on
Nov. 16, 2015, Affirmed Aaa (sf)
$46,500,000 Class B Senior Notes Due 2021, Affirmed Aaa (sf);
previously on Nov. 16, 2015, Upgraded to Aaa (sf)
$50,000,000 Class C Deferrable Mezzanine Notes Due 2021,
Affirmed A2 (sf); previously on Nov. 16, 2015, Upgraded to
A2 (sf)
Venture VIII CDO, Limited, issued in June 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in July
2014.
RATINGS RATIONALE
These rating actions are primarily a result of an increase in
defaulted assets and a decrease in the transaction's mezzanine and
junior over-collateralization (OC) ratios since November 2015.
Based on Moody's calculation, collateral defaults have increased to
$33.7 million, compared to $16.8 million in November 2015. Based on
the Trustee's May 2015 report, the OC ratios for the Class C, Class
D and Class E notes are currently 116.65%, 109.59% and 104.90%,
respectively, versus November 2015 levels of 118.76%, 111.66% and
106.93%, respectively.
Additionally, the percentage of CLO collateral with lowest credit
quality, or Caa1 and below rated collateral (Caa collateral), has
increased since November 2015. Based on Moody's calculations,
which include adjustments for ratings with a negative outlook and
ratings on watch for downgrade, Caa collateral has increased to
18.9%, compared to 16.4% in November 2015.
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 Ratings:
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 their current market
price. Realization of higher than assumed recoveries would
positively impact the CLO.
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% (2559)
Class A-1A: 0
Class A-1B: 0
Class A-2A: 0
Class A-2B: 0
Class A-3: 0
Class B: 0
Class C: +3
Class D: +1
Class E: +2
Moody's Adjusted WARF + 20% (3839)
Class A-1A: 0
Class A-1B: 0
Class A-2A: 0
Class A-2B: 0
Class A-3: 0
Class B: -1
Class C: -1
Class D: -1
Class E: 0
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 $578.4 million, defaulted par
of $33.7 million, a weighted average default probability of 19.68%
(implying a WARF of 3199), a weighted average recovery rate upon
default of 49.5%, a diversity score of 90 and a weighted average
spread of 3.95% (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. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
VOYA CLO 2012-1: S&P Raises Rating on Cl. E-R Notes to BB
---------------------------------------------------------
S&P Global Ratings raised its ratings on the class A-2-R, B-R, C-R,
D-R, and E-R notes from Voya CLO 2012-1 Ltd. S&P also removed
these ratings from CreditWatch, where it placed them with positive
implications on April 1, 2016. At the same time, S&P affirmed its
'AAA (sf)' rating on the class A-1-R notes from the same
transaction.
The rating actions follow S&P's review of the transaction's
performance using data from the June 3, 2016, trustee report.
The upgrades reflect the transaction's $106.56 million in
collective paydowns to the class A-1-R notes since S&P's March 2014
rating actions when the transaction refinanced. These paydowns
resulted in improved reported overcollateralization (O/C) ratios
since the February 2014 trustee report, which S&P used for its
March 2014 rating actions:
-- The class A O/C ratio improved to 152.4% from 136.1%.
-- The class B O/C ratio improved to 131.3% from 123.0%.
-- The class C O/C ratio improved to 121.5% from 116.4%.
-- The class D O/C ratio improved to 114.1% from 111.2%.
-- The class E O/C ratio improved to 109.8% from 108.2%.
The credit quality of the collateral portfolio has slightly
deteriorated since S&P's last rating actions. The transaction has
shown an increase in collateral obligations with ratings in the
'CCC' category with $12.55 million reported as of the June 2016
trustee report, up from $7.13 million as of the February 2014
trustee report. Over the same period, the par amount of defaulted
collateral has increased to $2.61 million from zero. Despite the
slightly larger concentrations in the 'CCC' category and defaulted
collateral, the transaction has benefited from a drop in the
weighted average life due to seasoning of the underlying collateral
with 3.44 years reported as of the June 2016 trustee report, down
from 5.06 years reported at the time of S&P's 2014 rating actions,
as well as the aforementioned paydowns.
On a standalone basis, the results of the cash flow analysis
pointed to a higher rating on the class D-R and E-R notes than
today's rating actions reflect. However, because the transaction
currently has some exposure to 'CCC' rated collateral obligations,
long-dated assets (i.e., assets that mature after the stated
maturity of the collateralized loan obligation), and loans from
companies in the energy and commodities sectors (which have come
under significant pressure from falling oil and commodity prices in
the last year), S&P limited the upgrade to each of these classes to
offset future potential credit migration in the underlying
collateral.
The affirmation reflects S&P's view that the credit support
available is commensurate with the current rating level.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the
aforementioned trustee report, to estimate future performance. In
line with S&P's criteria, its cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, S&P's analysis
considered the transaction's ability to pay timely interest and/or
ultimate principal to each of the rated tranches. The results of
the cash flow analysis demonstrated, in S&P's view, that all of the
rated outstanding classes have adequate credit enhancement
available at the rating levels associated with these rating
actions.
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as it deems
necessary.
CASH FLOW AND SENSITIVITY ANALYSIS
Voya CLO 2012-1 Ltd.
Cash flow Cash flow
Previous implied cushion Final
Class rating rating(i) (%)(ii) rating
A-1-R AAA (sf) AAA (sf) 34.87 AAA (sf)
A-2-R AA (sf)/Watch Pos AAA (sf) 17.21 AAA (sf)
B-R A (sf)/Watch Pos AA+ (sf) 11.72 AA+ (sf)
C-R BBB (sf)/Watch Pos AA- (sf) 1.73 AA- (sf)
D-R BB (sf)/Watch Pos BBB+ (sf) 3.87 BBB (sf)
E-R B (sf)/Watch Pos BB+ (sf) 1.99 BB (sf)
(i)The cash flow implied rating considers the actual spread,
coupon, and recovery of the underlying collateral. (ii)The cash
flow cushion is the excess of the tranche break-even default rate
above the scenario default rate at the assigned rating for a given
class of rated notes using the actual spread, coupon, and
recovery.
RECOVERY RATE AND CORRELATION SENSITIVITY
In addition to S&P's base-case analysis, it generated scenarios in
which S&P made negative adjustments of 10% to the current
collateral pool's recovery rates relative to each tranche's
weighted average recovery rate.
S&P also generated other scenarios by adjusting the intra- and
inter-industry correlations to assess the current portfolio's
sensitivity to different correlation assumptions assuming the
correlation scenarios outlined below.
Correlation
Scenario Within industry (%) Between industries (%)
Below base case 15.0 5.0
Base case equals rating 20.0 7.5
Above base case 25.0 10.0
Recovery Correlation Correlation
Cash flow decrease increase decrease
implied implied implied implied Final
Class rating rating rating rating rating
A-1-R AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf)
A-2-R AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf)
B-R AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf)
C-R AA- (sf) A+ (sf) A+ (sf) AA+ (sf) AA- (sf)
D-R BBB+ (sf) BBB-(sf) BBB+ (sf) BBB+ (sf) BBB (sf)
E-R BB+ (sf) B+ (sf) BB+ (sf) BB+ (sf) BB (sf)
DEFAULT BIASING SENSITIVITY
To assess whether the current portfolio has sufficient diversity,
S&P biased defaults on the assets in the current collateral pool
with the highest spread and lowest base-case recoveries.
Spread Recovery
Cash flow compression compression
implied implied implied Final
Class rating rating rating rating
A-1-R AAA (sf) AAA (sf) AAA (sf) AAA (sf)
A-2-R AAA (sf) AAA (sf) AAA (sf) AAA (sf)
B-R AA+ (sf) AA+ (sf) AA (sf) AA+ (sf)
C-R AA- (sf) A+ (sf) BBB+ (sf) AA- (sf)
D-R BBB+ (sf) BBB+ (sf) BB (sf) BBB (sf)
E-R BB+ (sf) BB (sf) CCC+ (sf) BB (sf)
RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE
Voya CLO 2012-1 Ltd.
Rating
Class To From
A-2-R AAA (sf) AA (sf)/Watch Pos
B-R AA+ (sf) A (sf)/Watch Pos
C-R AA- (sf) BBB (sf)/Watch Pos
D-R BBB (sf) BB (sf)/Watch Pos
E-R BB (sf) B (sf)/Watch Pos
RATING AFFIRMED
Voya CLO 2012-1 Ltd.
Class Rating
A-1-R AAA (sf)
WFRBS COMMERCIAL 2012-C8: Moody's Affirms Ba2 Rating on Cl. F Certs
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of 15 classes in
WFRBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2012-C8 as:
Cl. A-1, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-FL, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on June 25, 2015, Affirmed
Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on June 25, 2015, Affirmed
A2 (sf)
Cl. D, Affirmed Baa1 (sf); previously on June 25, 2015, Affirmed
Baa1 (sf)
Cl. E, Affirmed Baa3 (sf); previously on June 25, 2015, Affirmed
Baa3 (sf)
Cl. F, Affirmed Ba2 (sf); previously on June 25, 2015, Affirmed
Ba2 (sf)
Cl. G, Affirmed B2 (sf); previously on June 25, 2015, Affirmed
B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on June 25, 2015,
Affirmed Aaa (sf)
Cl. X-B, Affirmed Aa2 (sf); previously on June 25, 2015,
Affirmed Aa2 (sf)
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the IO classes were affirmed because the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes is consistent with Moody's expectations.
Moody's rating action reflects a base expected loss of 1.9% of the
current balance compared to 2.7% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.8% of the original
pooled balance, compared to 2.6% at the last review. Moody's
provides a current list of base expected losses for conduit and
fusion CMBS transactions on moodys.com at:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in December
2014.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22, compared to 23 at Moody's last review.
DEAL PERFORMANCE
As of the June 17, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 5% to $1.24 billion
from $1.30 billion at securitization. The certificates are
collateralized by 80 mortgage loans ranging in size from less than
1% to 12% of the pool, with the top ten loans (excluding
defeasance) constituting 54% of the pool. The pool contains no
loans with investment-grade structured credit assessments. Five
loans, constituting 6% of the pool, have defeased and are secured
by US government securities.
Six loans, constituting 15% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
There are currently two loans in special servicing, constituting
less than 1% of the pool. Moody's estimates an aggregate
$4 million loss for the specially serviced loans.
Moody's received full year 2015 operating results for 92% of the
pool, and partial year 2016 operating results for 22% of the pool.
Moody's weighted average conduit LTV is 86%, compared to 90% at
Moody's last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 12.0% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.6%.
Moody's actual and stressed conduit DSCRs are 1.82X and 1.27X,
respectively, compared to 1.77X and 1.22X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three performing conduit loans represent 27% of the pool
balance. The largest loan is the 100 Church Street Loan ($146
million -- 12% of the pool), which represents a participation
interest in a $223 million mortgage loan. The loan is secured by a
1.1 million square foot, Class B office property in Lower
Manhattan. The property was 99% leased as of March 2016, compared
to 91% leased one year prior. Moody's LTV and stressed DSCR are
95% and 1.03X, respectively, compared to 96% and 1.01X at prior
review.
The second largest loan is the Brennan Industrial Portfolio Loan
($103 million -- 8% of the pool). The loan is secured by a
portfolio consisting of 2.4 million square feet of industrial/flex
property located across 12 US states. The portfolio was 100%
leased as of March 2016, unchanged from at securitization. Moody's
LTV and stressed DSCR are 81% and 1.41X, respectively, compared to
83% and 1.37X at the last review.
The third largest loan is the Northridge Fashion Center Loan ($84
million -- 7% of the pool). The loan represents a participation
interest in a $231 million mortgage loan. The loan is secured by a
644,000 square foot portion of a 1.5 million square foot
super-regional mall located in Northridge, California. The mall's
non-collateral anchors include Macy's, Macy's Men and Home, Sears
and JC Penney. The mall was 97% leased as of year-end 2015,
essentially unchanged from the prior year. The loan benefits from
amortization. Moody's LTV and stressed DSCR are 93% and, 1.05X,
respectively, compared to 89% and 1.09X at the last review.
[*] Moody's Hikes $709MM of Subprime RMBS Issued 2003-2007
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 24 tranches,
from 11 transactions issued by various issuers backed by Subprime
mortgage loans.
Complete rating actions are:
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2004-WHQ1
Cl. M-3, Upgraded to Ba2 (sf); previously on Nov. 18, 2014,
Upgraded to B1 (sf)
Cl. M-4, Upgraded to Ba3 (sf); previously on Aug. 10, 2015,
Upgraded to B3 (sf)
Cl. M-5, Upgraded to Caa1 (sf); previously on Aug. 10, 2015,
Upgraded to Caa2 (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WCW3
Cl. A-1B, Upgraded to Aa1 (sf); previously on Sept. 2, 2015,
Upgraded to Aa3 (sf)
Cl. A-2C, Upgraded to Aa1 (sf); previously on Sept. 2, 2015,
Upgraded to Aa2 (sf)
Cl. M-2, Upgraded to B1 (sf); previously on Sept. 2, 2015,
Upgraded to B2 (sf)
Cl. M-3, Upgraded to Caa3 (sf); previously on April 6, 2010,
Downgraded to C (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2005-HE1
Cl. A-3C, Upgraded to Aa2 (sf); previously on Aug. 6, 2015,
Upgraded to A3 (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2005-OP1
Cl. M-3, Upgraded to Caa2 (sf); previously on Feb. 28, 2013,
Affirmed Ca (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2006-FR1
Cl. A-1, Upgraded to Aa1 (sf); previously on Aug. 6, 2015,
Upgraded to A1 (sf)
Cl. A-2C, Upgraded to Baa1 (sf); previously on Aug. 6, 2015,
Upgraded to Ba1 (sf)
Issuer: Structured Asset Securities Corp 2003-AM1
Cl. M1, Upgraded to A1 (sf); previously on March 7, 2011,
Downgraded to Baa1 (sf)
Issuer: Structured Asset Securities Corp Trust 2006-OPT1
Cl. A1, Upgraded to Baa2 (sf); previously on Aug. 6, 2015,
Upgraded to Ba2 (sf)
Cl. A5, Upgraded to A3 (sf); previously on Aug. 6, 2015,
Upgraded to Ba1 (sf)
Cl. A6, Upgraded to Baa2 (sf); previously on Aug. 6, 2015,
Upgraded to Ba2 (sf)
Issuer: Structured Asset Securities Corp Trust 2006-WF2
Cl. A4, Upgraded to A1 (sf); previously on Aug. 6, 2015,
Upgraded to Baa1 (sf)
Cl. M1, Upgraded to B1 (sf); previously on Oct. 7, 2014,
Upgraded to B3 (sf)
Issuer: Structured Asset Securities Corp Trust 2006-WF3
Cl. A1, Upgraded to A1 (sf); previously on Aug. 6, 2015,
Upgraded to Baa1 (sf)
Cl. A3, Upgraded to Aa2 (sf); previously on Aug. 6, 2015,
Upgraded to A2 (sf)
Cl. A4, Upgraded to A3 (sf); previously on Aug. 6, 2015,
Upgraded to Baa3 (sf)
Cl. A5, Upgraded to A1 (sf); previously on Aug. 6, 2015,
Upgraded to Baa1 (sf)
Cl. M1, Upgraded to Ba3 (sf); previously on Aug. 6, 2015,
Upgraded to B3 (sf)
Issuer: Structured Asset Securities Corp Trust 2007-BC4
Cl. A3, Upgraded to Aa3 (sf); previously on April 12, 2010,
Downgraded to Baa1 (sf)
Issuer: Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 2006-BC4
Cl. A4, Upgraded to Caa1 (sf); previously on April 12, 2010,
Downgraded to Ca (sf)
RATINGS RATIONALE
The upgrades are primarily due to total credit enhancement
available to the bonds. The actions reflect the 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 ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
[*] Moody's Hikes Ratings on 15 Tranches From 7 Transactions
------------------------------------------------------------
Moody's Investors Service, on June 28, 2016, upgraded the ratings
of 15 tranches from 7 transactions, backed by Alt-A and Option ARM
loans, issued by various issuers.
Complete rating actions are:
Issuer: Bear Stearns ALT-A Trust 2005-3
Cl. IV-A-1, Upgraded to B1 (sf); previously on March 13, 2015,
Upgraded to B3 (sf)
Cl. IV-A-2, Upgraded to Caa3 (sf); previously on July 2, 2010,
Downgraded to Ca (sf)
Cl. IV-A-3, Upgraded to B3 (sf); previously on March 13, 2015,
Upgraded to Caa1 (sf)
Issuer: CSFB Adjustable Rate Mortgage Trust 2005-3
Cl. 8-M-1, Upgraded to B2 (sf); previously on June 19, 2014,
Upgraded to Caa1 (sf)
Issuer: RALI Series 2005-QO2 Trust
Cl. A-1, Upgraded to Caa2 (sf); previously on Dec. 1, 2010,
Downgraded to Caa3 (sf)
Issuer: RALI Series 2007-QH1 Trust
Cl. A-1, Upgraded to Caa3 (sf); previously on Dec. 1, 2010,
Downgraded to Ca (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR6
Cl. I-A-1, Upgraded to Ba3 (sf); previously on Aug. 18, 2015,
Upgraded to B3 (sf)
Cl. II-A-1, Upgraded to B2 (sf); previously on Dec. 14, 2010,
Downgraded to Caa1 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2005-AR1
Cl. A-1B, Upgraded to B2 (sf); previously on Aug. 18, 2015,
Upgraded to B3 (sf)
Cl. A-2B, Upgraded to B2 (sf); previously on Aug. 18, 2015,
Upgraded to B3 (sf)
Cl. A-3, Upgraded to B1 (sf); previously on Aug. 18, 2015,
Upgraded to B2 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2005-AR11
Cl. A-1B2, Upgraded to B1 (sf); previously on May 23, 2014,
Upgraded to B2 (sf)
Cl. A-1B3, Upgraded to B1 (sf); previously on May 23, 2014,
Upgraded to B2 (sf)
Cl. A-1C3, Upgraded to Caa3 (sf); previously on Dec. 3, 2010,
Downgraded to Ca (sf)
Cl. A-1C4, Upgraded to Caa3 (sf); previously on Dec. 3, 2010,
Downgraded to Ca (sf)
RATINGS RATIONALE
The ratings upgraded are a result of the improving performance of
the related pools and/or an increase in credit enhancement
available to the bonds. The rating actions reflect the recent
performance of the underlying pools and Moody's updated loss
expectation 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 ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
[*] Moody's Takes Action on $1.1BB Subprime RMBS Issued 2005-2007
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 30 tranches
from 11 transactions, and downgraded the rating of one tranche
issued by one transaction, backed by Subprime mortgage loans.
Complete rating actions are as follows:
Issuer: Aegis Asset Backed Securities Trust 2005-5
Cl. IA3, Upgraded to Aa3 (sf); previously on Jul 31, 2015 Upgraded
to A3 (sf)
Cl. IA4, Upgraded to Baa1 (sf); previously on Jul 31, 2015 Upgraded
to Ba1 (sf)
Cl. IIA, Upgraded to A2 (sf); previously on Jul 31, 2015 Upgraded
to Baa2 (sf)
Cl. M1, Upgraded to B3 (sf); previously on Jul 31, 2015 Upgraded to
Caa1 (sf)
Issuer: Bear Stearns Asset Backed Securities I Trust 2005-TC1
Cl. M-2, Upgraded to Ba3 (sf); previously on Jul 31, 2015 Upgraded
to B3 (sf)
Cl. M-3, Upgraded to B2 (sf); previously on Jul 31, 2015 Upgraded
to Caa3 (sf)
Cl. M-4, Upgraded to Caa2 (sf); previously on May 21, 2010
Downgraded to C (sf)
Issuer: Bear Stearns Asset Backed Securities I Trust 2005-TC2
Cl. M-4, Upgraded to B1 (sf); previously on Jul 31, 2015 Upgraded
to B2 (sf)
Cl. M-5, Upgraded to B1 (sf); previously on Jul 31, 2015 Upgraded
to B3 (sf)
Cl. M-6, Upgraded to B1 (sf); previously on Jul 31, 2015 Upgraded
to Caa1 (sf)
Cl. M-7, Upgraded to Caa2 (sf); previously on Jul 31, 2015 Upgraded
to Ca (sf)
Issuer: HSI Asset Securitization Corporation Trust 2005-NC2
Cl. M-1, Downgraded to B1 (sf); previously on Aug 13, 2010
Downgraded to Ba1 (sf)
Issuer: HSI Asset Securitization Corporation Trust 2007-WF1
Cl. I-A, Upgraded to B1 (sf); previously on Jul 31, 2015 Upgraded
to B2 (sf)
Cl. II-A-3, Upgraded to Ba1 (sf); previously on Jul 31, 2015
Upgraded to B1 (sf)
Cl. II-A-4, Upgraded to Ba2 (sf); previously on Jul 31, 2015
Upgraded to B2 (sf)
Issuer: Merrill Lynch First Franklin Mortgage Loan Trust, Series
2007-H1
Cl. 1-A1, Upgraded to Ba1 (sf); previously on Jul 31, 2015 Upgraded
to Ba3 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2005-B
Cl. A-1, Upgraded to Aa2 (sf); previously on Jul 28, 2015 Upgraded
to A2 (sf)
Cl. A-2c, Upgraded to Aa2 (sf); previously on Jul 28, 2015 Upgraded
to A3 (sf)
Cl. A-2d, Upgraded to A2 (sf); previously on Jul 28, 2015 Upgraded
to Baa2 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2005-C
Cl. A-1, Upgraded to A1 (sf); previously on Jul 28, 2015 Upgraded
to Baa1 (sf)
Cl. A-2c, Upgraded to Baa1 (sf); previously on Jul 28, 2015
Upgraded to Baa3 (sf)
Cl. A-2d, Upgraded to Baa3 (sf); previously on Jul 28, 2015
Upgraded to Ba3 (sf)
Issuer: Specialty Underwriting and Residential Finance Trust,
Series 2005-BC2
Cl. M-3, Upgraded to B2 (sf); previously on Sep 8, 2014 Upgraded to
B3 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-4
Cl. M2, Upgraded to Aa2 (sf); previously on Jul 28, 2015 Upgraded
to A1 (sf)
Cl. M3, Upgraded to A2 (sf); previously on Jul 28, 2015 Upgraded to
Baa2 (sf)
Cl. M4, Upgraded to Ba2 (sf); previously on Jul 28, 2015 Upgraded
to B3 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-5
Cl. M2, Upgraded to Aa3 (sf); previously on Jul 28, 2015 Upgraded
to A3 (sf)
Cl. M3, Upgraded to Baa2 (sf); previously on Jul 28, 2015 Upgraded
to Ba3 (sf)
Cl. M4, Upgraded to Caa1 (sf); previously on Jul 28, 2015 Upgraded
to Caa3 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-7
Cl. A5, Upgraded to Aa2 (sf); previously on Jul 28, 2015 Upgraded
to A1 (sf)
Cl. M1, Upgraded to A1 (sf); previously on Jul 28, 2015 Upgraded to
Baa2 (sf)
RATINGS RATIONALE
The upgrades are primarily due to the total credit enhancement
available to the bonds. The downgrade of HSI Asset Securitization
Corporation Trust 2005-NC2 Class M-1 is primarily due to interest
shortfalls that are unlikely to be recouped. The actions reflect
the recent performance of the underlying pools and Moody's updated
loss expectations on the pools.
Factors that would lead to an upgrade or downgrade of the ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
[*] Moody's Takes Action on $543MM of Alt-A/Option ARMS RMBS Deals
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 23 tranches
and downgraded the ratings of two tranches from 11 transactions,
backed by Alt-A and Option ARM RMBS loans, issued by multiple
issuers.
Complete rating actions are:
Issuer: American Home Mortgage Assets Trust 2006-6
Cl. A2-A, Upgraded to Caa3 (sf); previously on Dec. 22, 2010,
Downgraded to Ca (sf)
Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2005-3
Cl. A-1, Upgraded to B2 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to B2 (sf); previously on Nov. 23,
2010, Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-1I, Upgraded to B2 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to B2 (sf); previously on Nov. 23,
2010, Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-2, Upgraded to B2 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Cl. A-2I, Upgraded to B2 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Cl. A-NA, Upgraded to B2 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to B2 (sf); previously on Nov. 23,
2010, Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2005-C
Cl. A-1, Upgraded to Ba3 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to Ba3 (sf); previously on Nov. 23,
2010 Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Insured
Ratings Withdrawn April 7, 2011)
Cl. A-1I, Upgraded to Ba3 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to Ba3 (sf); previously on Nov. 23,
2010, Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Insured
Ratings Withdrawn Apr 7, 2011)
Cl. A-2, Upgraded to Ba3 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Cl. A-2I, Upgraded to Ba3 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Cl. A-NA, Upgraded to Ba3 (sf); previously on Nov. 23, 2010,
Downgraded to B3 (sf)
Underlying Rating: Upgraded to Ba3 (sf); previously on Nov. 23,
2010, Downgraded to B3 (sf)
Financial Guarantor: Ambac Assurance Corporation (Insured Ratings
Withdrawn Apr 7, 2011)
Cl. IO, Upgraded to B3 (sf); previously on Feb. 22, 2012,
Downgraded to Caa1 (sf)
Issuer: Greenpoint Mortgage Funding Trust 2005-AR4
Cl. I-A-1, Upgraded to Baa1 (sf); previously on Aug. 18, 2015,
Confirmed at Ba1 (sf)
Cl. X-1, Upgraded to B1 (sf); previously on Aug. 18, 2015,
Upgraded to B3 (sf)
Issuer: HarborView Mortgage Loan Trust 2007-3
Cl. 2A-1A, Upgraded to B2 (sf); previously on Dec. 31, 2013,
Upgraded to Caa1 (sf)
Issuer: IndyMac INDX Mortgage Loan Trust 2006-AR37
Cl. 1-A-1, Downgraded to Caa1 (sf); previously on Oct. 12, 2010,
Downgraded to B3 (sf)
Issuer: Luminent Mortgage Trust 2006-6
Cl. A-1, Upgraded to B3 (sf); previously on Dec. 14, 2010,
Downgraded to Caa2 (sf)
Issuer: MASTR Alternative Loan Trust 2005-2
Cl. 1-A-1, Upgraded to B3 (sf); previously on April 15, 2010,
Downgraded to Caa1 (sf)
Cl. 1-A-2, Upgraded to Caa2 (sf); previously on April 15, 2010,
Downgraded to Ca (sf)
Cl. 4-A-1, Upgraded to B2 (sf); previously on Aug. 27, 2012,
Downgraded to B3 (sf)
Cl. 4-A-2, Upgraded to Caa2 (sf); previously on Aug. 27, 2012,
Upgraded to Caa3 (sf)
Issuer: Nomura Asset Acceptance Corporation Alternative Loan Trust,
Series 2005-AP2
Cl. A-5, Downgraded to Caa3 (sf); previously on July 12, 2010,
Downgraded to Caa2 (sf)
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2005-5
Cl. M-1, Upgraded to A1 (sf); previously on May 17, 2010,
Confirmed at Baa1 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR3
Cl. 1-A-1, Upgraded to B3 (sf); previously on Dec. 14, 2010,
Downgraded to Caa2 (sf)
Cl. II-A-1, Upgraded to Baa3 (sf); previously on Dec. 14, 2010,
Downgraded to Ba2 (sf)
RATINGS RATIONALE
The rating actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectation on
the pools. The rating upgrades are a result of the improving
performance of the related pools and an increase in credit
enhancement available to the bonds, as well as realignment with
other seniors that are currently at the same structure level. The
rating downgrades are due to the erosion of enhancement available
to the bonds and realignment with other seniors that are currently
at the same structure level.
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 ratings:
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 4.7% in May 2016 from 5.5% in May
2015. 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.
[*] S&P Completes Review of 143 Classes From 143 RMBS/ReREMIC Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 143 classes from 21 U.S.
residential mortgage-backed securities (RMBS) and U.S. RMBS
resecuritized real estate mortgage investment conduit (re-REMIC)
transactions. S&P raised 36, lowered four, affirmed 102, and
discontinued one.
All of the transactions in this review were issued between 2002 and
2007 and are supported by a mix of fixed- and adjustable-rate
subprime and prime jumbo mortgage loan collateral. One of the
transactions, WaMu Mortgage Pass-Through Certificates Series
2003-XSF1 Trust, is an excess yield interest re-REMIC transaction
backed primarily by 18 excess yield interests representing the
right to be paid excess yield amounts attributable to certain
fixed-rate first-lien mortgage loans. The loans are included,
along with other residential mortgage loans, in these underlying
prime trusts that issued mortgage-backed securities:
-- WaMu Mortgage Pass-Through Certificates Series 2002-S7,
-- WaMu Mortgage Pass-Through Certificates Series 2002-S8,
-- WaMu Mortgage Pass-Through Certificates Series 2003-S1,
-- WaMu Mortgage Pass-Through Certificates Series 2003-S2,
-- WaMu Mortgage Pass-Through Certificates Series 2003-S3,
-- WaMu Mortgage Pass-Through Certificates Series 2003-S4,
-- Washington Mutual MSC Mortgage Pass-Through Certificates
Series 2002-MS7,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS8,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS9,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS10,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS11,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS12,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS1,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS2,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS3,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS4,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS5,
-- Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2003-MS6.
Subordination, overcollateralization (where available) and excess
interest, as applicable, provide credit enhancement for the
transactions in this review.
ANALYTICAL CONSIDERATIONS
S&P incorporate 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 transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes.
UPGRADES
The upgrades are based on S&P's view that the projected credit
support for these classes is sufficient to cover S&P's projected
losses at the upgraded rating levels. Among other factors, the
upgrades reflect improved performance trends in the underlying
transactions, payment allocation mechanics, and/or an increase in
credit support.
DOWNGRADES
The downgrades include two ratings that were lowered three or more
notches. Three of the lowered ratings remain at an
investment-grade level ('BBB-' or higher), while one downgraded
class already had a speculative-grade rating ('BB+' or lower). The
downgrades are based on S&P's belief that its projected credit
support for the affected classes will be insufficient to cover
S&P's projected losses for the related transactions at a higher
rating. The downgrades reflect one or more of:
-- Deteriorated collateral performance of the underlying loans,
-- An increase in delinquencies, and/or
-- An increase in loss severities.
AFFIRMATIONS
The affirmations of ratings in the 'AAA' through 'B' rating
categories primarily reflect S&P's opinion that its projected
credit support on these classes remains relatively consistent with
S&P's prior projections and is sufficient to cover its projected
losses for those rating scenarios. Regarding WaMu Mortgage
Pass-Through Certificates Series 2003-XSF1 Trust, the rating
actions reflect the application of S&P's IO criteria, which provide
that S&P will maintain the current ratings on an IO class until all
of the classes that the IO security references are either lowered
to below 'AA- (sf)' or have been retired--at which time S&P will
withdraw these IO ratings.
A criteria interpretation for the above mentioned criteria was
issued to clarify that when the criteria state "we will maintain
the current ratings," it means that we will maintain active
surveillance of these IO classes using the methodology applied
prior to the release of this criteria. In so far as surveillance
methods for IO classes, when asset quality and priority of payment
or other structural protections warrant, de-linking from the
creditworthiness of the referenced security may be appropriate, as
the creditworthiness of the IO security may be higher than the
referenced security. Given that the excess yield amounts for WaMu
Mortgage Pass-Through Certificates Series 2003-XSF1, which provide
cash flow to the re-REMIC trust, are senior in payment priority,
S&P believes the creditworthiness of the IO securities is higher
than their referenced securities. Thus, S&P is affirming its
ratings at 'AAA'.
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. When S&P's model recommended an upgrade, S&P
either limited the extent of its upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Historical interest shortfalls;
-- Tail risk exposure;
-- Long duration;
-- Weak hard-dollar credit support remaining; and/or
-- A loss multiple not meeting 'A', 'AA', and 'AAA' category
sensitivity multiples.
The affirmations at 'CCC (sf)' or 'CC (sf)' reflect S&P's belief
that its projected credit support will remain insufficient to cover
its projected losses for these classes. As defined in "Criteria
For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published
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 'D (sf)' rating on class M7 from Option One
Mortgage Loan Trust 2005-3. This class has been written down to
zero as a result of realized losses that remain outstanding. S&P
discontinued this rating according to its surveillance and
withdrawal policy, as S&P views a subsequent upgrade to a rating
higher than 'D (sf)' to be unlikely under the relevant criteria.
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. S&P Global Ratings' baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.8% in 2016;
-- Real GDP growth of 2.3% for 2016;
-- An inflation rate of 1.8% in 2016; and
-- An average 30-year fixed mortgage rate of about 4.1% 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 S&P Global Ratings' 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 5.1% for 2016;
-- Downward pressure will cause GDP growth to fall to 1.3% in
2016;
-- Home price momentum will slow as potential buyers are not
able to purchase property; and
-- While the 30-year fixed mortgage rate will remain at a low
3.7% 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/2907wpg
[*] S&P Completes Review of 31 Classes From 10 Re-REMIC RMBS Deals
------------------------------------------------------------------
S&P Global Ratings, on June 27, 2016, completed its review of 31
classes from 10 U.S. residential mortgage-backed securities (RMBS)
re-REMIC transactions issued between 2005 and 2009. The review
yielded various upgrades, affirmations, and discontinuances. S&P
removed one of the affirmed ratings from CreditWatch, where it was
placed with negative implications on Jan. 20, 2016. S&P also
placed 13 ratings on CreditWatch with negative implications.
The transactions in this review are supported by underlying
securities which rely on the U.S. government or affiliated
entities, including Fannie Mae and Freddie Mac. The underlying
securities are backed by a mix of fixed- and adjustable-rate
mortgage loans, which are secured primarily by first liens on one-
to four-family residential properties.
ANALYSIS
Analytical Considerations
S&P 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 transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes.
UPGRADES
S&P raised its ratings on four classes to 'AA+ (sf)' from
'AA- (sf)' because, even without the benefit of support from their
respective derivative counterparties, S&P's projected credit
support for the affected classes is sufficient to support the
current rating level.
AFFIRMATIONS
The affirmations of ratings in the 'AA+' rating category reflect
S&P's opinion that its projected credit support on these classes
remained relatively consistent with S&P's prior projections and is
sufficient to cover our projected losses for those rating
scenarios. The affirmations also reflect certain guarantees by the
U.S. government or affiliated entities.
In addition to S&P's affirmation at 'AA+ (sf)', it removed class
2-A-X from Deutsche Mortgage Securities Inc. REMIC Trust
Certificates' series 2008-RS1 from CreditWatch negative. This
class is an interest-only (IO) class whose notional balance
references class 2-A-1 from the same transaction. In the
application of S&P's IO criteria to such securities issued on or
before April 15, 2010 (the criteria publication date), the rating
on the IO security will generally reflect the highest rating on the
referenced securities until all of the ratings on the referenced
securities are lowered to below 'AA-(sf)' or retired, at which
point the rating on the IO security will be withdrawn. Thus, in
this case, the rating on the IO class is weak-linked to the
underlying senior referenced security.
Of the affirmations, classes P-1, P-2, and P-3 from LVII
Resecuritization Trust 2009-1 were affirmed at 'AA+p (sf)'. These
ratings reflect S&P's assessment of the likelihood of repayment of
principal.
The ratings affirmed at 'CCC (sf)' reflect S&P's belief that its
projected credit support will remain insufficient to cover its 'B'
expected case projected losses for these classes. Pursuant to
"Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings,"
Oct. 1, 2012, the 'CCC (sf)' affirmations reflect S&P's view that
these classes are still vulnerable to defaulting.
DISCONTINUANCES
S&P discontinued its ratings on classes that were paid in full
during recent remittance periods and certain IO classes whose
interest obligations have expired.
CREDITWATCH PLACEMENTS
S&P placed 13 ratings from three transactions on CreditWatch with
negative implications because the trustee reported potential
interest shortfalls on these classes, which could negatively affect
our rating on the class. After verifying these possible interest
shortfalls, S&P will adjust the rating as it considers appropriate
according to S&P's criteria.
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. S&P Global Ratings' baseline macroeconomic outlook
assumptions for variables that S&P believes could affect
residential mortgage performance are:
-- An overall unemployment rate of 4.8% in 2016;
-- Real GDP growth of 2.3% for 2016;
-- The inflation rate will be 1.8% in 2016; and
-- The 30-year fixed mortgage rate will average about 4.1% 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 S&P Global Ratings' downside
forecast, S&P believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- Total unemployment will tick up to 5.1% 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 remains a low 3.7% 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/29ekgfG
[*] S&P Cuts Ratings on 112 MBIA-Insured Classes From 58 RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings, in June 24, 2016, lowered its ratings on 112
classes from 58 U.S. residential mortgage-backed securities (RMBS)
transactions. All but six of these classes are insured by MBIA
Insurance Corp. (MBIA). The remaining six classes are
resecuritized real estate mortgage investment conduit (re-REMIC)
classes that have their underlying classes insured by MBIA.
The rating actions follow the June 16, 2016, downgrade of S&P's
financial strength rating on MBIA to 'CCC' from 'B'. The outlook
on the company is negative.
Based on S&P's criteria, the ratings on any bond-insured classes
reflect the higher of the rating on the respective bond insurer and
the rating on the classes, assuming no bond insurance.
S&P will continue to monitor its ratings on all MBIA-insured U.S.
RMBS classes and take further rating actions as S&P deems
appropriate based on its criteria.
A list of the Affected Ratings is available at:
http://bit.ly/294qfTF
[*] S&P Takes Rating Actions on 51 Classes From 19 RMBS Deals
-------------------------------------------------------------
S&P Global Ratings, on June 28, 2016, took various rating actions
on 51 classes from 19 U.S. residential mortgage-backed securities
(RMBS) transactions. S&P lowered two ratings (which S&P removed
from CreditWatch negative), raised seven ratings, and affirmed 42
ratings (one of which S&P removed from CreditWatch negative).
All of the transactions in this review were issued between 2002 and
2007 and are supported by closed-end second-lien and second-lien
high loan-to-value (LTV) ratio loans.
With respect to insured obligations, where S&P maintains a rating
on the bond insurer that is lower than what S&P would rate the
class without bond insurance or where the bond insurer is not
rated, we relied solely on the underlying collateral's credit
quality and the transaction structure to derive the rating on the
class. As discussed in S&P's criteria, "The Interaction Of Bond
Insurance And Credit Ratings," published Aug. 24, 2009, the rating
on a bond-insured obligation will be the higher of the rating on
the bond insurer and the rating of the underlying obligation
without considering the potential credit enhancement from the bond
insurance.
ANALYTICAL CONSIDERATIONS
S&P incorporate 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 transaction-specific performance or structural
characteristics, or both, and their potential effects on certain
classes.
DOWNGRADES
S&P downgraded classes M-2 and M-4 from CWABS Inc. series 2003-SC1
to 'CCC (sf)' from 'B (sf)' and 'B- (sf)', respectively, and
removed them from CreditWatch with negative implications. The
downgrades were based on S&P's assessment of interest shortfalls to
the affected classes during recent remittance periods. The lowered
ratings were derived by applying S&P's interest shortfall criteria,
which designate a maximum potential rating to these classes.
UPGRADES
The upgrades include two ratings that were raised three or more
notches. S&P's projected credit support for the affected classes
is sufficient to cover its projected losses for these rating
levels. The upgrades reflect decreased delinquencies and increased
credit support relative to our projected losses.
AFFIRMATIONS
The affirmations of ratings in the 'AAA' through 'B' rating
categories reflect S&P's opinion that its projected credit support
on these classes remains relatively consistent with its prior
projections and is sufficient to cover S&P's projected losses for
those rating scenarios.
S&P affirmed class M-1 from CWABS Inc. series 2003-SC1 removed it
from CreditWatch with negative implications. This class was
previously placed on CreditWatch negative because of interest
shortfalls. The class is no longer experiencing interest
shortfalls, and S&P considers the outstanding shortfalls to be de
minimis as they are less than 1 basis point of the original class
balance.
For certain transactions, S&P considered specific performance
characteristics that, in S&P's 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:
-- A high proportion of balloon loans in the pool that are
approaching their maturity date;
-- Low levels of available credit enhancement;
-- The application of an operational risk cap; and
-- Deteriorating credit performance trends.
In addition, in accordance with S&P's second-lien criteria, some
classes are limited to a liquidity rating cap of 'A+' because they
have an estimated payoff of greater than 24 months or insufficient
hard credit enhancement for higher rating categories.
The ratings affirmed at 'CCC (sf)' or 'CC (sf)' reflect S&P's
belief that its projected credit support will remain insufficient
to cover its 'B' expected case projected losses to these classes.
According to "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And
'CC' Ratings," published Oct. 1, 2012, the 'CCC (sf)' affirmations
reflect S&P's view that these classes are still vulnerable to
defaulting, and the 'CC (sf)' affirmations reflect S&P's view that
these classes remain virtually certain to default.
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. S&P Global Ratings' baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.8% in 2016;
-- Real GDP growth of 2.3% for 2016;
-- The inflation rate will be 1.8% in 2016; and
-- The 30-year fixed mortgage rate will average about 4.1% 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 S&P Global Ratings' downside
forecast, S&P believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- Total unemployment will tick up to 5.1% 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 remains a low 3.7% 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/2974e5U
[*] S&P Takes Ratings on 108 Classes From 19 U.S. RMBS Deals
------------------------------------------------------------
S&P Global Ratings, on June 24, 2016, took various rating actions
on 108 classes from 19 U.S. residential mortgage-backed securities
(RMBS) transactions. S&P raised 20 ratings, lowered 20 ratings,
affirmed 63 ratings, discontinued two ratings, and withdrew three
ratings.
All of the transactions in this review were issued between 2000 and
2006 and are supported by a mix of fixed- and adjustable-rate
subprime mortgage loans.
Subordination, overcollateralization (where available), excess
interest, as applicable, and bond insurance, provide credit
enhancement for the transactions in this review. Where the bond
insurer is rated lower than what S&P would rate the respective
class, we 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 projected cash flows. These
considerations are based on specific performance or structural
characteristics, or both, and their potential effects on certain
classes.
UPGRADES
S&P raised its ratings on 20 classes. The projected credit support
for the affected classes is sufficient to cover S&P’s projected
losses at these rating levels. The upgrades reflect one or more
of:
-- Improved collateral performance/delinquency trends;
-- Increased credit support; and
-- Expected short duration.
DOWNGRADES
S&P lowered its ratings on 20 classes due to deteriorating
collateral performance and/or the erosion of credit support.
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:
-- Delinquency trends;
-- Historical interest shortfalls;
-- Significant growth in observed loss severities;
-- 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 22 ratings in the 'AAA' through 'B' categories. 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 also affirmed 41 'CCC (sf)' and 'CC (sf)' ratings. S&P
believes that its projected credit support will remain insufficient
to cover S&P's projected losses to these classes. As defined in
"Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings,"
published 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 rating on class I-A from HSI Asset
Securitization Corp. Trust 2006-OPT2 because the class has been
paid in full. S&P also discontinued its 'D (sf)' rating on class
M-12 from HSI Asset Securitization Corp. Trust 2006-OPT1. This
class has been written down to zero as a result of realized losses
that remain outstanding. S&P discontinued this rating according to
its surveillance and withdrawal policy, as S&P views a subsequent
upgrade to a rating higher than 'D (sf)' to be unlikely under the
relevant criteria.
WITHDRAWALS
S&P withdrew its ratings on classes MV-1, MV-2, and BV from Home
Equity Mortgage Loan Asset-Backed Trust's series SPMD 2000-A based
on the small number of loans remaining in the respective pool. Once
a pool has declined to a de minimis amount, S&P believes that tail
risk cannot be addressed because the high degree of credit
instability is incompatible with any rating level.
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 4.8% in 2016;
-- Real GDP growth of 2.3% for 2016;
-- The inflation rate will be 1.8% in 2016; and
-- The 30-year fixed mortgage rate will average about 4.1% 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 5.1% 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 remains a low 3.7% 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/290gBja
[*] S&P Takes Ratings on 108 Classes From 20 RMBS Deals
-------------------------------------------------------
S&P Global Ratings, on June 24, 2016, took various rating actions
on 108 classes from 20 U.S. residential mortgage-backed securities
(RMBS) subprime transactions. S&P raised 31 ratings, lowered four
ratings, and affirmed 73 ratings.
All of the transactions in this review were issued between 2002 and
2006 and are supported by a mix of fixed- and adjustable-rate
subprime mortgage loans.
Subordination, overcollateralization (where available), and excess
interest, as applicable, provide credit enhancement for the
transactions in this review.
ANALYTICAL CONSIDERATIONS
S&P 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.
UPGRADES
S&P raised its ratings on 31 classes. The projected credit support
for the affected classes is sufficient to cover its projected
losses at these rating levels. The upgrades reflect one or more
of:
-- Improved collateral performance/delinquency trends;
-- Increased credit support; and/or
-- Expected short duration.
DOWNGRADES
S&P lowered its ratings on four classes due to deteriorating
collateral performance, an increase in delinquencies, and/or the
erosion of credit support. The downgrades reflect S&P's belief
that its projected credit support for the affected classes will be
insufficient to cover its projected losses for the related
transactions at a higher rating.
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. When S&P's model recommended an upgrade, it
either limited the extent of its upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Delinquency trends;
-- Historical interest shortfalls;
-- Significant growth in observed loss severities;
-- A low priority of principal payments;
-- A high proportion of re-performing loans in the pool; and/or
-- Insufficient subordination, overcollateralization, or both.
The affirmations of ratings in the 'AAA' through 'B' categories
reflect S&P's opinion that its projected credit support on these
classes remained relatively consistent with S&P's prior projections
and is sufficient to cover its projected losses for those rating
scenarios.
The ratings affirmed at 'CCC (sf)' or 'CC (sf)' reflect S&P's
belief that its projected credit support will remain insufficient
to cover its 'B' expected case projected losses for these classes.
Pursuant to "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC'
Ratings," Oct. 1, 2012, the 'CCC (sf)' affirmations reflect S&P's
view that these classes are still vulnerable to defaulting, and the
'CC (sf)' affirmations reflect S&P's view that these classes remain
virtually certain to default.
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. S&P's Global Ratings' baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.8% in 2016;
-- Real GDP growth of 2.3% for 2016;
-- The inflation rate will be 1.8% in 2016; and
-- The 30-year fixed mortgage rate will average about 4.1% 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 S&P Global Ratings' 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 5.1% 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 remains a low 3.7% 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/28ZFOag
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
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however, be complete or accurate. The Monday Bond Pricing table
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The Sunday TCR delivers securitization rating news from the week
then-ending.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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