/raid1/www/Hosts/bankrupt/TCR_Public/161127.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 27, 2016, Vol. 20, No. 331
Headlines
ACCESS GROUP 2002-A: Fitch Affirms 'Bsf' Rating on Class B Notes
ACCESS GROUP 2005-A: Fitch Affirms BBsf Rating on Class B Notes
ACCESS GROUP: Moody's Takes Action on 7 FFELP Student Loan Deals
AFFORDABLE MULTIFAMILY 2014-1: DBRS Confirms BB Rating on E Notes
ALL STUDENT IV: Moody's Lowers Rating on 2 Tranches to B3
AMERICAN CREDIT 2016-1: S&P Affirms BB Rating on Class D Notes
AMERICAN CREDIT 2016-4: S&P Assigns BB Rating on Class E Notes
AMERICAN CREDIT 2016-4: S&P Reinstates BB Rating on Cl. E Notes
APOLLO AVIATION 2016-2: S&P Assigns BB Rating on Class C Notes
ARROWPOINT CLO 2013-1: S&P Gives Prelim BB- Rating on Cl. D-R Notes
AVERY POINT II: S&P Lowers Rating on Class F Notes to B-
BAYVIEW COMMERCIAL: Moody's Takes Actions on $764.8MM of ABS
BAYVIEW OPPORTUNITY 2016-SPL1: DBRS Gives (P)BB Rating on 3 Tranche
BEAR STEARNS 2003-TOP12: Moody's Hikes Rating on Cl. N Debt to B1
BEAR STEARNS 2004-PWR5: Moody's Hikes Cl. L Debt Rating to Ba1
BENEFIT STREET X: S&P Assigns Prelim. BB Rating on Cl. D Notes
BLUEMOUNTAIN CLO 2012-2: S&P Assigns BB Rating on Cl. E-R Notes
BLUEMOUNTAIN CLO 2014-4: S&P Affirms Prelim B Rating on Cl. F Notes
BLUEMOUNTAIN CLO 2016-3: S&P Assigns BB Rating on Cl. E Notes
BNPP IP CLO 2014-1: S&P Lowers Rating on Class E Notes to B-
CANADIAN COMMERCIAL 2013-2: DBRS Confirms BB Rating on Cl. F Notes
CEDAR CREEK CLO: S&P Affirms B- Rating on Class F Notes
CITIGROUP COMMERCIAL 2004-C2: Moody's Cuts Cl. H Debt Rating to B3
CITIGROUP COMMERCIAL 2016-C3: DBRS Assigns BB Rating on Cl. E Debt
CITIGROUP COMMERCIAL 2016-C3: Fitch Rates Class F Certs 'B-sf'
CMLBC 2001-CMLB1: Moody's Affirms Ba3 Rating on Class X Certs
COMM 2014-CCRE15: Moody's Affirms Ba2 Rating on Cl. E Certificates
COMMERCIAL MORTGAGE 1999-C2: Moody's Affirms Ca Rating on H Certs
CREDIT SUISSE 2006-C1: S&P Lowers Rating on Class J Certs to D
CW CAPITAL I: Moody's Hikes Class C Notes Rating to B3
CWABS TRUST: Moody's Takes Action on $2.8BB Debt Issued 2006-2007
DRYDEN 33 SENIOR: S&P Assigns BB Rating on Class E-R Notes
DRYDEN 33 SENIOR: S&P Assigns Prelim. BB Rating on Cl. E-R Notes
FLAGSHIP CREDIT 2015-1: S&P Affirms BB- Rating on Class E Notes
FLATIRON CLO 2007-1: Moody's Affirms Ba3 Rating on Class E Notes
FORTRESS CREDIT V: S&P Affirms BB Rating on Class F Notes
FREDDIE MAC 2016-SC02: Moody's Assigns Ba2 Rating on Cl. M-2 Debt
GALAXY XIV: S&P Assigns BB Rating on Class E-R Notes
GALLATIN VI: Fitch Corrects Nov. 7 Ratings Release
GE COMMERCIAL 2004-C3: Moody's Hikes Class K Certs Rating to B3
GERMAN AMERICAN 2016-CD2: Fitch to Rate 2 Tranches 'BB-'
GLOBAL MORTGAGE 2004-A: Moody's Lowers Rating on Class B4 Debt to C
GO FINANCIAL 2015-2: DBRS Confirms BB(low) Rating on Class C Notes
GREENWICH CAPITAL 2004-GG1: S&P Affirms B+ Rating on Cl. G Certs
GSR MORTGAGE 2007-2F: Moody's Hikes Cl. 1A-1 Debt Rating to Caa1
GSRPM MORTGAGE 2006-1: Moody's Raises Rating on Cl. M-1 Debt to B1
HEMPSTEAD CLO: Fitch Affirms 'BBsf' Rating on Class D Notes
HILTON USA 2016-SFP: Moody's Assigns B3 Rating on Class F Certs
INWOOD PARK: S&P Raises Rating on Class E Notes to BB+
JP MORGAN 2004-C1: Moody's Raises Rating on Class M Certs to Ba2
JP MORGAN 2005-LDP1: Fitch Hikes Class G Notes Rating to 'BBsf'
JP MORGAN 2006-LDP6: Moody's Affirms Caa3 Rating on Cl. X-1 Debt
JP MORGAN 2014-C25: DBRS Confirms BB Rating on Class E Notes
JP MORGAN 2016-4: Fitch to Rate Class B-4 Certs. 'BBsf'
JP MORGAN 2016-4: Moody's Assigns (P)Ba3 Rating on Cl. B-4 Certs
JP MORGAN 2016-ASH: Moody's Assigns (P)B3 Rating on Class F Certs
KEYCORP STUDENT 2004-A: Moody's Hikes Cl. II-C Debt Rating to Ba2
KKR CLO 16: Moody's Assigns Ba3 Rating on Class D Notes
LB-UBS COMMERCIAL 2004-C1: S&P Affirms BB+ Rating on Class D Certs
LB-UBS COMMERCIAL 2007-C1: Fitch Affirms 'Dsf' Rating on 5 Tranches
LB-UBS COMMERCIAL 2007-C7: S&P Affirms B Rating on Cl. A-J Certs
LCM XVII: S&P Affirms BB Rating on Class E Replacement Notes
LNR CDO III: Moody's Lowers Class B Notes Rating to 'C'
MADISON PARK XXIV: S&P Assigns Prelim. BB- Rating on Class E Notes
MARINER CLO 2015-1: S&P Raises Rating on Class E Notes to BB+
MCAP 2014-1: Fitch Affirms 'BBsf' Rating on Class F Notes
MERCER FIELD: Fitch Affirms 'BBsf' Rating on Class E Notes
MORGAN STANLEY 2006-HQ9: S&P Lowers Rating on Class F Certs to D
MORGAN STANLEY 2016-BNK2: S&P Assigns B+ Rating on 4 Tranches
MORGAN STANLEY 2016-C31: Fitch Assigns BB-sf Rating on Cl. X-E Debt
MORGAN STANLEY 2016-SNR: S&P Gives Prelim. BB- Rating on E Certs
MORGAN STANLEY 2016-UBS12: Fitch to Rate Cl. X-E Debt 'BB-sf'
NAVIENT SOLUTIONS: Moody's Takes Actions on 17 FFELP Transactions
NEWCASTLE CDO V: Moody's Hikes Class II Notes Rating to Ba2
NRZ ADVANCE 2015-ON1: S&P Gives Prelim. BB Rating on E-T4 Notes
OCEAN TRAILS II: Moody's Affirms Ba1 Rating on Class C Notes
OCP CLO 2012-2: S&P Assigns BB- Rating on Class E-R Notes
OCTAGON INVESTMENT XI: Moody's Hikes Class D Notes Rating to Ba2
RAAC TRUST 2005-RP2: Moody's Hikes Cl. M-4 Debt Rating to Ba1
RAIT TRUST 2016-FL6: DBRS Assigns Prov. BB Rating on Class E Debt
RESIDENTIAL REINSURANCE 2016-II: S&P Rates Class 3 Notes B-
SALEM FIELDS: Moody's Assigns Ba3 Rating on 2 Tranches
SARATOGA INVESTMENT 2013-1: S&P Assigns BB Rating on Cl. E-R Notes
SARATOGA INVESTMENT 2013-1: S&P Gives Prelim BB Rating on E-R Notes
SCHOONER TRUST 2007-8: Moody's Affirms Ba1 Rating on Class F Certs
SHACKLETON 2016-IX: S&P Assigns BB Rating on Class E Notes
SHELLPOINT CO-ORIGINATOR 2016-1: Moody's Rates Cl. B-4 Certs Ba2
SHELLPOINT CO-ORIGINATOR 2016-1: Moody's Rates Cl. B-4 Certs Ba2
SLM STUDENT 2006-1: Fitch Lowers Rating on Cl. B Notes to 'Bsf'
SLM STUDENT 2007-2: Fitch Lowers Rating on Cl. A-4 Notes to 'Bsf'
SLM STUDENT 2007-3: Fitch Lowers Rating on 2 Tranches to 'Bsf'
SLM STUDENT 2008-8: Fitch Lowers Rating on 2 Tranches to 'Bsf'
SOUND POINT XIV: Moody's Assigns Ba3 Rating on Class E Notes
STEERS TRUST 2: Moody's Affirms Caa3 Ratings on 4 Trust Units
STEERS TRUST: Moody's Affirms Caa3 Ratings on 3 Trust Units
STRUCTURED FINANCE III: Moody's Hikes Class A Notes Rating to B2
SYMPHONY CLO XVIII: Moody's Assigns (P)Ba3 Rating on Cl. E Notes
TRADE MAPS 1: Fitch Affirms 'Bsf' Rating on Class D Notes
TRIMARAN CLO VII: Moody's Affirms Ba1 Rating on Cl. B-2L Notes
TRIMARAN CLO VII: Moody's Affirms Ba1 Rating on Class B-2L Notes
VENTURE XXV CLO: Moody's Assigns Ba3 Rating on Cl. E Notes
WACHOVIA BANK 2006-C28: S&P Affirms B Rating on Class B Certs
WACHOVIA BANK 2007-C33: S&P Affirms CCC Rating on Cl. C Certs
WELLS FARGO 2016-LC25: DBRS Assigns (P)BB Rating on Class F Certs
WEST CLO 2012-1: S&P Affirms Prelim. BB- Rating on Class D Notes
[*] Moody's Hikes Ratings on $226MM Subprime RMBS Issued 2003-2004
[*] S&P Completes Review on 149 Classes From 25 US RMBS Transaction
[*] S&P Completes Review on 39 Classes From 8 U.S. RMBS Deals
[*] S&P Completes Review on 49 Classes From 6 RMBS Re-REMIC Deals
[*] S&P Completes Review on 96 Classes From 15 U.S. RMBS Deals
*********
ACCESS GROUP 2002-A: Fitch Affirms 'Bsf' Rating on Class B Notes
----------------------------------------------------------------
Fitch Ratings has affirmed the class A and B notes issued by Access
Group, Inc. 2002-A Private Trust at 'Asf' and 'Bsf', respectively.
The Rating Outlook remains Stable for the class A notes, and
Negative for the class B notes.
While Fitch's analysis indicated a lower rating than 'Bsf' for the
class B notes, the decision to maintain the 'Bsf' rating takes into
consideration its time to maturity and possibility of positive
excess spread in the future with reduced defaults.
KEY RATING DRIVERS
Adequate Collateral Quality: The trust is collateralized by
approximately $71.4 million of private student loans as of August
2016. The loans were originated by Access Group.
Sufficient Credit Enhancement (CE): CE is provided by
overcollateralization (OC; the excess of trust's asset balance over
bond balance) and excess spread. Senior and total parity ratios
are currently 127.04% and 100.05%, respectively. The projected
remaining defaults are expected to be 4%-6%. A recovery rate of
30% was applied which was determined to be appropriate based on
data provided by the issuer.
As long as the Senior Asset Requirement parity levels of 110% and
101.5% for the senior and subordinate notes, respectively, continue
not to be met, all principal payments will continue to flow to the
senior A-2 notes only. Should the Senior Asset Requirement levels
be met, however, principal payments can be applied to the
subordinate B notes before the A-2 notes, resulting in a decline in
senior parity.
Satisfactory Servicing Capabilities: Day-to-day servicing is
provided by Xerox Education Services. Fitch believes the servicing
operations are acceptable at this time.
Criteria Variation
Eligible Investment: Under Fitch's "Counterparty Criteria for
Structured Finance and Covered Bonds", dated Sept. 1, 2016, Fitch
looks to its own ratings in analyzing counterparty risk and
assessing a counterparty's creditworthiness. The definition of
permitted investments for this deal allows for the possibility of
using investments not rated by Fitch, which represents a criteria
variation. Since the only available funds to invest are monthly
collections, and the funds can only be invested for a short
duration of one month given the payment frequency of the notes,
Fitch does not believe such variation has a measurable impact upon
the current ratings assigned.
RATING SENSITIVITIES
As Fitch's base case default proxy is derived primarily from
historical collateral performance, actual performance may differ
from the expected performance, resulting in higher loss levels than
the base case. This will result in a decline in CE and remaining
loss coverage levels available to the bonds and may make certain
bond ratings susceptible to potential negative rating actions,
depending on the extent of the decline in coverage. Fitch will
continue to monitor the performance of the trust.
Fitch has affirmed these ratings:
Access Group, Inc. 2002-A Private Trust:
-- Class A-2 at 'Asf'; Outlook Stable;
-- Class B at 'Bsf'; Outlook Negative.
ACCESS GROUP 2005-A: Fitch Affirms BBsf Rating on Class B Notes
---------------------------------------------------------------
Fitch Ratings has affirmed the senior and subordinate notes issued
by Access Group Inc. 2005-A at 'AAsf' and 'BBsf', respectively. The
Rating Outlooks remain Stable.
KEY RATING DRIVERS
Adequate Collateral Quality: The trust is collateralized by
approximately $109.6 million of private student loans as of the end
of the September 2016 collection period. The loans were originated
by Access Group, Inc. Based upon the trust's performance; the
projected remaining gross defaults are expected to be in the range
of 7% to 9% of the current collateral balance. A recovery rate of
30% was applied, which was determined to be appropriate based on
the latest data provided by the issuer.
Sufficient Credit Enhancement (CE): CE is provided by
overcollateralization, excess spread, and for the senior notes,
subordination provided by the subordinate notes. As of the October
2016 distribution, the senior and total parity ratios are 124.51%
and 103.0%, respectively. The trust is releasing excess spread
since it has reached its release total parity level of 103%.
Adequate Liquidity Support: Liquidity support is provided by a
$1,000,000 capitalized interest account.
Satisfactory Servicing Capabilities: Day-to-day servicing is
provided by Xerox Education Services. Fitch believes the servicing
operations are acceptable at this time.
Criteria Variation
Eligible Investment: Under the Counterparty Criteria for Structured
Finance and Covered Bonds, dated Sept. 1, 2016, Fitch looks to its
own ratings in analysing counterparty risk and assessing a
counterparty's creditworthiness. The definition of permitted
investments for this deal allows for the possibility of using
investments not rated by Fitch, which represents a criteria
variation. Since the only available funds to invest are monthly
collections, and the funds can only be invested for a short
duration of one month given the payment frequency of the notes,
Fitch doesn't believe such a variation has a measurable impact upon
the current ratings assigned.
RATING SENSITIVITIES
As Fitch's base case default proxy is derived primarily from
historical collateral performance, actual performance may differ
from the expected performance, resulting in higher loss levels than
the base case. This will result in a decline in CE and remaining
loss coverage levels available to the bonds and may make certain
bond ratings susceptible to potential negative rating actions,
depending on the extent of the decline in coverage. Fitch will
continue to monitor the performance of the trust.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
Fitch has affirmed the following ratings:
Access Group Inc., 2005-A:
-- Class A-3 at 'AAsf'; Outlook Stable;
-- Class B at 'BBsf'; Outlook Stable.
ACCESS GROUP: Moody's Takes Action on 7 FFELP Student Loan Deals
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 24 tranches
and upgraded the ratings of two tranches in seven securitizations
backed by student loans originated under the Federal Family
Education Loan Program (FFELP), issued by Access Group Inc. The
loans are guaranteed by the US government for a minimum of 97% of
defaulted principal and accrued interest.
The complete rating actions are as follow:
Issuer: Access Group Inc. Federal Student Loan Asset-Backed
Notes, (2002 Trust Indenture)
-- Senior Ser. 2002-1 Cl. A-3, Downgraded to Baa3; previously
on Dec 18, 2013 Upgraded to Aaa
-- Senior Ser. 2002-1 Cl. A-4, Downgraded to Baa3; previously
on Dec 18, 2013 Upgraded to Aaa
-- Sub. Ser. 2002-1 Cl. B, Downgraded to Ca; previously on Jun
14, 2016 Caa3 Placed Under Review for Possible Upgrade
-- Senior Ser. 2003-1 Cl. A-3, Downgraded to Baa3; previously
on Dec 18, 2013 Upgraded to Aaa
-- Senior Ser. 2003-1 Cl. A-4, Downgraded to Baa3; previously
on Dec 18, 2013 Upgraded to Aaa
-- Senior Ser. 2003 Cl. A-5, Downgraded to Baa3; previously on
Dec 18, 2013 Upgraded to Aaa
-- Senior Ser. 2003-1 Cl. A-6, Downgraded to Baa3; previously
on Dec 18, 2013 Upgraded to Aaa
-- Sub. Ser. 2003-1 Cl. B, Downgraded to Ca; previously on Jun
14, 2016 Caa3 Placed Under Review for Possible Downgrade
-- Senior Ser. 2004-1A-3, Downgraded to Baa3; previously on Dec
18, 2013 Upgraded to Aaa
-- Senior Ser. 2004-1A-4, Downgraded to Baa3; previously on Jun
14, 2016 Aaa Placed Under Review for Possible Downgrade
-- Senior Ser. 2004-1A-5, Downgraded to Baa3; previously on Jun
14, 2016 Aaa Placed Under Review for Possible Downgrade
-- Sub. Ser. 2004-1B, Downgraded to Ca; previously on Jun 14,
2016 Caa3 Placed Under Review for Possible Downgrade
Issuer: Access Group, Inc. Series 2004-2
-- 2004-2-A-3, Downgraded to A1; previously on Jun 22, 2015 Aa3
Placed Under Review for Possible Downgrade
-- 2004-2-A-4, Downgraded to A1; previously on Jun 22, 2015 Aaa
Placed Under Review for Possible Downgrade
-- 2004-2-A-5, Downgraded to Aa3; previously on Jun 14, 2016
Aaa Placed Under Review for Possible Downgrade
-- 2004-2-B, Downgraded to Baa2; previously on Jun 14, 2016 A2
Placed Under Review for Possible Downgrade
Issuer: Access Group, Inc. Federal Student Loan Asset-Backed
Floating Rate Notes, Series 2005-1
-- 2005-1-A-4, Downgraded to Baa1; previously on Jun 14, 2016
Aaa Placed Under Review for Possible Downgrade
-- 2005-1-B, Downgraded to Baa2; previously on Jun 14, 2016 Aa1
Placed Under Review for Possible Downgrade
Issuer: Access Group Inc. - Federal Student Loan Asset-Backed
Floating Rate Notes, Series 2005-2
-- 2005-2-B, Upgraded to A1; previously on Jun 14, 2016 A3
Placed Under Review for Possible Upgrade
Issuer: Access Group Inc., Series 2006-1
-- 2006-1-A-3, Downgraded to A1; previously on Jun 14, 2016 Aaa
Placed Under Review for Possible Downgrade
-- 2006-1-B, Downgraded to A1; previously on Jun 14, 2016 Aa1
Placed Under Review for Possible Downgrade
Issuer: Access Group, Inc. Series 2007-1
-- 2007-A-4, Downgraded to Ba2; previously on Jun 22, 2015 Aaa
Placed Under Review for Possible Downgrade
-- 2007-A-5, Downgraded to Baa3; previously on Jun 14, 2016 Aaa
Placed Under Review for Possible Downgrade
-- 2007-B, Downgraded to Baa3; previously on Jun 14, 2016 Aa1
Placed Under Review for Possible Downgrade
-- 2007-C, Downgraded to Baa3; previously on Jun 14, 2016 Aa3
Placed Under Review for Possible Downgrade
Issuer: Access Funding 2015-1 LLC
-- Class B Notes, Upgraded to Aaa (sf); previously on Jun 14,
2016 A2 (sf) Placed Under Review for Possible Upgrade
RATINGS RATIONALE
Most of the notes in the rating actions were placed on watch in
June 2016 in connection with the application of Moody's updated
FFELP methodology. Under the new methodology, Moody's derives the
expected loss of each tranche by running its standard 28 cash flow
scenarios and using the weights associated with each scenario.
The downgrades are primarily a result of Moody's analysis
indicating that the tranches will not pay off by final maturity
dates in either some or all of Moody's 28 cash flow scenarios, thus
causing the tranches to incur expected losses that are higher than
the expected loss benchmarks set in Moody's idealized loss tables
for the previous ratings. The low payment rates on the underlying
securitized pools of FFELP student loans are driven primarily by
persistently high levels of loans to borrowers in non-standard
payment plans, including deferment, forbearance and Income-Based
Repayment (IBR), as well as by the relatively low rates of
voluntary prepayments.
The downgrades of tranches of Access Group Inc. Federal Student
Loan Asset-Backed Notes (2002 Trust Indenture) also reflect error
corrections. "As to all of these tranches, in our June 2016 action
we incorrectly calculated the Commercial Paper Rate, which led to
the coupon of the notes being capped at net loan rate." Moody's
said. As a result of the correction, the coupon in our cash flow
scenarios is higher, and the expected loss for these classes has
increased to a level higher than the expected loss benchmark levels
set in Moody's Idealized Cumulative Expected Loss Rates table for
the previous ratings.
The rating actions on the senior auction rate tranches of Access
Group Inc. Federal Student Loan Asset-Backed Notes (2002 Trust
Indenture), Senior Ser. 2002-1 Cl. A-3, Senior Ser. 2002-1 Cl. A-4,
Senior Ser. 2003-1 Cl. A-3, Senior Ser. 2003-1 Cl. A-4, Senior Ser.
2003 Cl. A-5, Senior Ser. 2003-1 Cl. A-6, Senior Ser. 2004-1A-3,
Senior Ser. 2004-1A-4 and Senior Ser. 2004-1A-5, also reflect the
correction of an additional error related to the paydown of
affected auction rate securities. "As to these tranches, in our
June 2016 watch action we incorrectly modeled the paydown of the
auction rate securities under a sequential structure, which led to
only the bottom two senior notes (Senior Ser. 2004-1A-4 and Senior
Ser. 2004-1A-5) being placed on review for possible downgrade.
Given uncertainty due to trustee discretion in paydown sequence, we
updated our models to reflect a pro-rata sequence amongst the
senior auction rate securities. As a result of the correction, some
of the notes that were previously not on review for downgrade had
expected losses that increased to a level higher than the expected
loss benchmark levels set in Moody's Idealized Cumulative Expected
Loss Rates table for the prior ratings," Moody's said.
The upgrades of one tranche of Access Group Inc. Federal Student
Loan Asset-Backed Floating Rate Notes, Series 2005-2 and one
tranche of Access Funding 2015-1 LLC are primarily a result of
Moody's analysis indicating that the expected losses on these
tranches across Moody's cash flow scenarios are lower than the
expected loss benchmarks in Moody's Idealized Cumulative Expected
Loss Rates table for the previous tranche ratings. Access Funding
2015-1 LLC is full turbo.
The principal methodology used in these ratings was "Moody's
Approach to Rating Securities Backed by FFELP Student Loans'
published in August 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Among the factors that could drive the ratings up are lower than
expected borrower usage of deferment, forbearance and IBR, higher
than expected voluntary prepayment rates, prepayments with proceeds
from sponsor repurchases of student loan collateral.
Down
Among the factors that could drive the ratings down are lower than
expected levels of voluntary prepayments, higher than expected
borrower usage of deferment, forbearance and IBR, declining credit
quality of the US government.
AFFORDABLE MULTIFAMILY 2014-1: DBRS Confirms BB Rating on E Notes
-----------------------------------------------------------------
DBRS, Inc. confirmed the ratings for all classes of Affordable
Multifamily Commercial Mortgage Loan Pass-Through Certificates,
Series 2014-1 (the Certificates) issued by Impact Funding
Affordable Multifamily Housing Mortgage Loan Trust 2014-1 (the
Trust). The ratings are listed below; all trends are Stable.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-FX1 at AAA (sf)
-- Class X-FX2 at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
Classes A-1, A-2, A-3, X-A and X-FX1 represent the Certificates
that were purchased and guaranteed by Freddie Mac and deposited
into the structured pass-through certificate (SPC) Trust to back
the Offered SPCs. Classes B, C, D, E, F, X-B and X-FX2 represent
the non-guaranteed offered Certificates.
All Classes are privately placed.
The rating confirmations reflect the healthy overall performance of
the transaction that closed in November 2014, and comprised 124
fixed rate loans secured by 118 multifamily properties. The
collateral properties are Low Income Housing Tax Credit
developments. The average loan term is long, at 208 months (17.3
years), with generally low leverage metrics as reflected in the
current and exit DBRS debt yields of 11.8% and 17.3%, respectively.
As of the October 2016 remittance report, there has been a
collateral reduction of 2.5%, with all original loans remaining in
the pool. Based on the YE2015 reporting, the weighted-average (WA)
debt service coverage ratio (DSCR) for the pool was 1.78 times (x),
up from the WA DBRS underwritten (UW) figure of 1.41x and the
Issuer’s WA UW figure of 1.50x. The improvement in DSCR is
reflective of a WA net cash flow growth of 26.9%, over the DBRS UW
figures at YE2015.
There are eight loans (seven properties) on the servicer’s
watchlist, representing 5.1% of the transaction balance. All of
these loans are being monitored for cash flow declines since
issuance, with coverage ratios ranging between -0.10x and 1.07x for
the Q2 2016 reporting period. Some of the collateral properties on
the watchlist have shown occupancy declines since issuance, while
others have shown stable revenues with sharp increases in operating
expenses. The two largest loans on the watchlist are detailed
below.
The Montague Terrace Apartments loan (Prospectus ID #17, 1.6% of
the pool) is secured by a 96-unit garden apartment property located
in the rural town of Stuarts Draft, Virginia, situated
approximately 100 miles west of Richmond. The property was
constructed in 2012, and at issuance, had shown historically stable
occupancy rates that hovered around 95.0%. Shortly after issuance,
however, the property’s occupancy rate was negatively impacted by
the construction of competing supply within relatively close
proximity. The YE2014 DSCR fell to 0.92x before improving slowly to
1.04x at YE2015, and 1.07x at Q2 2016, with an occupancy rate of
93.0% reported in June 2016. The servicer’s site inspection
conducted in August 2016 showed the property in good condition
overall, at an occupancy rate of 89.6%, with 10 vacant units
available for rent. Given the sustained cash flow declines from
issuance, when the DBRS UW DSCR was 1.30x, the loan was modeled
with a stressed cash flow to reflect the increased risk.
The Brookland Art Space Lofts loan (Prospectus ID #29, 1.1% of the
pool) is secured by a 41-unit loft-style apartment property in
Washington, D.C. The property was constructed in 2011 and caters to
low income artists and performers. Occupancy rates at the property
have been low as compared to historical performance for the past
few years, with levels hovering around 80% and causing the DSCR to
decline to 0.83x at YE2015 and again to -0.10x at Q2 2016. The
servicer reports that the cash flow decline for the first half of
2016 occurred as a result of a combination of lower occupancy rates
and higher costs associated with evictions processed during that
time. Occupancy rates have partially recovered, with the August
2016 rent roll showing a vacancy rate of 9.8%, with a wait list of
14 people for the four available units. The servicer's September
2016 site inspection found the property in good condition overall,
with no deferred maintenance items observed. As cash flows have
been sustained at significantly lower levels since issuance, this
loan was also modeled with a stressed cash flow to reflect the
increased risk.
ALL STUDENT IV: Moody's Lowers Rating on 2 Tranches to B3
---------------------------------------------------------
Moody's Investors Service has downgraded the rating of nine
tranches and upgraded the rating in one tranche in two
securitizations backed by student loans originated under the
Federal Family Education Loan Program (FFELP), issued by All
Student Loan Corporation. The loans are guaranteed by the US
government for a minimum of 97% of defaulted principal and accrued
interest.
The complete rating actions are:
Issuer: All Student Loan Corporation, Series 2012-I (Access to
Loans for Learning Corporation)
Subordinate Ser. B, Upgraded to A1; previously on June 14, 2016,
A3 Placed Under Review for Possible Upgrade
Issuer: All Student Loan Corporation, Series IV (Access to Loans
for Learning Corporation, Series IV)
Senior Ser. IV-A-8, Downgraded to B3; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IV-A-10, Downgraded to B3; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IVA-11, Downgraded to B3; previously on June 4,
2009, Downgraded to Ba2
Senior Ser. IV-A-14, Downgraded to Caa1; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IV-A-15, Downgraded to Caa1; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IV-A-16, Downgraded to Caa1; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IV-A-17, Downgraded to Caa1; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Senior Ser. IV-A-18, Downgraded to Caa1; previously on June 14,
2016, Ba2 Placed Under Review for Possible Upgrade
Subordinate Ser. IV-C-1, Downgraded to C; previously on June 14,
2016, Caa1 Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The notes in the rating actions were placed on watch in June 2016
in connection with the application of Moody's updated FFELP
methodology. Under the new methodology, Moody's derives the
expected loss of each tranche by running its standard 28 cash flow
scenarios and using the weights associated with each scenario.
The downgrades are primarily a result of Moody's analysis
indicating that the tranches will not pay off by final maturity
dates in either some or all of Moody's 28 cash flow scenarios, thus
causing the tranches to incur expected losses that are higher than
the expected loss benchmarks set in Moody's idealized loss tables
for the previous ratings. The low payment rates on the underlying
securitized pools of FFELP student loans are driven primarily by
persistently high levels of loans to borrowers in non-standard
payment plans, including deferment, forbearance and Income-Based
Repayment (IBR), as well as by the relatively low rates of
voluntary prepayments. Moody's is expecting collateral losses on
these tranches. Moody's is assuming pro rata payment amongst
auction rate tranches.
Additionally, the downgrades of tranches of All Student Loan
Corporation, Series IV (Access to Loans for Learning Corporation,
Series IV) also reflect the correction of an error in calculating
the maximum coupon cap of the notes. In Moody's June 2016 action,
we incorrectly calculated the Commercial Paper Cap, which led to
the coupon of the notes being capped at an artificially low rate.
As a result of the correction, the coupon in our cash flow
scenarios is higher, and the expected loss for these classes has
increased to a level higher than the expected loss benchmark levels
set in Moody's Idealized Cumulative Expected Loss Rates table for
the previous ratings.
The upgrade of class B of All Student Loan Corporation, Series
2012-I (Access to Loans for Learning Corporation) is primarily a
result of Moody's analysis indicating that the expected loss on
this tranche across Moody's cash flow scenarios is lower than the
expected loss benchmarks in Moody's idealized loss tables for the
previous tranche rating. The transaction is full turbo.
The principal methodology used in these ratings was "Moody's
Approach to Rating Securities Backed by FFELP Student Loans"
published in August 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Among the factors that could drive the ratings up are lower than
expected borrower usage of deferment, forbearance and IBR, higher
than expected voluntary prepayment rates, prepayments with proceeds
from sponsor repurchases of student loan collateral.
Down
Among the factors that could drive the ratings down are lower than
expected levels of voluntary prepayments, higher than expected
borrower usage of deferment, forbearance and IBR, declining credit
quality of the US government.
AMERICAN CREDIT 2016-1: S&P Affirms BB Rating on Class D Notes
--------------------------------------------------------------
S&P Global Ratings raised its ratings on 28 classes of notes from
American Credit Acceptance Receivables Trust 2013-1, 2013-2,
2014-1, 2014-2, 2014-3, 2014-4, 2015-1, 2015-2, and 2015-3. In
addition, S&P affirmed its ratings on 12 classes of notes from
American Credit Acceptance Receivables Trust 2016-1, 2016-2, and
2016-3.
The rating actions reflect the transactions' collateral performance
to date, S&P's views regarding future collateral performance, S&P's
current economic forecast, the transactions' structures, and the
credit enhancement available. In addition, S&P incorporated
secondary credit factors into its analysis, such as credit
stability, payment priorities under certain scenarios, and sector-
and issuer-specific analyses. Considering all these factors, S&P
believes the notes' creditworthiness remains consistent with the
raised and affirmed ratings.
Since the transactions closed, the credit support for each series
has increased as a percentage of the amortizing pool balance. In
addition to the nonamortizing reserve account and
overcollateralization (O/C) that have grown as a percentage of the
pool balance, subordination (as a percentage of the current pool
balance) for the higher classes has increased also due to the
sequential pay structure of the notes.
Recently, S&P reassessed the rating cap that it placed on American
Credit Acceptance LLC's (ACA) transactions. Previously, S&P capped
the rating at 'AA+ (sf)' but it determined that a rating cap no
longer applies and S&P can now assign or raise them as high as 'AAA
(sf)'.
ACA is the originator and servicer of the loans. ACA underwrites
two lines of auto loans: Tier 1 and Tier 2. Each line has different
collateral loan characteristics. The Tier 1 loans generally have
lower annual percentage rates (APRs) and vehicle mileage than the
Tier 2 loans, as well as longer original loan terms and higher
average loan balances. Tier 1 also includes a large percentage of
contracts from Carmax-affiliated dealers, which S&P expects to
perform somewhat better than the remainder of Tier 1's
originations. Tier 2 also has a high percentage of contracts from
large strategic partnerships, which S&P expects to perform somewhat
better than the remainder of Tier 2's originations.
Cumulative lifetime loss expectations have been revised higher
compared to S&P's initial expectations for series 2013-1, 2013-2,
2014-1, 2014-2, and 2014-3 (although the variance is approximately
only 100 basis points or less for series 2014-1 and 2014-3), while
cumulative lifetime loss expectations remain the same for series
2014-4, 2015-1, 2015-2, and 2015-3. Considering this, S&P is
raising the outstanding ratings on these transactions because, in
its opinion, the total credit enhancement (as a percentage of the
amortizing pool balance), provides a level of loss support that is
commensurate with the higher ratings. Series 2016-1, 2016-2, and
2016-3 have only eight, six, and two months of performance,
respectively and S&P is not revising its loss expectations or S&P's
ratings for these deals at this time.
To derive the expected loss for each transaction, S&P analyzed loss
projections by the two collateral pool segments, Tier 1 and Tier 2
loans. S&P also examined each transaction's collateral composition
to arrive at its revised lifetime loss expectations for the pools.
Table 1
Collateral Performance And CNL Expectations (%)
As of the October 2016 distribution month
Pool 60-plus-days Current
Series Mo. factor delinquent CNL
2013-1 42 13.92 9.86 24.33
2013-2 38 17.81 10.00 23.75
2014-1 33 23.48 10.15 23.14
2014-2 30 25.95 11.95 24.80
2014-3 26 30.42 10.95 21.15
2014-4 22 38.66 10.80 20.75
2015-1 19 49.23 10.19 17.01
2015-2 16 55.46 9.50 13.45
2015-3 12 66.03 8.97 9.67
2016-1 8 78.61 8.61 6.56
2016-2 6 88.81 8.60 3.12
2016-3 2 97.36 2.75 0.05
CNL--Cumulative net loss expectations. Mo.--Month.
Table 2
CNL Expectations (%)
As of the October 2016 distribution month
Initial Revised
lifetime lifetime
Series CNL exp. CNL exp.(i)
2013-1 21.15-21.65 up to 26.25
2013-2 22.70-23.20 up to 26.50
2014-1 26.40-26.90 26.50-27.50
2014-2 27.00-28.00 28.75-29.75
2014-3 25.75-26.75 26.25-27.25
2014-4 26.50-27.50 26.50-27.50
2015-1 25.75-26.75 25.75-26.75
2015-2 24.50-25.50 24.50-25.50
2015-3 25.00-26.00 25.00-26.00
2016-1 25.50-26.50 N/A
2016-2 25.50-26.50 N/A
2016-3 25.75-26.75 N/A
(i)Revised expected lifetime CNL on Nov. 2, 2016.
CNL--Cumulative net loss.
N/A--Not applicable.
All transactions have a sequential principal payment structure with
credit enhancement consisting of O/C, a nonamortizing reserve
account, subordination for the higher-rated classes, and excess
spread. Series 2013-1, 2013-2, 2014-1, 2014-2, 2014-3, 2014-4,
2015-1, 2015-2, and 2015-3 have a nonamortizing reserve account of
2%. Series 2016-1, 2016-2, 2016-3 have a nonamortizing reserve
account of 1.5%. Additionally, each transaction is structured with
a monthly cumulative net loss (CNL) trigger that, if breached,
would result in a higher O/C target. Currently, all of the
transactions are below the CNL trigger levels. All of the
transactions are structured with an O/C target as a percentage of
the current pool balance. Series 2013-1 and 2013-2 are structured
with an O/C floor of 1% of the initial pool balance, while series
2014-1, 2014-2, 2014-3, 2014-4, 2015-1, 2015-2, and 2015-3 have a
2% O/C floor, and series 2016-1, 2016-2, and 2016-3 have a 2.50%
O/C floor. For all series, overall hard credit enhancement has
continued to grow as a percentage of their current pool balances.
Table 3
Hard Credit Support (%)
As of the October 2016 distribution month
Current
Total hard total hard
credit support credit support(i)
Class at issuance(i) (% of current)
2013-1
C 18.53 84.58
D 10.50 26.87
2013-2
C 21.50 78.07
D 12.00 24.73
2014-1
B 34.05 107.47
C 20.71 50.66
D 14.75 25.27
2014-2
B 36.00 101.35
C 21.25 44.51
D 16.50 26.21
2014-3
B 34.31 88.06
C 21.18 44.88
D 15.00 24.57
2014-4
B 36.75 74.86
C 23.00 39.30
D 17.25 24.42
2015-1
A 51.00 93.59
B 35.00 61.09
C 21.00 32.66
D 16.00 22.50
2015-2
A 48.00 81.51
B 33.00 54.46
C 20.50 31.92
D 14.50 21.11
2015-3
A 50.00 76.04
B 34.50 52.57
C 21.50 32.88
D 14.50 22.28
2016-1
A 51.50 68.32
B 36.00 48.60
C 22.50 31.43
D 16.00 23.16
2016-2
A 51.50 61.46
B 36.00 44.01
C 22.50 28.81
D 16.00 21.49
2016-3
A 52.25 56.32
B 36.50 40.15
C 23.00 26.28
D 16.00 19.09
(i) Consists of overcollateralization, a reserve account, and
subordination for the higher tranches, and excludes excess spread,
which can provide additional enhancement also.
S&P's review of the series 2013-1, 2013-2, 2014-1, 2014-2, 2014-3,
2014-4, 2015-1, 2015-2, and 2015-3 incorporated a stressed
break-even cash flow analysis that included our assumptions on
recoveries, the timing of losses, and voluntary absolute prepayment
speeds that S&P believes are appropriate given each transaction's
current performance and the assigned ratings.
"Aside from our break-even cash flow analysis, we also conducted a
sensitivity analysis to determine the impact that a moderate
('BBB') stress scenario would have on our ratings if losses began
trending higher than our revised base-case loss expectation. Our
results showed that the raised and affirmed ratings are consistent
with our rating stability criteria, which outline the outer bounds
of credit deterioration for any given security under specific,
hypothetical stress scenarios. The results demonstrated, in our
view, that all of the classes from these transactions have adequate
credit enhancement at their respective raised and affirmed rating
levels," S&P said.
S&P will continue to monitor the performance of all of the
outstanding transactions to ensure that the credit enhancement
remains sufficient, in S&P's view, to cover its revised CNL
expectations under S&P's stress scenarios for each of the rated
classes.
RATINGS RAISED
American Credit Acceptance Receivables Trust
Rating
Series Class To From
2013-1 C AAA (sf) AA- (sf)
2013-1 D A (sf) BBB- (sf)
2013-2 C AAA (sf) AA- (sf)
2013-2 D A- (sf) BBB- (sf)
2014-1 B AAA (sf) AA (sf)
2014-1 C AAA (sf) A (sf)
2014-1 D A (sf) BBB- (sf)
2014-2 B AAA (sf) AA (sf)
2014-2 C AA (sf) A- (sf)
2014-2 D A (sf) BBB- (sf)
2014-3 B AAA (sf) A (sf)
2014-3 C AA+ (sf) BBB (sf)
2014-3 D A (sf) BB (sf)
2014-4 B AAA (sf) A (sf)
2014-4 C AA (sf) BBB (sf)
2014-4 D A (sf) BB (sf)
2015-1 A AAA (sf) AA (sf)
2015-1 B AA+ (sf) A (sf)
2015-1 C AA- (sf) BBB (sf)
2015-1 D A (sf) BB (sf)
2015-2 A AAA (sf) AA (sf)
2015-2 B AA+ (sf) A (sf)
2015-2 C A+ (sf) BBB (sf)
2015-2 D A- (sf) BB (sf)
2015-3 A AAA (sf) AA (sf)
2015-3 B AA (sf) A (sf)
2015-3 C A- (sf) BBB (sf)
2015-3 D BBB- (sf) BB (sf)
RATINGS AFFIRMED
American Credit Acceptance Receivables Trust
Series Class Rating
2016-1 A AA (sf)
2016-1 B A (sf)
2016-1 C BBB (sf)
2016-1 D BB (sf)
2016-2 A AA (sf)
2016-2 B A (sf)
2016-2 C BBB (sf)
2016-2 D BB (sf)
2016-3 A AA (sf)
2016-3 B A (sf)
2016-3 C BBB (sf)
2016-3 D BB (sf)
AMERICAN CREDIT 2016-4: S&P Assigns BB Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings, on Nov. 18, 2016, assigned its ratings to
American Credit Acceptance Receivables Trust 2016-4's $211.250
million asset-backed notes series 2016-4.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of approximately 63.9%, 57.5%, 47.7%,
39.4%, and 36.2% of credit support for the class A, B, C, D,
and E notes, respectively, based on break-even stressed cash
flow scenarios (including excess spread), which provide
coverage of approximately 2.35x, 2.10x, 1.70x, 1.37x, and
1.25x our 26.50%-27.50% expected net loss range for the
class A, B, C, D, and E notes, respectively.
-- The timely interest and principal payments made to the rated
notes by the assumed legal final maturity dates under S&P's
stressed cash flow modeling scenarios that it believes are
appropriate for the assigned ratings. The expectation that
under a moderate ('BBB') stress scenario, the ratings on the
class A and B notes would remain within one rating category
of S&P's 'AAA (sf)' and 'AA (sf)' ratings, and the ratings
on the class C, D, and E notes would remain within two
rating categories of S&P's 'A (sf)', 'BBB (sf)', and
'BB (sf)' ratings. These potential rating movements are
consistent with S&P's credit stability criteria, which
outline the outer bound of credit deterioration equal to a
one-rating category downgrade within the first year for
'AAA' and 'AA' rated securities and a two-rating category
downgrade within the first year for 'A' through 'BB' rated
securities under moderate stress conditions.
-- The collateral characteristics of the subprime automobile
loans securitized in this transaction.
-- The backup servicing arrangement with Wells Fargo Bank N.A.
-- The transaction's payment and credit enhancement structures,
which include performance triggers.
-- The transaction's legal structure.
RATINGS ASSIGNED
American Credit Acceptance Receivables Trust 2016-4
Class Rating Type Interest Amount
rate (mil. $)(i)
A AAA (sf) Senior Fixed 96.875
B AA (sf) Subordinate Fixed 26.875
C A (sf) Subordinate Fixed 43.125
D BBB (sf) Subordinate Fixed 37.500
E BB (sf) Subordinate Fixed 6.875
(i)The actual size of these tranches will be determined on the
pricing date.
AMERICAN CREDIT 2016-4: S&P Reinstates BB Rating on Cl. E Notes
---------------------------------------------------------------
Due to an error, S&P Global Ratings incorrectly withdrew its
ratings on American Credit Acceptance Receivables Trust 2016-4's
notes on Nov. 21, 2016. S&P has corrected this error and
reinstated the ratings on these notes.
RATINGS REINSTATED
American Credit Acceptance Receivables Trust 2016-4
Rating
Class To From
A AAA (sf) NR
B AA (sf) NR
C A (sf) NR
D BBB (sf) NR
E BB (sf) NR
NR--Not rated.
APOLLO AVIATION 2016-2: S&P Assigns BB Rating on Class C Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Apollo Aviation
Securitization Equity Trust 2016-2's $640 million fixed-rate
loans.
The transaction is backed by two AOE issuers' series A, B, and C
notes, which are in turn backed by 35 aircraft and the related
leases and shares or beneficial interests in entities that directly
and indirectly receive aircraft portfolio lease rental and residual
cash flows, among others.
The assigned ratings reflect:
-- The likelihood of timely interest on the class A loans
(excluding the step-up amount) on each payment date, the
timely interest on the class B loans (excluding the step-up
amount) when they are the senior-most loans outstanding on
each payment date, and the ultimate interest and principal
payment on the class A, B, and C loans on the legal final
maturity at the respective rating stress.
-- The 69.12% loan-to-value (LTV) ratio (based on the lower of
the mean and median of the three half-life base values and
the three half-life current market values, except for four
A330-200 aircraft where S&P excludes BK Associates'
appraisal) on the class A loans; the 80.53% LTV ratio on the
class B loans; and the 84.84% LTV ratio on the class C
loans.
-- The aircraft collateral's quality and lease rental and
residual value generating capability. The portfolio
contains 31 narrow-body passenger planes (18 A320 family, 12
B737-NG, and one B757-200) and four A330-200 wide-body
passenger planes. The 35 aircraft have a weighted average
age of approximately 12.2 years and remaining average lease
term of approximately 4.5 years. Except for one B757-200
aircraft, these aircraft are still in-production models and
have a large operator base, which provides the aircraft with
a lot of liquidity in the aircraft re-leasing and trading
market. While Airbus delivered the first A320 neo in
January and Boeing will deliver the B737MAX next year, S&P
expects that the new fuel-efficient models replacing all of
the current A320 family will take many years; S&P views this
as a moderate threat to aircraft values and incorporate it
into S&P's collateral evaluation.
-- That many of the initial lessees have low credit quality,
and 59.6% of lessees (by aircraft value) are domiciled in
emerging markets. S&P's view of the lessee credit quality,
country risk, lessee concentration, and country
concentration is reflected in S&P's lessee default rate
assumptions.
-- The transaction's capital structure, payment priority, loan
amortization schedules, and performance triggers. Similar
to S&P's recently rated mid-life aircraft ABS, this
transaction has a few structural features, such as rapid
amortization, partial rapid amortization, and excess
proceeds payment, that can, to some extent, mitigate the
value retention risk of aging aircraft and the risk of
monetization of aircraft's green time.
-- The existence of a revolving credit facility that equals
nine months of interest on the series A and B notes.
-- A series C reserve account (initially funded with
$1.85 million), which covers the series C loans' interest.
That ICF International will provide a maintenance analysis
at closing. After closing, Apollo Aviation Management
Limited (AAML) will perform the maintenance analysis, which
will be confirmed for reasonableness and achievability in an
opinion letter from ICF International. The senior
maintenance reserve account, the junior reserve account, and
the engine reserve account, which in aggregate must keep a
balance of the higher of: the lower of $1 million and the
rated notes' outstanding notional amount, and the sum of
forward-looking maintenance expenses and engine reserve
account payments. The senior maintenance reserve account,
the junior reserve account, and the engine reserve account
will be funded at $25.12 million in the aggregate at
closing. Six months after the initial closing date and each
month thereafter, any excess maintenance amounts over the
required amount will be transferred to the collection
account.
-- The senior indemnification (capped at $10 million), which is
modeled to occur in the first 12 months.
-- The junior indemnification (uncapped), which is subordinated
to the rated classes' interest and principal payment.
-- AAML, an affiliate of Apollo Aviation Group LLC (a multi-
strategy alternative investment firm specializing in
commercial aviation investing), which is the servicer for
this transaction. AAML specializes in managing mid-life and
older aircraft assets, and S&P views AAML's capability of
servicing such aircraft assets as sufficient.
RATINGS ASSIGNED
Apollo Aviation Securitization Equity Trust 2016-2
Class Rating Amount (mil. $)
A A (sf) 515
B BBB (sf) 85
C BB (sf) 40
ARROWPOINT CLO 2013-1: S&P Gives Prelim BB- Rating on Cl. D-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, and D-R replacement notes from Arrowpoint
CLO 2013-1 Ltd., a collateralized loan obligation (CLO) originally
issued in 2013 that is managed by Arrowpoint Asset Management LLC.
The replacement notes will be issued via a proposed supplemental
indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
On the Nov. 25, 2016, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, S&P anticipates withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw its
preliminary ratings on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Issue the notes at a higher spread than the original notes.
-- Issue the notes as floating-rate notes.
-- Extend the stated maturity, reinvestment period, and
weighted average life test by approximately four years.
-- Change the concentration limitations: other than senior
secured loans, cash, and eligible investments went from 5.0%
to 6.0%; 'CCC' collateral obligations went from 5.0% to
7.5%; and, additionally, it is anticipated that the
transaction will no longer be able to purchase bonds or
letter of credit obligations.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
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 further rating actions
as it deems necessary.
PRELIMINARY RATINGS ASSIGNED
Arrowpoint CLO 2013-1 Ltd.
Replacement class Rating Amount
(mil. $)
A-1-R AAA (sf) 225.72
A-2-R AA (sf) 44.28
B-R (deferrable) A (sf) 26.28
C-R (deferrable) BBB (sf) 16.92
D-R (deferrable) BB- (sf) 18.00
Subordinated notes NR 36.20
NR--Not rated.
AVERY POINT II: S&P Lowers Rating on Class F Notes to B-
--------------------------------------------------------
S&P Global Ratings lowered its rating on the class F notes from
Avery Point II CLO Ltd., a U.S. collateralized loan obligation
(CLO) managed by Sankaty Advisors LLC that closed in June 2013. At
the same time, S&P removed the rating from CreditWatch negative,
where it placed it on Aug. 22, 2016. In addition, S&P affirmed its
ratings on the class A, B-1, B-2, C, D, and E notes from the same
transaction.
The rating actions follow S&P's review of the transaction's
performance using data from the Sept. 30, 2016, trustee report. The
transaction is scheduled to remain in its reinvestment period until
July 2017, and S&P anticipates the manager will continue to
reinvest principal proceeds in line with the transaction documents.
The lowered rating reflects par loss in the underlying collateral
portfolio and subsequent reduction in the overcollateralization
(O/C) ratios since S&P's effective date rating affirmations in
November 2013. The reported O/C ratios for each of the rated notes
have decreased as of the September 2016 report from the 2013
effective date report because of the aforementioned par loss:
-- The class A/B O/C ratio decreased to 130.03% from 133.94%.
-- The class C O/C ratio decreased to 118.64% from 122.21%.
-- The class D O/C ratio decreased to 111.58% from 114.94%.
-- The class E O/C ratio decreased to 105.77% from 108.95%.
In addition, the reinvestment O/C test on the class F notes has
decreased to 102.76% from 105.85% and was passing by only 0.39% as
of the September trustee report.
The transaction has benefited from the collateral's seasoning as
the reported weighted average life has decreased to 4.74 years from
5.52 years. At the same time, assets with an S&P Global Ratings
credit rating of 'BB-' or above have increased since the effective
date, and there are currently no defaulted assets in the portfolio.
The portfolio also has lower exposure to assets in the energy and
commodity sectors. These positive factors have partially mitigated
the par loss and increase in the amount of assets with an S&P
Global Ratings' credit rating of 'CCC+' or lower to 4.50% of the
aggregate principal balance from 1.67% at the effective date.
On a standalone basis, the results of the cash flow analysis
indicated a lower rating on the class F notes than its current
rating level. S&P's rating analysis considered the above-mentioned
positive portfolio trends and "Criteria For Assigning 'CCC+',
'CCC', 'CCC-', And 'CC' Ratings," published Oct. 1, 2012. Hence,
S&P did not lower the rating to the level suggested by the cash
flow analysis. However, any increase in defaults and/or par loss
could lead to potential negative rating actions on the class F
notes in the future.
The affirmed ratings reflect S&P's belief that the credit support
available is commensurate with the current rating levels.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the
September 2016 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 or
ultimate principal, or both, to each of the rated tranches.
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 further rating actions
as it deems necessary.
RATING LOWERED AND REMOVED FROM CREDITWATCH
Avery Point II CLO Ltd.
Rating
Class To From
F B- (sf) B (sf)/Watch Neg
RATINGS AFFIRMED
Avery Point II CLO Ltd.
Class Rating
A AAA (sf)
B-1 AA (sf)
B-2 AA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
BAYVIEW COMMERCIAL: Moody's Takes Actions on $764.8MM of ABS
------------------------------------------------------------
Moody's Investors Service placed fourteen tranches from four
transactions issued by Bayview Commercial Asset Trust on review for
downgrade since Moody's found that the maturity dates of a number
of loans underlying the four transactions were modified to dates
beyond the maturity dates of the rated tranches. In addition,
Moody's upgraded the ratings on eleven tranches from six
transactions, and downgraded the ratings on sixteen tranches from
seven transactions of small business loans issued by Bayview
Commercial Asset Trusts and Bayview Commercial Mortgage
Pass-Through Trusts, reflecting performance of the transactions.
The loans are secured primarily by small commercial real estate
properties in the U.S. owned by small businesses and investors; the
2006-CAD1 transaction's loans are secured by small commercial real
estate properties located in Canada.
Complete rating actions are:
Issuer: BayView Commercial Asset Trust 2004-1
Cl. M-2, Upgraded to A1 (sf); previously on Jan. 14, 2016,
Upgraded to A2 (sf)
Cl. B, Upgraded to A3 (sf); previously on Jan. 14, 2016,
Upgraded to Baa1 (sf)
Issuer: BayView Commercial Asset Trust 2004-2
Cl. B-1, Upgraded to Baa3 (sf); previously on Jan. 14, 2016,
Upgraded to Ba1 (sf)
Issuer: Bayview Commercial Asset Trust 2004-3
Cl. B-1, Upgraded to Baa2 (sf); previously on Jan. 14, 2016,
Upgraded to Baa3 (sf)
Issuer: Bayview Commercial Asset Trust 2005-1
Cl. B-2, Upgraded to Ba2 (sf); previously on March 28, 2014,
Upgraded to Ba3 (sf)
Issuer: BayView Commercial Asset Trust 2005-3
Cl. A-1, Downgraded to Baa3 (sf); previously on Jan. 14, 2016,
Downgraded to Baa1 (sf)
Cl. A-2, Downgraded to Baa3 (sf); previously on Jan. 14, 2016,
Downgraded to Baa1 (sf)
Cl. M-1, Downgraded to Ba1 (sf); previously on Jan. 14, 2016,
Downgraded to Baa3 (sf)
Cl. M-2, Downgraded to Ba2 (sf); previously on Jan. 14, 2016,
Downgraded to Ba1 (sf)
Issuer: BayView Commercial Asset Trust 2006-1
Cl. A-1, Downgraded to Baa3 (sf); previously on Jan. 14, 2016,
Downgraded to Baa2 (sf)
Cl. A-2, Downgraded to Baa3 (sf); previously on Jan. 14, 2016,
Downgraded to Baa2 (sf)
Issuer: Bayview Commercial Asset Trust 2006-4
Cl. A-1, Downgraded to Baa1 (sf); previously on Jan. 14, 2016,
Downgraded to A3 (sf)
Cl. A-2, Downgraded to B1 (sf); previously on Jan. 14, 2016,
Downgraded to Ba3 (sf)
Issuer: BayView Commercial Asset Trust 2006-CAD1
Cl. B-1, Upgraded to Aaa (sf); previously on Jan. 25, 2016,
Upgraded to Aa1 (sf)
Cl. B-2, Upgraded to Aa2 (sf); previously on Jan. 25, 2016,
Upgraded to Aa3 (sf)
Cl. B-3, Upgraded to A1 (sf); previously on Jan. 25, 2016,
Upgraded to A2 (sf)
Issuer: Bayview Commercial Asset Trust 2007-1
Cl. A-1, Downgraded to A3 (sf); previously on May 31, 2012,
Downgraded to A1 (sf)
Issuer: Bayview Commercial Asset Trust 2007-3
Cl. A-1, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 14, 2016, Downgraded to A3 (sf)
Cl. A-2, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on May 31, 2012, Downgraded to Ba2 (sf)
Cl. M-1, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 23, 2015, Downgraded to B2 (sf)
Cl. M-2, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 23, 2015, Downgraded to B3 (sf)
Cl. M-3, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 23, 2015, Downgraded to Caa1 (sf)
Issuer: Bayview Commercial Asset Trust 2007-6
Cl. A-4A, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 23, 2015, Downgraded to Caa3 (sf)
Issuer: Bayview Commercial Asset Trust 2008-3
Cl. A-4, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 14, 2016, Downgraded to B1 (sf)
Cl. M-1, Downgraded to Caa1 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan. 14, 2016, Downgraded to
B3 (sf)
Cl. M-2, Downgraded to Caa3 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan. 14, 2016, Downgraded to
Caa2 (sf)
Issuer: Bayview Commercial Asset Trust 2008-4
Cl. A-4, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct. 31, 2013, Downgraded to Ba1 (sf)
Cl. M-1, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 14, 2016, Downgraded to Ba3 (sf)
Cl. M-2, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 14, 2016, Downgraded to B2 (sf)
Cl. M-3, Downgraded to Caa1 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan. 14, 2016, Downgraded to
B3 (sf)
Cl. M-4, Downgraded to Caa3 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan. 14, 2016, Downgraded to
Caa2 (sf)
Cl. M-5, Downgraded to C (sf); previously on Jan. 14, 2016,
Downgraded to Ca (sf)
Issuer: BayView Commercial Mortgage Pass-Through Trust 2006-SP1
Cl. M-2, Upgraded to Aa1 (sf); previously on Jan. 14, 2016,
Upgraded to Aa3 (sf)
Cl. M-3, Upgraded to Baa1 (sf); previously on May 31, 2012,
Downgraded to Baa2 (sf)
Cl. M-4, Upgraded to Ba1 (sf); previously on May 31, 2012,
Downgraded to Ba2 (sf)
Issuer: Bayview Commercial Mortgage Pass-Through Trust 2006-SP2
Cl. A, Downgraded to Ba1 (sf); previously on Jan. 14, 2016,
Downgraded to Baa3 (sf)
Cl. M-1, Downgraded to Ba3 (sf); previously on Jan. 14, 2016,
Downgraded to Ba2 (sf)
RATINGS RATIONALE
The review for downgrade actions on the 2007-3, 2007-6, 2008-3, and
2008-4 transactions reflect that over 20% of the current pool
balances for these transactions consists of loans that were
modified to have maturity dates in excess of the tranches' maturity
dates. As a result, there is the potential for more than 5% to 10%
of the current collateral pool for each transaction to be
outstanding at the tranches' maturity dates, although this amount
could be reduced by prepayments. Tranches that have the highest
potential impact from this issue have been placed on review for
downgrade based on Moody's initial assessment. Moody's notes that
the Cl. A-1 note in the 2007-3 transaction is particularly
vulnerable to this issue and is likely to be significantly
downgraded, given the transaction's pro rata pay structure coupled
with the high balance of loans (in excess of 50% of outstanding
pool balance) that have been extended past the note final maturity
date. Moody's will use the review period to confirm the dollar
amount of loans in each of the transactions that have loan
maturities in excess of the tranche maturity, and complete an
analysis of the expected impact.
The upgrades related to the 2004-1, 2004-2, 2004-3 and 2005-1
transactions were primarily prompted by a build-up in credit
enhancement due to increasing reserve account balances relative to
outstanding pool balances, availability of excess spread and
stabilizing collateral performance. Available amounts in reserve
accounts for the 2004-1, 2004-2, 2004-3, and 2005-1 transactions
increased to 38%, 26%, 23%, and 16% of outstanding pool balances,
respectively, as of the October 2016 distribution date from 30%,
22%, 18%, and 13% of the outstanding pool balance as of the
December 2015 distribution date, around which time Moody's last
took action on the Bayview transactions. Upgrades to the 2006-SP1
transaction were prompted by increases in subordination for the
affected tranches, while upgrades to the 2006-CAD1 transaction were
prompted by increases in both overcollateralization and
subordination.
The downgrades are primarily due to further realized losses on the
underlying pools in combination with continued low levels of credit
enhancement from reserve accounts, overcollateralization and
subordinate tranches. Over the past year, cumulative net losses
for the Bayview 2005-3, 2006-1, 2006-SP2, 2006-4, 2007-1, 2008-3
and 2008-4 transactions increased to a range of 20% to 33% as of
the October 2016 distribution date, from a range of 18% to 31% as
of the December 2015 distribution date, in each case as a percent
of the original pool balance.
In general, for the Bayview small business ABS collateral pools,
excluding the Canadian transaction, delinquencies of 60 days or
more, including loans in foreclosure and REO, have improved with
the average deal experiencing a decrease in delinquencies of 2.0%
on an absolute basis over the past 10 months. Delinquencies of 60
days or more ranged from 8% to 21% of the outstanding pool balances
as of the October 2016 distribution date, versus 11% to 22% as of
the December 2015 distribution date. Average severities are still
high in the 70% to 80% range.
A key factor in Moody's loss projections is its evaluation and
treatment of modified loans. Excluding the Canadian transaction,
Bayview Loan Servicing has modified approximately 50% to 80% of the
loan balance classified as current as of the October 2016
distribution date in the deals affected by today's rating actions.
Most of these loans were delinquent before modification and are
therefore more likely to become delinquent than non-modified loans
in the future. Moody's evaluation of loan-level data indicates
that these current, modified loans are two to three times as likely
to become defaulted compared to current, non-modified loans.
Moody's accounted for this likelihood in its loss projection
methodology described in the "Methodology" section below.
The current ratings reflect the likelihood of security holders
recovering outstanding credit risk shortfalls for the bonds on
which they exist. Even though available credit enhancement to a
tranche may be high, recovery of interest shortfalls may take
several years for rated tranches with outstanding shortfalls.
Transactions with ratings that continue to be impacted by interest
shortfalls include Bayview 2007-4, 2007-5, 2007-6, 2008-2, 2008-3,
and 2008-4.
METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating SME Balance Sheet Securitizations" published in
Ocotober 2015.
Moody's evaluated the sufficiency of credit enhancement by first
analyzing the loans to determine an expected remaining net loss for
each collateral pool. Moody's compared these expected net losses
with the available credit enhancement, consisting of
overcollateralization, subordination, excess spread, and a reserve
account if any. For the lower subordinate tranches, Moody's
identified relatively near term future write-downs by examining the
expected losses from loans in foreclosure and REO in relation to a
tranche's available credit enhancement.
To forecast expected losses for the Bayview small business ABS
collateral pools, Moody's evaluated each pool according to the
delinquency and modification status of the underlying loans,
applying different roll rates to default to loans according to each
status. In order to determine the roll rates to default, Moody's
assessed historical roll rate behavior according to their
delinquency status.
This approach leads to a wide range of lifetime loan default rates
depending on vintage, modification status and delinquency status.
For modified current loans, the remaining lifetime default rate
assumption was 15% to 20%, two to three times the remaining
lifetime default rate estimate of 5% to 8% for non-modified current
loans. For delinquent loans, the lifetime default rates range from
30% to 75%. For loans in foreclosure or REO, the lifetime default
rates are roughly 70% to 100%.
For loss severities, Moody's generally applied 75% severities for
both modified and non-modified loans.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against expected losses could drive the ratings
up. Losses below Moody's expectations as a result of a decrease in
seriously delinquent loans or lower severities than expected on
liquidated loans. Reimbursement of interest shortfalls more
rapidly than anticipated when applicable.
Down
Levels of credit protection that are insufficient to protect
investors against expected losses could drive the ratings down.
Losses above Moody's expectations as a result of an increase in
seriously delinquent loans and higher severities than expected on
liquidated loans. Reimbursement of interest shortfalls slower than
anticipated when applicable. Further modifications that extend
maturities of the underlying collateral beyond that of the notes.
Other methodologies and factors that Moody's may have considered in
the process of rating these transactions appear on Moody's website.
BAYVIEW OPPORTUNITY 2016-SPL1: DBRS Gives (P)BB Rating on 3 Tranche
-------------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Asset-Backed Notes, Series 2016-SPL1 (the Notes) issued by Bayview
Opportunity Master Fund IVa Trust 2016-SPL1 (the Trust):
-- $151.3 million Class A at AAA (sf)
-- $151.3 million Class A-IOA at AAA (sf)
-- $151.3 million Class A-IOB at AAA (sf)
-- $24.5 million Class B1 at AA (sf)
-- $24.5 million Class B1-IOA at AA (sf)
-- $24.5 million Class B1-IOB at AA (sf)
-- $10.4 million Class B2 at A (sf)
-- $10.4 million Class B2-IO at A (sf)
-- $11.6 million Class B3 at BBB (sf)
-- $11.6 million Class B3-IOA at BBB (sf)
-- $11.6 million Class B3-IOB at BBB (sf)
-- $5.7 million Class B4 at BBB (low) (sf)
-- $5.7 million Class B4-IOA at BBB (low) (sf)
-- $5.7 million Class B4-IOB at BBB (low) (sf)
-- $4.3 million Class B5 at BB (sf)
-- $4.3 million Class B5-IOA at BB (sf)
-- $4.3 million Class B5-IOB at BB (sf)
-- $8.7 million Class B6 at B (sf)
Classes A-IOA, A-IOB, B1-IOA, B1-IOB, B2-IO, B3-IOA, B3-IOB,
B4-IOA, B4-IOB, B5-IOA and B5-IOB are interest-only notes. The
class balances represent notional amounts.
The AAA (sf) ratings on the Notes reflect the 37.30% of credit
enhancement provided by subordinated Notes in the pool. The AA
(sf), A (sf), BBB (sf), BBB (low) (sf), BB (sf) and B (sf) ratings
reflect 27.15%, 22.85%, 18.05%, 15.70%, 13.90% and 10.30% 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 seasoned
performing and re-performing first-lien residential mortgages. The
Notes are backed by approximately 4,854 loans with a total
principal balance of $241,230,723 as of the Cut-Off Date (October
31, 2016).
The portfolio is comprised of 97.7% daily simple interest loans and
has an average original loan size of $68,872. The loans are
approximately 126 months seasoned and all are current as of the
Cut-Off Date, including 0.3% bankruptcy-performing loans.
Approximately 92.3% of the mortgage loans have been zero times 30
days delinquent based on the interest paid through date for the
past 36 months under the Mortgage Bankers Association delinquency
methods. Approximately 27.5% of the loans have been modified, 99.8%
of which happened more than two years ago. Within the pool, 1,937
mortgages have non-interest-bearing deferred amounts, which are not
included in the principal balances of the mortgage loans and will
instead be payable to the holders of the Class X Notes. As a result
of the seasoning of the collateral, none of the loans are subject
to the Consumer Financial Protection Bureau
Ability-to-Repay/Qualified Mortgage rules.
An affiliate of BFA IVa Depositor, LLC (the Depositor) acquired the
loans from CitiFinancial Credit Company and its lending
subsidiaries prior to the Closing Date and subsequently transferred
the loans to various transferring trusts owned by the Sponsor. On
the Closing Date, the transferring trusts will assign the loans to
the Depositor who will contribute the loans to the Trust. As the
Sponsor, Bayview Opportunity Master Fund IVa L.P. will acquire and
retain a 5% eligible vertical interest in each class of securities
to be issued to satisfy the credit risk retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder. These loans were originated and
previously serviced by CitiFinancial Credit Company. As of the
Cut-Off Date, all of the loans are serviced by Bayview Loan
Servicing, LLC (BLS).
There will not be any advancing of delinquent principal or interest
on any mortgages by the servicer or any other party to the
transaction; 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.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Class A and Class B1 Notes (and the related interest-only bonds),
but such shortfalls on more subordinate bonds will not be paid from
principal. In addition, diverted interest from the mortgage loans
will be used to pay down principal on the Notes sequentially.
The ratings reflect transactional strengths that include underlying
assets that have generally performed well through the crisis, an
experienced servicer and strong structural features. Additionally,
a third-party due diligence review was performed on the portfolio
with respect to regulatory compliance, payment history, servicing
comments, data capture and title and lien review. Home Data Index
values were provided for all but two of the mortgage loans and
broker price opinions or 2055 appraisals were provided for
approximately 61.8% of the mortgage loans.
The representations and warranties provided in this transaction
generally conform to the representations and warranties that DBRS
would expect to receive for a RMBS transaction with seasoned
collateral; however, the transaction employs a representations and
warranties framework that includes an unrated representation
provider (Bayview Opportunity Master Fund IVa L.P.) with a backstop
by an unrated entity (Bayview Asset Management, LLC) and certain
knowledge qualifiers. Mitigating factors include (1) significant
loan seasoning and relative clean performance history in recent
years, (2) a due diligence review, (3) a strong representations and
warranties enforcement mechanism, including delinquency review
trigger, and (4) for representations and warranties with knowledge
qualifiers, even if the Sponsor did not have actual knowledge of
the breach, the Remedy Provider is still required to remedy the
breach in the same manner as if no knowledge qualifier had been
made.
The enforcement mechanism for breaches of representations includes
automatic breach reviews by a third-party reviewer for any
seriously delinquent loans or any loans that incur loss upon
liquidation. Resolution of disputes are ultimately subject to
determination in an arbitration proceeding.
The lack of principal and interest advances on delinquent mortgages
may increase the possibility of periodic interest shortfalls to the
Noteholders; however, principal proceeds can be used to pay
interest to the Notes sequentially and subordination levels are
greater than expected losses, which may provide for timely payment
of interest to the rated Notes.
The DBRS ratings of AAA (sf) and AA (sf) address the timely payment
of interest and full payment of principal by the legal final
maturity date in accordance with the terms and conditions of the
related Notes. The DBRS ratings of A (sf), BBB (sf), BBB (low)
(sf), BB (sf) and B (sf) address the ultimate payment of interest
and full payment of principal by the legal final maturity date in
accordance with the terms and conditions of the related Notes.
BEAR STEARNS 2003-TOP12: Moody's Hikes Rating on Cl. N Debt to B1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on five classes
and affirmed the ratings on two classes in Bear Stearns Commercial
Mortgage Securities Trust, Commercial Mortgage Pass-Through
Certificates, Series 2003-TOP12 as:
Cl. H, Affirmed Aaa (sf); previously on May 6, 2016, Upgraded to
Aaa (sf)
Cl. J, Upgraded to Aaa (sf); previously on May 6, 2016, Upgraded
to Aa1 (sf)
Cl. K, Upgraded to Aaa (sf); previously on May 6, 2016, Upgraded
to A3 (sf)
Cl. L, Upgraded to Aa2 (sf); previously on May 6, 2016, Upgraded
to Baa2 (sf)
Cl. M, Upgraded to Baa1 (sf); previously on May 6, 2016,
Upgraded to B1 (sf)
Cl. N, Upgraded to B1 (sf); previously on May 6, 2016, Upgraded
to Caa1 (sf)
Cl. X-1, Affirmed B3 (sf); previously on May 6, 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 as well as overall improved pool performance. The
deal has paid down 19% since Moody's last review and nearly 98%
since securitization.
The rating on Class H was affirmed because the transaction's key
metrics, including Moody's loan-to-value ratio, Moody's stressed
debt service coverage ratio (DSCR) and the transaction's Herfindahl
Index (Herf), are within acceptable ranges.
The rating on IO Class, Class X-1, was affirmed based on the credit
performance (or the weighted average rating factor) of the
referenced classes.
Moody's rating action reflects a base expected loss of 0.1% of the
current balance, compared to 1.2% at Moody's last review. Moody's
base expected loss plus realized losses is now 0.3% of the original
pooled balance, and remains the same since 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 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 4, compared to 5 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 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 Oct. 13, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 97.5% to $28.7
million from $1.16 billion at securitization. The certificates are
collateralized by 16 mortgage loans ranging in size from less than
1% to 39% of the pool, with the top ten loans constituting 79% of
the pool. Four loans, constituting 18.8% of the pool, have
defeased and are secured by US government securities.
One loan, constituting 3.5% 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.
Ten loans have been liquidated from the pool with a loss, resulting
in an aggregate realized loss of $3.3 million (for an average loss
severity of 2.6%).
Moody's received full year 2015 operating results for 78% of the
pool, and partial year 2016 operating results for 78% of the pool.
Moody's weighted average conduit LTV is 43%, compared to 42% 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 23% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.52X and 3.74X,
respectively, compared to 1.56X and 3.51X 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.
As of the October 2016 remittance statement, the top three
non-defeased loans represent 60% of the pool balance. The largest
loan is the Eagle Plaza Shopping Center Loan ($11.2 million --
39.1% of the pool), which is secured by a retail property located
in Voorhees, New Jersey. As of February 2016, the property was 89%
leased, compared to 88% in June 2015. The loan has amortized over
37% since securitization and matures in August 2018.
The second largest loan is the Cokesbury Court Loan
($4.2 million -- 14.6% of the pool), which is secured by a 200 unit
student housing apartment property located in Oklahoma City,
Oklahoma. The property is located adjacent to Oklahoma City
University. As of September 2015, the property was 96% leased,
compared to 85% in June 2015. This loan is fully amortizing, has
amortized over 52% since securitization and matures in August
2023.
The third largest loan is the 3105 Glendale-Milford Road Loan ($1.9
million -- 6.7% of the pool), which is secured by a single tenant
retail property leased to Walgreens and located in Evandale, Ohio,
approximately 16 miles northeast of Cincinnati. The property was
last inspected by the master servicer in August 2016 and found to
be in good condition with no deferred maintenance. The loan had an
original loan term of 20 years and amortizes based on a 22-year
schedule. The loan has amortized over 42% and is scheduled to
mature in September 2023.
BEAR STEARNS 2004-PWR5: Moody's Hikes Cl. L Debt Rating to Ba1
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on four classes
and affirmed the ratings on six classes in Bear Stearns Commercial
Mortgage Securities Trust, Commercial Mortgage Pass-Through
Certificates, Series 2004-PWR5 as:
Cl. F, Affirmed Aaa (sf); previously on Jan. 7, 2016, Affirmed
Aaa (sf)
Cl. G, Affirmed Aaa (sf); previously on Jan. 7, 2016, Affirmed
Aaa (sf)
Cl. H, Affirmed Aaa (sf); previously on Jan. 7, 2016, Upgraded
to Aaa (sf)
Cl. J, Upgraded to Aaa (sf); previously on Jan. 7, 2016,
Upgraded to A1 (sf)
Cl. K, Upgraded to Aa3 (sf); previously on Jan. 7, 2016,
Upgraded to Baa1 (sf)
Cl. L, Upgraded to Ba1 (sf); previously on Jan. 7, 2016,
Upgraded to Ba3 (sf)
Cl. M, Upgraded to B1 (sf); previously on Jan. 7, 2016, Upgraded
to B3 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Jan. 7, 2016, Affirmed
Caa3 (sf)
Cl. P, Affirmed C (sf); previously on Jan. 7, 2016, Affirmed
C (sf)
Cl. X-1, Affirmed B2 (sf); previously on Jan. 7, 2016, Affirmed
B2 (sf)
RATINGS RATIONALE
The ratings on four P&I classes were upgraded based primarily on an
increase in credit support resulting from loan paydowns and
amortization as well as an increase in defeasance. The deal has
paid down 9% since Moody's last review. Defeasance has increased
to 73% of the pool from 69% of the pool since last review.
The ratings on three 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 two P&I classes were affirmed because the
ratings are consistent with Moody's expected loss.
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 2.9% of the
current balance, compared to 2.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.4% of the original
pooled balance, the same as 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 six, the same as 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 Nov. 14, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $67.6 million
from $1.23 billion at securitization. The certificates are
collateralized by 10 mortgage loans ranging in size from less than
1% to 59% of the pool. One loan, constituting 6% of the pool, has
an investment-grade structured credit assessment. Two loans,
constituting 73% of the pool, have defeased and are secured by US
government securities.
One loan, constituting less than 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.
Seven loans have been liquidated from the pool with a loss,
resulting in an aggregate realized loss of $15.9 million (for an
average loss severity of 46%). One loan, constituting 5% of the
pool, is currently in special servicing. The specially serviced
loan is the Pottsburg Plaza Loan ($3.4 million -- 5.0% of the
pool), which is secured by a 35,905 square foot (SF) retail center
located in Jacksonville, Florida. The loan transferred to special
servicing in May 2014 due to maturity default and is currently REO.
The property was only 52% leased as of September 2016, the same as
of December 2015.
Moody's received full year 2015 operating results for 100% of the
pool and partial year 2016 operating results for 89% of the pool.
Moody's weighted average conduit LTV is 36%, compared to 37% 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 10%.
Moody's actual and stressed conduit DSCRs are 1.66X and 4.07X,
respectively, compared to 1.71X and 3.56X 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 New Castle
Marketplace Loan ($4.1 million -- 6.1% of the pool), which is
secured by a retail property located in New Castle, Delaware. As
of March 2016, the property was 100% leased. The loan is fully
amortizing and has amortized by 74% since securitization. Moody's
structured credit assessment and stressed DSCR are aaa (sca.pd) and
greater than 4.00X, respectively, the same as at the last review.
The top three conduit loans represent 14% of the pool balance. The
largest loan is the Arcade Garage Loan ($4.4 million -- 6.4% of the
pool), which is secured by a parking garage located in Providence,
Rhode Island. The loan is fully amortizing and has already
amortized by 44% since securitization. Moody's LTV and stressed
DSCR are 41% and 2.82X, respectively, compared to 44% and 2.64X at
the last review.
The second largest loan is the 877 Post Road East Loan
($3.0 million -- 4.4% of the pool), which is secured by a 29,000 SF
mixed use property in Westport, Connecticut. The property was 100%
leased as of December 2015. The loan is fully amortizing and has
amortized by 46% since securitization. Moody's LTV and stressed
DSCR are 45% and 2.17X, respectively, compared to 44% and 2.23X at
the last review.
The third largest loan is the Herriman Crossroads Loan
($1.9 million -- 2.9% of the pool), which is secured by a 31,000 SF
retail property in Herriman, Utah. The property was 92% leased as
of March 2016. The loan is fully amortizing and has amortized by
46% since securitization. Moody's LTV and stressed DSCR are 36%
and 2.55X, respectively, compared to 37% and 2.46X at the last
review.
BENEFIT STREET X: S&P Assigns Prelim. BB Rating on Cl. D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Benefit
Street Partners CLO X Ltd./Benefit Street Partners CLO X LLC's
$460.00 million floating-rate notes.
The note issuance is a collateralized loan oblgooigation
transaction backed by broadly syndicated speculative-grade senior
secured term loans.
The preliminary ratings are based on information as of Nov. 17,
2016. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term
loans that are governed by collateral quality tests. The
credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Benefit Street Partners CLO X Ltd./Benefit Street Partners CLO X
LLC
Class Rating Amount (mil. $)
A-1 AAA (sf) 320.00
A-2 AA (sf) 60.00
B A (sf) 30.00
C BBB (sf) 30.00
D BB (sf) 20.00
Subordinated notes NR 50.52
NR--Not rated.
BLUEMOUNTAIN CLO 2012-2: S&P Assigns BB Rating on Cl. E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R notes from BlueMountain CLO 2012-2 Ltd., a U.S.
collateralized loan obligation (CLO) transaction managed by
BlueMountain Capital Management LLC. S&P withdrew its ratings on
the transaction's original class A-1, A-2, B-1, B-2, C, D, and E
notes after they were fully redeemed.
On the Nov. 21, 2016, refinancing date, the proceeds from the
issuance of the replacement notes were used to redeem the original
notes, as outlined in the document provisions. Therefore, S&P
withdrew its ratings on the original notes in line with their full
redemption and assigned ratings to the replacement notes.
The ratings reflect S&P's opinion that the credit support available
is commensurate with the associated rating levels.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the trustee
report as of Sept. 30, 2016, 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 or
ultimate principal, or both, to each of the rated tranches.
S&P's review of this transaction also relied in part upon a
criteria interpretation with respect to "CDOs: Mapping A Third
Party's Internal Credit Scoring System To Standard & Poor's Global
Rating Scale," published May 8, 2014, which allows S&P to use a
limited number of public ratings from other nationally recognized
statistical rating organizations (NRSROs) for the purposes of
assessing the credit quality of assets not rated by S&P Global
Ratings. The criteria provide specific guidance for treatment of
corporate assets not rated by S&P Global Ratings, and the
interpretation outlines treatment of securitized assets.
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.
RATINGS ASSIGNED
BlueMountain CLO 2012-2 Ltd.
Replacement class Rating Amount (mil. $)
A-R AAA (sf) 382.20
B-R AA (sf) 68.10
C-R A (sf) 48.90
D-R BBB (sf) 30.10
E-R BB (sf) 25.25
RATINGS WITHDRAWN
BlueMountain CLO 2012-2 Ltd.
Rating
Refinanced class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B-1 NR AA+ (sf)
B-2 NR AA+ (sf)
C NR A+ (sf)
D NR BBB (sf)
E NR BB (sf)
NR--Not rated.
BLUEMOUNTAIN CLO 2014-4: S&P Affirms Prelim B Rating on Cl. F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-1-R, B-2-R, and C-R replacement notes from
BlueMountain CLO 2014-4 Ltd., a U.S. collateralized loan obligation
(CLO) transaction that closed in January 2015 and is managed by
BlueMountain Capital Management LLC. The replacement notes will be
issued via a proposed supplemental indenture. S&P do not expect
the refinancing to have any impact on the outstanding ratings on
the class D, E, and F notes.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels. The replacement notes are expected to be issued at a lower
spread over LIBOR and coupon than the original notes they replace.
On the Nov. 30, 2016, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, S&P anticipates withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw its
preliminary ratings on the replacement notes.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
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 S&P deems
necessary.
PRELIMINARY RATINGS ASSIGNED
BlueMountain CLO 2014-4 Ltd.
Replacement class Rating Amount (mil. $)
A-1-R AAA (sf) 301.125
A-2-R AAA (sf) 15.000
B-1-R AA (sf) 50.500
B-2-R AA (sf) 5.000
C-R A (sf) 41.125
OTHER OUTSTANDING RATINGS
BlueMountain CLO 2014-4 Ltd.
Class Rating
D BBB- (sf)
E BB- (sf)
F B (sf)
Subordinated notes NR
NR--Not rated.
BLUEMOUNTAIN CLO 2016-3: S&P Assigns BB Rating on Cl. E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to BlueMountain CLO 2016-3
Ltd./BlueMountain CLO 2016-3 LLC's $437.00 million floating-rate
notes.
The note issuance is a collateralized loan obligation transaction
backed by broadly syndicated senior secured term loans.
The ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term
loans that are governed by collateral quality tests. The
credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
BlueMountain CLO 2016-3 Ltd./BlueMountain CLO 2016-3 LLC
Class Rating Amount
(mil. $)
A AAA (sf) 294.50
B AA (sf) 68.875
C A (sf) 30.875
D BBB (sf) 23.75
E BB (sf) 19.00
Subordinated notes NR 43.10
NR--Not rated.
BNPP IP CLO 2014-1: S&P Lowers Rating on Class E Notes to B-
------------------------------------------------------------
S&P Global Ratings lowered its rating on the class E notes from
BNPP IP CLO 2014-1 Ltd., a cash flow collateralized loan obligation
(CLO), and removed it from CreditWatch, where S&P placed it with
negative implications on Aug. 22, 2016. At the same time, S&P
affirmed its ratings on the class A-1, A-2, B, C, and D notes from
the same transaction to reflect adequate credit support at their
current respective rating levels.
The rating actions follow S&P's review of the transaction's
performance using data from the October 2016 trustee report. The
transaction is scheduled to remain in its reinvestment period until
April 2018.
Since S&P's effective date rating affirmations, the transaction has
experienced par loss and credit deterioration in the underlying
portfolio. Comparing the October 2016 trustee report with the July
2014 trustee report used for the effective date analysis shows that
the exposure to 'CCC' rated assets has risen to $23.22 million from
zero. The par loss has led to decreases in the
overcollateralization (O/C) ratio for each class:
-- The class A O/C decreased to 134.24% from 135.47%.
-- The class B O/C decreased to 120.69% from 121.80%.
-- The class C O/C decreased to 113.19% from 114.23%.
-- The class D O/C decreased to 107.92% from 108.91%.
-- The class E O/C decreased to 103.82% from 104.78%.
Despite the heightened downgrade-to-upgrade ratio within U.S.
speculative-grade corporate ratings (i.e., those rated 'BB+' or
lower) in recent months, S&P did note a significant increase in
exposure to assets rated 'BB-' and above. Since the July 2014
trustee report, the exposure to 'BB' category assets has increased
to 25.9% from 14.3%, which has helped to maintain the overall
rating distribution of the portfolio--a potential benefit for the
senior and mezzanine notes. Although cash flow results showed
higher ratings on the class A-2, B, C, and D notes, S&P affirmed
its ratings on these classes and on class A-1 to maintain a rating
cushion as the transaction continues to reinvest.
The class E note was structured as the most subordinated rated note
and is sensitive to potential portfolio deterioration. Since S&P's
effective date analysis, the rating cushion for this class has
declined considerably, given the deterioration noted above.
Although the cash flow analysis indicated a lower rating, S&P
lowered its rating on the class E note by only one notch to
'B- (sf)' because S&P do not believe that this tranche meets its
criteria for assigning a 'CCC' rating.
S&P will continue to monitor this transaction and will take rating
or CreditWatch actions as it deems appropriate.
RATING LOWERED
BNPP IP CLO 2014-1 Ltd.
Rating
Class To From
E B- (sf) B (sf)/Watch Neg
RATINGS AFFIRMED
BNPP IP CLO 2014-1 Ltd.
Class Rating
A-1 AAA (sf)
A-2 AA (sf)
B A (sf)
C BBB (sf)
D BB (sf)
CANADIAN COMMERCIAL 2013-2: DBRS Confirms BB Rating on Cl. F Notes
------------------------------------------------------------------
DBRS Limited upgraded one class of Canadian Commercial Mortgage
Origination Trust, Series 2013-2 as follows:
-- Class B to AA (high) (sf) from AA (sf)
In addition, DBRS has confirmed the remaining classes in the
transaction as follows:
-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
All trends are Stable, except for Class C, the trend on which was
changed to Positive from Stable.
The rating upgrade and trend change reflect the increased credit
support to the bonds as a result of loan amortization and loan
prepayments. Since issuance, the pool has experienced a collateral
reduction of 16.8% with 37 loans out of the original 42 loans
outstanding as of the November 2016 remittance report. Loans
representing 96.8% of the pool are reporting YE2015 or trailing
12-month 2016 figures with a weighted-average (WA) debt service
coverage ratio (DSCR) and a WA debt yield of 1.53 times (x) and
10.2%, respectively. Three loans, representing 5.5% of the current
pool balance, are scheduled to mature in 2017 and reported a DBRS
Refinance DSCR of 1.42x and a WA Exit Debt Yield of 15.3%. All
remaining loans are scheduled to mature in 2018. The largest 15
loans in the pool collectively represent 68.5% of the transaction
balance and those loans exhibited a WA net cash flow growth of 7.0%
over the DBRS underwriting figures, as per the most recent
financials, with a WA DSCR and debt yield of 1.55x and 10.2%,
respectively.
Nine loans, representing 25.1% of the current pool balance, share
common sponsorship through affiliates of Northview Apartment REIT
and True North Commercial REIT. To account for this increased
concentration risk, DBRS applied a penalty to all loans in the
pool, thereby elevating the probability of default.
There are no loans in special servicing as of the November 2016
remittance, but one loan, 4 Racine Road (Prospectus ID#33; 1.0% of
the current pool balance), is on the servicer’s watchlist. This
loan was flagged for its upcoming January 2017 maturity and,
according to the servicer, the borrower is currently working toward
a refinance plan. The loan reported a YE2015 DSCR of 1.73x with an
exit debt yield of 12.1%. The largest loan in the transaction is
discussed below.
The Playfair Residences loan (Prospectus ID#1; 11.0% of the current
pool balance) is secured by two high-rise multifamily towers
totalling 433 units in Ottawa, Ontario, located within the Alta
Vista submarket. At issuance, the borrower initiated an
intensification plan for the neighbourhood by developing a
“Playfair Community” consisting of three new 14-storey
condominium towers in addition to the subject property; however,
construction has yet to begin and DBRS has requested an update from
the servicer. According to the May 2016 rent roll, the subject was
89.6% occupied with an average rental rate of $1,124 per unit,
which has slightly declined from the issuance occupancy rate of
91.5% with the average rental rate remaining consistent. As of
November 2016, the subject was advertising rental rates ranging
from $650 to $1,699 per unit compared with rental rates at
issuance, which ranged from $604 to $1,655 per unit. The subject is
mostly composed of one- and two-bedroom units with advertised
rental rates of $825 per unit and $1,199 per unit, respectively.
This is a decline from issuance rental rates of $959 per unit for
one-bedroom apartments and $1,247 per unit for two-bedroom
apartments. According to the Fall 2015 CMHC Rental Market Report,
the Alta Vista submarket reported an average vacancy rate of 4.1%
with rental rates ranging between $805 per unit and $1,523 per
unit. One- and two-bedroom apartments had an average rental rate of
$924 per unit and $1,134 per unit, respectively. Because of the
declines in occupancy and rental rates, the YE2015 DSCR was
reported at 1.12x, unchanged from YE2014 but below the YE2013 DSCR
of 1.21x and DBRS underwritten DSCR of 1.27x. This loan is
scheduled to mature in April 2018 and has full recourse to the
sponsor.
The ratings assigned to Class C, D, E, F and G differ from the
higher rating implied by the quantitative model. DBRS considers
this difference to be a material deviation and, in this case, the
sustainability of loan performance trends was not demonstrated and,
as such, was reflected in the ratings.
CEDAR CREEK CLO: S&P Affirms B- Rating on Class F Notes
-------------------------------------------------------
S&P Global Ratings affirmed its ratings on the class A, B, C, D, E,
and F notes from Cedar Creek CLO Ltd., a U.S. collateralized loan
obligation (CLO) transaction that closed in March 2013 and is
managed by 4086 Advisors Inc.
The rating actions follow S&P's review of the transaction's
performance, which used data from the Oct. 7, 2016, trustee report.
The transaction is scheduled to remain in its reinvestment period
until April 2017.
Since the transaction's effective date in June 2013, the
trustee-reported collateral portfolio's weighted average life has
declined to 4.55 years from 5.84 years. This seasoning has
decreased the overall credit risk profile of the portfolio. In
addition, the number of obligors has increased during this period,
which contributed to the portfolio's improved diversification.
That said, the transaction has also experienced an increase in both
defaults and assets rated 'CCC+' and below since the June 2013
trustee report, which S&P used for its effective date analysis.
Specifically, the amount of defaulted assets increased to $1.46
million (0.39% of the adjusted collateral principal amount) as of
the Oct. 7, 2016, trustee report, from zero as of the June 2013
report. The level of assets rated 'CCC+' and below increased, to
$5.93 million (1.56% of the adjusted collateral principal amount),
from zero over the same period.
The increase in defaulted assets, among other factors, has affected
the level of credit support available to all tranches, as seen by
the decline in the overcollateralization (O/C) ratios:
-- The class A/B O/C ratio was 132.08%, down from 133.84%.
-- The class C O/C ratio was 117.39%, down from 118.96%.
-- The class D O/C ratio was 112.00%, down from 113.49%.
-- The class E O/C ratio was 106.85%, down from 108.27%.
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 increased
diversification of the collateral pool. However, any significant
deterioration in these metrics could negatively affect the deal in
the future, especially the junior tranches. As such, 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 indicates higher ratings for the
class A, B, C, and D notes, its rating actions factor in 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. Other factors S&P considered include the decline in O/C
ratios as well as a lack of significant improvement in the cash
flow cushions at the current rating levels since S&P's
effective-date rating actions.
The cash flow results indicated a lower rating for the class F
notes. However, S&P views the overall credit seasoning as an
improvement and also considered that the transaction will enter its
amortization period in April 2017. In addition, the transaction
currently exhibits below-average exposure to 'CCC' rated collateral
obligations and minimal exposure to defaulted assets. As a result,
S&P affirmed the rating on the class F notes to remain in line with
its credit stability framework. However, any increase in defaults
and/or par losses could lead to potential negative rating actions
on the class F notes in the future.
The affirmations of the ratings reflect S&P's belief that the
credit support available is commensurate with the current rating
levels.
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 S&P
deems necessary.
RATINGS AFFIRMED
Cedar Creek CLO Ltd.
Class Rating
A AAA (sf)
B AA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
F B- (sf)
CITIGROUP COMMERCIAL 2004-C2: Moody's Cuts Cl. H Debt Rating to B3
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on two classes,
affirmed the ratings on five classes and downgraded the ratings on
four classes in Citigroup Commercial Mortgage Trust, Commercial
Pass-Through Certificates, Series 2004-C2 as follows:
-- Cl. B, Affirmed Aaa (sf); previously on Nov 24, 2015
Affirmed Aaa (sf)
-- Cl. C, Affirmed Aaa (sf); previously on Nov 24, 2015
Affirmed Aaa (sf)
-- Cl. D, Affirmed Aaa (sf); previously on Nov 24, 2015
Upgraded to Aaa (sf)
-- Cl. E, Upgraded to Aaa (sf); previously on Nov 24, 2015
Upgraded to Aa1 (sf)
-- Cl. F, Upgraded to A1 (sf); previously on Nov 24, 2015
Upgraded to A3 (sf)
-- Cl. G, Affirmed Baa3 (sf); previously on Nov 24, 2015
Affirmed Baa3 (sf)
-- Cl. H, Downgraded to B3 (sf); previously on Nov 24, 2015
Affirmed Ba3 (sf)
-- Cl. J, Downgraded to C (sf); previously on Nov 24, 2015
Affirmed B3 (sf)
-- Cl. K, Downgraded to C (sf); previously on Nov 24, 2015
Affirmed Caa2 (sf)
-- Cl. L, Affirmed C (sf); previously on Nov 24, 2015 Affirmed
C (sf)
-- Cl. XC, Downgraded to Caa1 (sf); previously on Nov 24, 2015
Downgraded to B3 (sf)
RATINGS RATIONALE
The ratings on P&I classes E and F were upgraded based primarily on
an increase in credit support resulting from loan paydowns and
amortization. The deal has paid down 13% since Moody's last
review.
The ratings on P&I classes B, C, D and G 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 P&I class L was affirmed because the ratings are
consistent with Moody's expected loss.
The ratings on P&I classes H, J and K 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 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 22.7% of the
current balance, compared to 12.9% at Moody's last review. Moody's
base expected loss plus realized losses is now 4.7% of the original
pooled balance, compared to 3.9% 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 "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 four, compared to six at Moody's last review.
Moody's analysis used the excel-based Large Loan Model. 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 October 17, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to $105.1
million from $1.03 billion at securitization. The certificates are
collateralized by seven mortgage loans ranging in size from less
than 5% to 41% of the pool. Two loans, constituting 49% of the
pool, have defeased and are secured by US government securities.
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.
Twelve loans have been liquidated from the pool, resulting in an
aggregate realized loss of $24.5 million (for an average loss
severity of 35%). Four loans, constituting 39% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Williamsburg Shopping Center Loan ($18.4 million -- 17.5% of
the pool), which is secured by a 249,000 square foot (SF) grocery
anchored retail center located 1 mile from downtown Williamsburg,
Virginia. The loan transferred to special servicing in April 2014
due to imminent default and the property became REO in September
2014. The special servicer has listed the property with CBRE and it
is being marketed as a development opportunity. As of September
2016, the property was 55% leased. The master servicer has
recognized a $10.7 million appraisal reduction on this loan.
The second largest specially serviced loan is the Ceres Group
Building Loan ($11.7 million --11.1% of the pool), which is secured
by a 125,000 SF, three-story office building located in
Strongsville, Ohio. The property was built to suit for Ceres
Group's corporate headquarters however, the tenant vacated the
property upon lease expiration in July 2016. The loan transferred
to special servicing in September 2016 for imminent default and the
property remains vacant. Moody's incorporated a lit/dark analysis
to account for the single tenant nature of the property.
The remaining two specially serviced loans are secured by anchored
retail properties. Moody's estimates an aggregate $23.9 million
loss for the specially serviced loans (59% expected loss on
average).
The remaining conduit loan is the Desert Skye Esplanade Loan ($12.9
million -- 12.3% of the pool), which is secured by a 160,000 SF
anchored retail center located in Phoenix, Arizona. The property is
shadow anchored by a Walmart Supercenter and Lowe's. National
tenants at the property include Big Lots, Ross Dress For Less,
Dollar Tree and Party City. As of June 2016, the property was 100%
leased to 22 tenants. The loan is benefitting from amortization and
matures in July 2019. Moody's LTV and stressed DSCR are 91% and
1.12X, respectively, compared to 99% and 1.03X at the last review.
CITIGROUP COMMERCIAL 2016-C3: DBRS Assigns BB Rating on Cl. E Debt
------------------------------------------------------------------
DBRS, Inc. finalized provisional ratings on the following classes
of Commercial Mortgage Pass-Through Certificates, Series 2016-C3
issued by Citigroup Commercial Mortgage Trust 2016-C3:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B 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 B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
All trends are Stable.
Classes X-D, X-E, X-F, X-G, D, E, and F have been privately
placed.
The Classes X-A, X-B, X-D, X-E, X-F and X-G balances are notional.
DBRS ratings on interest-only (IO) certificates address the
likelihood of receiving interest based on the notional amount
outstanding. DBRS considers the IO certificates' positions within
the transaction payment waterfall when determining the appropriate
ratings.
The collateral consists of 44 fixed-rate loans secured by 72
commercial properties, comprising a total transaction balance of
$756,492,190. The transaction has a sequential-pay pass-through
structure. Two loans, representing 8.6% of the pool, were
shadow-rated investment grade by DBRS. Proceeds for the
shadow-rated loans are floored at their respective ratings within
the pool. When 8.6% of the pool has no proceeds assigned below the
rating floor, the resulting pool subordination is diluted or
reduced below that rated floor. The conduit pool was analyzed to
determine the ratings, reflecting the long-term probability of loan
default within the term and its liquidity at maturity. When the
cut-off loan balances were measured against the DBRS Stabilized Net
Cash Flow (NCF) and their respective actual constants, none of the
loans had a DBRS Term Debt Service Coverage Ratio (DSCR) below 1.15
times (x), a threshold indicative of a higher likelihood of
mid-term default. Additionally, to assess refinance risk given the
current low-interest-rate environment, DBRS applied its refinance
constants to the balloon amounts. This resulted in 18 loans,
representing 44.5% of the pool, having refinance DSCRs below 1.00x.
Two of the largest eight loans, Potomac Mills and Quantum Park,
exhibit credit characteristics consistent with investment-grade
shadow ratings. The loans represent 8.6% of the pool. Potomac Mills
has credit characteristics consistent with an A (low) shadow
rating, while Quantum Park has credit characteristics consistent
with a BBB (high) shadow rating. Additionally, five of the largest
15 loans that comprise 28.3% of the pool were modeled with strong
sponsorship: Briarwood Mall, 101 Hudson Street, Potomac Mills,
Hill7 and Mills Fleet Farm. The pool exhibits a relatively strong
DBRS Weighted-Average (WA) Term DSCR of 1.95x based on the whole
loan balances, which indicates moderate term default risk.
Twenty-three loans, representing 73.6% of the pool, have a DBRS
Term DSCR in excess of 1.50x. Even when excluding the two
shadow-rated loans, the deal continues to exhibit a healthy DBRS
Term DSCR of 1.83x. None of the loans in the pool are secured by
student or military housing properties, which often exhibit higher
cash flow volatility than traditional multifamily properties.
The transaction has a notable related borrower concentration with a
combined 17 loans, representing 34.7% of the pool, sponsored by
either Simon Property Group, Inc. (Simon); Starwood Capital Group;
Columbia Sussex Corporation; HK Realty; Gregory S. Houge, Bruce H.
Rothman, Laurent A. Opman and Serge Azria; Bruce P. Woodward, James
Alexander McCabe and Steven Dietrich; or Fred D. Grimes, Mark P.
Esbensen and William Wen-Wai Lo. Two loans sponsored by Simon,
accounting for 13.2% of the pool and 38.1% of the related borrower
loan balance, were modeled with strong sponsorship. In total, ten
loans, representing 20.9% of the pool, are secured by hotels,
including four of the largest 15 loans. Hotels have the highest
cash flow volatility of all major property types as their income,
which is derived from daily contracts rather than multi-year
leases, and expenses, which are often mostly fixed, are quite high
as a percentage of revenue. These two factors cause revenue to fall
swiftly during a downturn and cash flow to fall even faster as a
result of high operating leverage. DBRS cash flow volatility for
such hotels, which ultimately determines a loan’s probability of
default (POD), assumes between a 23.6% and 30.0% cash flow decline
for a BBB stress and a 66.8% and 84.9% cash flow decline for a AAA
stress. To further mitigate hotels’ more volatile cash flow, the
loans in the pool secured by hotel properties have a WA DBRS Debt
Yield and WA DBRS Exit Debt Yield of 10.3% and 10.6%, respectively,
which compare favorably with the WA DBRS Debt Yield and DBRS Exit
Debt Yield of 8.8% and 10.1%, respectively, for the non-hotel
properties in the pool.
The DBRS sample included 26 of the 44 loans in the pool. Site
inspections were performed on 45 of the 72 properties in the
portfolio (77.5% of the pool by allocated loan balance). The DBRS
average sample NCF adjustment for the pool was -10.0% and ranged
from -21.7% to -0.2%. Furthermore, the pool is concentrated based
on loan size, with a concentration profile equivalent to that of 23
equal-sized loans. The largest five and ten loans total 35.9% and
56.3% of the pool, respectively. A concentration penalty was
applied given the pool’s lack of diversity, which increases each
loan’s POD. While the transaction is concentrated in the largest
ten loans, two of these loans (Potomac Mills and Quantum Park),
totaling 8.6% of the pool, are shadow-rated at A (low) and BBB
(high), respectively, by DBRS.
The rating assigned to Class F differs from the higher rating
implied by the quantitative model. DBRS considers this difference
to be a material deviation, and in this case, the ratings reflect
the dispersion of loan-level cash flows expected to occur
post-issuance.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure and
underlying trust assets. All classes will be subject to ongoing
surveillance, which could result in upgrades or downgrades by DBRS
after the date of issuance.
CITIGROUP COMMERCIAL 2016-C3: Fitch Rates Class F Certs 'B-sf'
--------------------------------------------------------------
Fitch Ratings has assigned these ratings and Ratings Outlooks to
Citigroup Commercial Mortgage Trust 2016-C3 commercial mortgage
pass-through certificates:
-- $31,197,000 class A-1 'AAAsf'; Outlook Stable;
-- $75,370,000 class A-2 'AAAsf'; Outlook Stable;
-- $180,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $209,266,000 class A-4 'AAAsf'; Outlook Stable;
-- $33,711,000 class A-AB 'AAAsf'; Outlook Stable;
-- $592,900,000b class X-A 'AAAsf'; Outlook Stable;
-- $40,662,000b class X-B 'AA-sf'; Outlook Stable;
-- $63,356,000 class A-S 'AAAsf'; Outlook Stable;
-- $40,662,000 class B 'AA-sf'; Outlook Stable;
-- $30,259,000 class C 'A-sf'; Outlook Stable;
-- $39,716,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $17,021,000ab class X-E 'BB-sf'; Outlook Stable;
-- $7,565,000ab class X-F 'B-sf'; Outlook Stable;
-- $39,716,000a class D 'BBB-sf'; Outlook Stable;
-- $17,021,000a class E 'BB-sf'; Outlook Stable;
-- $7,565,000a class F 'B-sf'; Outlook Stable.
Fitch does not rate the $28,369,189ab class X-G and the
$28,369,189a class G.
a) Privately placed pursuant to Rule 144A.
b) Notional amount and interest only.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 44 loans secured by 72
commercial properties having an aggregate principal balance of
$765,492,189 as of the cut-off date. The loans were contributed to
the trust by Citigroup Global Markets Realty Corporation, Barclays
Bank PLC, Rialto Mortgage Finance, LLC, and Cantor Commercial Real
Estate Lending, L.P.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 73.5% of the properties
by balance, cash flow analysis of 88.7%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
Lower Than Average Fitch Leverage: The Fitch leverage for this
transaction is better than other recent Fitch-rated transactions.
The pool's weighted average (WA) Fitch debt service coverage ratio
(DSCR) of 1.30x is better than both the year-to-date (YTD) 2016
average of 1.19x and the 2015 average of 1.18x. The pool's WA
Fitch loan to value (LTV) of 103.5% is better than the YTD 2016
average of 105.8% and the 2015 average of 109.3%
Investment-Grade Credit Opinion Loan: The sixth largest loan,
Potomac Mills (4.6% of the pool), has an investment-grade credit
opinion of 'BBBsf*' on a stand-alone basis. Excluding this loan,
the conduit has a Fitch DSCR of 1.29x and Fitch LTV of 105.5%.
High Lodging Exposure: There are 10 loans, representing 20.86% of
the pool, that consist of hotel properties. The largest hotel loan
is Marriott Hilton Head Resort & Spa (4.0% of the pool), which is
the 10th largest loan in the pool. The pool's hotel concentration
is greater than the YTD 2016 average of 17.0%. Hotels have the
highest probability of default in Fitch's multiborrower CMBS
model.
Average Pool Concentration: The top 10 loans in pool make up 48.2%
of the total balance. This is lower than the YTD average of 55.3%
and the 2015 average of 49.3%. The pool's loan concentration index
(LCI) is 428, which is slightly higher than the YTD average of 421.
Sponsor concentration for the pool is higher than average due to
related borrowers. The pool's sponsor concentration index (SCI) is
564, which is greater than the YTD average of 494.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 10.6% below
the most recent year's net operating income (NOI; for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to the
CGCMT 2016-C3 certificates and found that the transaction displays
average sensitivity to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'A+sf' could occur. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB+sf'
could occur.
CMLBC 2001-CMLB1: Moody's Affirms Ba3 Rating on Class X Certs
-------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
of Commercial Mortgage Leased-Backed Certificates 2000-CMLB1 (CMLBC
2001-CMLB1) as follows:
-- Cl. A-2, Affirmed Aaa (sf); previously on May 12, 2016
Affirmed Aaa (sf)
-- Cl. A-3, Affirmed Aaa (sf); previously on May 12, 2016
Affirmed Aaa (sf)
-- Cl. X, Affirmed Ba3 (sf); previously on May 12, 2016
Affirmed Ba3 (sf)
RATINGS RATIONALE
The ratings on two P&I classes, classes A-2 & A-3, were affirmed
because the transaction's key metric, the weighted average rating
factor (WARF), is 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 its
referenced classes.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The ratings of Credit Tenant Lease (CTL) deals 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.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Credit Tenant Lease and Comparable Lease
Financings" published in October 2016.
Moody's used a Gaussian copula model, incorporated in its public
CDO rating model CDOROM, to generate a portfolio loss distribution
of a pool of CTL loans to assess the ratings.
DEAL PERFORMANCE
As of the October 20, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 63% to $177.9
million from $476.3 million at securitization. The Certificates are
collateralized by 103 mortgage loans ranging in size from less than
1% to 7% of the pool. Eighty-two of the loans are CTL loans secured
by properties leased to 20 corporate credits tenants. Twenty-one
loans, representing 16.3% of the pool, have defeased and are
collateralized with U.S. Government securities.
Sixteen loans, constituting 9.2% 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.
One loan has been liquidated from the pool, resulting in a realized
loss of $5.5 million (49% loss severity). Due to realized losses,
Class K has been eliminated entirely and Class J has experienced an
11% principal loss. There are currently no loans in special
servicing.
The CTL pool, excluding defeasance, consists of 82 loans secured by
properties leased to 20 credit tenants. The largest exposures are
SUPERVALU Inc. ($27.0 million -- 15.1% of the pool; senior
unsecured rating B3 -- stable outlook), Autozone, Inc. ($26.3
million -- 14.8% of the pool; senior unsecured rating: Baa1 -
stable outlook) and Walgreen Co. ($14.4 million -- 8.1% of the
pool; senior unsecured rating Baa2 - On review for possible
downgrade). Excluding defeased loans, approximately 97% of the
credits are publicly rated by Moody's and 49% of them have
investment grade ratings.
The bottom-dollar weighted average rating factor (WARF) for this
pool is 1493, compared to 1488 at the last review. WARF is a
measure of the overall quality of a pool of diverse credits. The
bottom-dollar WARF is a measure of default probability.
COMM 2014-CCRE15: Moody's Affirms Ba2 Rating on Cl. E Certificates
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on 14 classes in
COMM 2014-CCRE15 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates as:
Cl. A-1, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jan. 8, 2016,
Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Jan. 8, 2016, Affirmed
Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Jan. 8, 2016, Affirmed
A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Jan. 8, 2016, Affirmed
Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Jan. 8, 2016, Affirmed
Ba2 (sf)
Cl. F, Affirmed B2 (sf); previously on Jan. 8, 2016, Affirmed
B2 (sf)
Cl. PEZ, Affirmed A1 (sf); previously on Jan. 8, 2016, Affirmed
A1 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Jan. 8, 2016, Affirmed
Aaa (sf)
Cl. X-B, Affirmed Baa1 (sf); previously on Jan. 8, 2016,
Affirmed Baa1 (sf)
RATINGS RATIONALE
The ratings on the 11 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 two IO classes were affirmed based on the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes.
The transaction contains a group of exchangeable certificates.
Classes A-M, B and C may be exchanged for Class PEZ certificates
and Class PEZ may be exchanged for the Classes A-M, B and C. The
PEZ certificates will be entitled to receive the sum of interest
and principal distributable on the Classes A-M, B and C
certificates that are exchanged for such PEZ certificates. The
ratings on class PEZ was affirmed due to the credit performance (or
the weighted average rating factor or WARF) of the exchangeable
classes.
Moody's rating action reflects a base expected loss of 3.7% of the
current balance, compared to 2.6% at Moody's last review. Moody's
base expected loss plus realized losses is now 3.6% 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 20, compared to 21 at Moody's last review.
DEAL PERFORMANCE
As of the Nov. 14, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 2.3% to
$984.9 million from $1.01 billion at securitization. The
certificates are collateralized by 49 mortgage loans ranging in
size from less than 1% to 11% of the pool, with the top ten loans
constituting 58% of the pool. One loan, constituting 9% of the
pool, has an investment-grade structured credit assessments.
Two loans, constituting 3% 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 have been no loans liquidated from the pool. Two loans,
constituting 2.4% of the pool, are currently in special servicing.
The largest specially serviced loan is the Century Court Apartments
Loan ($12.6 million -- 1.3% of the pool), which is secured by a 192
unit multifamily complex located in Williston, North Dakota in
proximity to the Bakken Shale Oil Formation. Operations have been
adversely impacted by the oil crisis and the borrower has been
unable to make debt service payments. The loan transferred to
special servicing in May 2016 due to imminent monetary default.
The remaining specially serviced loan is also secured by a
multi-family property in Dickinson, North Dakota. Moody's
estimates an aggregate $14.3 million loss for the specially
serviced loans (60% expected loss on average).
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 64% of
the pool. Moody's weighted average conduit LTV is 109%, compared
to 111% 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 15% 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 1.38X and 0.98X,
respectively, compared to 1.35X and 0.96X 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 625 Madison
Avenue Loan ($85.0 million -- 8.6% of the pool), which represents a
participation interest in a $195.0 million mortgage loan. The loan
is also encumbered by $195.0 million of mezzanine debt. The loan
is secured by a ground lease at 625 Madison Avenue between 58th and
59th streets in New York City, with improvements consisting of a
17-story, mixed-use building. Initial rent payments are $4,612,500
until June 30, 2022 at which time the ground lease payments become
4.5% of fair market value. Moody's structured credit assessment
and actual DSCR are aa2 (sca.pd) and 1.03X respectively.
The top three conduit loans represent 27.2% of the pool balance.
The largest loan is the Google and Amazon Office Portfolio Loan
($110.0 million -- 11.2% of the pool), which represents a
participation interest in a $452.2 million mortgage loan. The loan
is also encumbered by $67.8 million of mezzanine debt. The loan is
secured by two office properties located in Sunnyvale, California.
The Moffett Towers Building D (Amazon Building) is an eight-story,
Class A office building containing 357,481 square feet (SF). It is
part of a seven building campus. A2Z development, a wholly owned
subsidiary of Amazon, will use the space for design and product
development for the Kindle e-reader. The Google Campus is comprised
of four, four-story, Class A office buildings totaling 700,328 SF,
which is part of a six-building office campus known as Technology
Corners. Moody's LTV and stressed DSCR are 112% and 0.91X,
respectively, the same as at the last review.
The second largest loan is the AMC Portfolio Pool I Loan
($87.5 million -- 8.9% of the pool), which is secured by seven
manufactured housing communities. The properties are located in
Dallas, Texas (3 properties); Austin, Texas (2); and Flint,
Michigan (2). The communities were built between 1968 and 1998 and
contain approximately 2,000 pads in aggregate. The loan is still
in its initial 47 month interest only period, after which it will
begin to amortize on a 360-month schedule. Moody's LTV and
stressed DSCR are 119% and 0.80X, respectively, the same as at the
last review.
The third largest loan is the 25 West 45th Street Loan
($70.0 million -- 7.1% of the pool), which is secured by a 17-story
Class-B office property on West 45th street of 5th Avenue in
Manhattan, New York. The improvements contain approximately
186,000 SF of which approximately 169,000 SF (91% of NRA) is
represented by office space and the remaining 16,500 (9% of NRA)
consists of grade level retail. Moody's LTV and stressed DSCR are
122% and 0.80X, respectively, the same as at the last review.
COMMERCIAL MORTGAGE 1999-C2: Moody's Affirms Ca Rating on H Certs
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
in Commercial Mortgage Asset Trust, Commercial Mortgage
Pass-Through Certificates, Series 1999-C2 as follows:
-- Cl. G, Affirmed Aaa (sf); previously on Jan 28, 2016
Affirmed Aaa (sf)
-- Cl. H, Affirmed Ca (sf); previously on Jan 28, 2016 Affirmed
Ca (sf)
-- Cl. X, Affirmed Caa3 (sf); previously on Jan 28, 2016
Affirmed Caa3 (sf)
RATINGS RATIONALE
The rating on Class G was affirmed at Aaa (sf) because it is fully
covered by defeased loans. Defeasance represents 86% of the current
pool balance.
The rating on Class H was affirmed because the rating is consistent
with Moody's expected loss and the cumulative certificate loss from
previously liquidated loans. Class H has had an aggregate
certificate loss of 24% based on its original balance.
The rating on the IO Class (Class X) was affirmed based on the
credit performance (or the weighted average rating factor or WARF)
of the referenced classes.
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 7.7%
of the original pooled balance, compared to 7.8% 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 "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model. 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 October 17, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $23.9 million
from $775 million at securitization. The certificates are
collateralized by four mortgage loans. Three loans, constituting
86% of the pool, have defeased and are secured by US government
securities.
Currently, there are no loans on the master servicer's watchlist or
in special servicing. Fifteen loans have been liquidated from the
pool, resulting in an aggregate realized loss of $60 million (50%
loss severity on average).
The sole remaining non-defeased loan is the Regal Cinema Loan ($3.4
million -- 14.2% of the pool), which is secured by a stadium-style
movie theater in Medina, Ohio. The lease expires in December 2018,
approximately nine months prior to the loan's anticipated repayment
date of September 2019. The loan has amortized 52% since
securitization and Moody's current LTV and stressed DSCR are 53%
and 2.27X, respectively, compared to 57% and 2.11X at last review.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress
rate the agency applied to the loan balance.
CREDIT SUISSE 2006-C1: S&P Lowers Rating on Class J Certs to D
--------------------------------------------------------------
S&P Global Ratings raised its ratings on two classes of commercial
mortgage pass-through certificates from Credit Suisse Commercial
Mortgage Trust Series 2006-C1, a U.S. commercial mortgage-backed
securities (CMBS) transaction. In addition, S&P lowered its rating
on class J to 'D (sf)' and affirmed our rating on one other class
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 assets in the
pool, the transaction's structure, and the liquidity available to
the trust.
S&P raised its ratings on classes F and G to reflect its
expectation of the available credit enhancement for these classes,
which S&P believes is greater than its most recent estimate of
necessary credit enhancement for the respective rating levels. The
upgrades also follow S&P's views regarding the current and future
performance of the transaction's collateral and available liquidity
support.
The downgrade on class J to 'D (sf)' reflects current interest
shortfalls that S&P expects will remain outstanding for the
foreseeable future, as well as credit support erosion that S&P
anticipates will occur upon the eventual resolution of the seven
assets ($40.2million, 36.8%) with the special servicer.
According to the Oct. 17, 2016, trustee remittance report, the
current monthly interest shortfalls totaled $102,908 and resulted
primarily from:
-- Appraisal subordinate entitlement reduction amounts totaling
$47,163;
-- Shortfalls due to rate modifications totaling $43,837; and
-- Special servicing fees totaling $8,393.
The current interest shortfalls affected classes subordinate to and
including class J.
The affirmation on class H 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. The affirmation also reflects S&P's views
regarding the current and future performance of the transaction's
collateral, the transaction structure, and liquidity support
available to the class.
While available credit enhancement levels suggest further positive
rating movement on class G and positive rating movement on class H,
S&P's analysis also considered the susceptibility to reduced
liquidity support from the seven specially serviced assets and the
magnitude of performing loans that were previously specially
serviced (four loans; $42.9 million, 39.3%).
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $109.2 million, which is 3.6% of the pool balance
at issuance. The pool currently includes 29 loans and two real
estate-owned (REO) assets (representing the A-note and B-note as
one), down from 417 loans at issuance. Seven of these assets
($40.2 million, 36.2%) are with the special servicer, and three
($9.4 million, 8.6%) are on the master servicers' combined
watchlist. The master servicers, KeyBank Real Estate Capital,
Berkadia Commercial Mortgage LLC, and National Cooperative Bank
N.A. collectively reported financial information for 89.7% of the
loans in the pool, of which 0.3% was partial-year 2016 data, 84.8%
was partial- or year-end 2015 data, and the remainder was year-end
2014 data.
S&P calculated a 1.36x S&P Global Ratings weighted average debt
service coverage (DSC) and 92.4% S&P Global Ratings weighted
average loan-to-value (LTV) ratio using an 8.13% S&P Global Ratings
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the seven specially
serviced assets, two subordinate B hope notes ($8.1 million, 7.4%),
and the 14 cooperative housing loans ($14.9 million, 13.7%). The
top 10 loans have an aggregate outstanding pool trust balance of
$88.1 million (80.6%). Using adjusted servicer-reported numbers,
S&P calculated an S&P Global Ratings weighted average DSC and LTV
of 1.23x and 114.9%, respectively, for five of the top 10 loans.
The remaining loans are either specially serviced or secured by
cooperative housing.
To date, the transaction has experienced $109.6 million in
principal losses, or 3.6% of the original pool trust balance. S&P
expects losses to reach approximately 4.4% 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 seven specially serviced assets and the two B hope notes for
The Times Building and Providence Pavilion loans.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2016, trustee remittance report, seven assets in
the pool were with the special service,r Situs Holdings LLC.
Details of the two largest specially serviced loans, both of which
are part of the top 10 loans, are:
The Arrowhead Mall loan ($16.3 million, 14.9%) is the third-largest
loan in the pool and has a total reported exposure of $16.3
million. The loan is secured by a 432,866-sq.-ft. anchored retail
mall in Muskogee, Okla. The loan was transferred to the special
servicer on Jan. 11, 2016, because of imminent default, in which
the borrower cited cash flow difficulties caused by low occupancy.
Foreclosure is currently in process. A $9 million appraisal
reduction amount (ARA) is in effect against this loan. The reported
DSC as of year-end 2015 was 0.73x, and occupancy as of Sept. 29,
2016, is 69.0%. S&P expects a significant loss upon this loan's
eventual resolution.
The Jupiter Service Center loan ($9.4 million, 8.6%) is the
fourth-largest loan in the pool and has a total reported exposure
of $9.9 million. The loan is secured by a 126,485-sq.-ft. office
property in Plano, Texas. The loan was transferred to the special
servicer on Jan. 26, 2016, because of imminent default caused by
loss of a large tenant. The special servicer stated that
forbearance is in place whereby the lender will not pursue remedies
until July 2017 in exchange for implementation of lock-box and
continuation of monthly debt service payments. An ARA of $0.8
million is in effect against this loan. S&P expects a minimal loss
upon this loan's eventual resolution.
The five remaining assets with the special servicer have individual
balances that represent less than 5.5% of the total pool trust
balance. S&P credits impaired the two B hope notes assuming a
significant loss. S&P estimated losses for the seven specially
serviced assets and the two credit-impaired notes, arriving at a
weighted average loss severity of 44.1%.
With respect to the specially serviced assets 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
Credit Suisse Commercial Mortgage Trust Series 2006-C1
Commercial mortgage pass-through certificates series 2006-C1
Rating
Class Identifier To From
F 225470G72 AAA (sf) BB- (sf)
G 225470G80 BBB- (sf) B (sf)
H 225470H22 B- (sf) B- (sf)
J 225470H48 D (sf) CCC (sf)
CW CAPITAL I: Moody's Hikes Class C Notes Rating to B3
------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by CW Capital Cobalt I, Ltd.:
-- Cl. C, Upgraded to B3 (sf); previously on Nov 20, 2015
Upgraded to Caa3 (sf)
-- Cl. D, Upgraded to Ca (sf); previously on Nov 20, 2015
Affirmed C (sf)
Moody's has also affirmed the ratings on the following notes:
-- Cl. B-1, Affirmed Baa3 (sf); previously on Nov 20, 2015
Upgraded to Baa3 (sf)
-- Cl. B-2, Affirmed Baa3 (sf); previously on Nov 20, 2015
Upgraded to Baa3 (sf)
-- Cl. E-1, Affirmed C (sf); previously on Nov 20, 2015
Affirmed C (sf)
-- Cl. E-2, Affirmed C (sf); previously on Nov 20, 2015
Affirmed C (sf)
-- Cl. F-1, Affirmed C (sf); previously on Nov 20, 2015
Affirmed C (sf)
-- Cl. F-2, Affirmed C (sf); previously on Nov 20, 2015
Affirmed C (sf)
-- Cl. G, Affirmed C (sf); previously on Nov 20, 2015 Affirmed
C (sf)
RATINGS RATIONALE
Moody's has upgraded the ratings on two classes of notes due the
greater than expected recoveries on high credit risk assets, and
improvements in the underlying collateral pool as evidenced by the
WARF and WARR. Moody's has affirmed the ratings on seven classes of
notes because the key transaction metrics are commensurate with
existing ratings. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized debt
obligation (CRE CDO and ReRemic) transactions.
CW Capital Cobalt I, Ltd. is a static cash transaction whose
reinvestment period ended in May 2010. The transaction is backed by
a portfolio of: i) commercial mortgage backed securities (CMBS)
(86.0% of the pool balance); and ii) b-notes (14.0%). As of the
trustee's August 25, 2016 note valuation report, the aggregate note
balance of the transaction, including preferred shares, has
decreased to $165.7 million from $450.9 million at issuance, with
the paydown directed to the senior most outstanding notes, as a
result of regular amortization, recoveries from defaulted
collateral, and the re-direction of interest proceeds as principal
payment due to the failure of certain par value and interest
coverage tests.
The pool contains eighteen assets totaling $58.1 million (84.4% of
the collateral pool balance) that are listed as defaulted
securities as of the trustee's October 31, 2016 report. While there
have been realized losses on the underlying collateral to date,
Moody's does expect moderate/low losses to occur on the defaulted
securities.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these as actual parameters for static
deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 4307,
compared to 5323 at last review. The current ratings on the
Moody's-rated collateral and the assessments of the non-Moody's
rated collateral follow: Aaa-Aa3 (12.7% compared to 9.8% at last
review), Baa1-Baa3 (27.2% compared to 6.4% at last review); Ba1-Ba3
(14.0% compared to 14.8% at last review); B1-B3 (0.0% compared to
12.4% at last review); and Caa1-Ca/C (46.1% compared to 56.7% at
last review).
Moody's modeled a WAL of 1.7 years, compared to 3.2 years at last
review. The WAL is based on assumptions about extensions on the
underlying collateral look-through loan exposures.
Moody's modeled a fixed WARR of 4.9%, compared to 2.5% at last
review.
Moody's modeled a MAC of 3.1%, compared to 8.0% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the recovery rates of the underlying collateral and credit
assessments. Holding all other parameters constant, reducing the
recovery rates of 100% of the collateral pool by 5% would result in
an average modeled rating movement on the rated notes of zero to
one notch downward (e.g., one notch down implies a ratings movement
of Baa3 to Ba1). Increasing the recovery rate of 100% of the
collateral pool by 5% would result in an average modeled rating
movement on the rated notes of zero to one notch upward (e.g., one
notch up implies a ratings movement of Baa3 to Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
CWABS TRUST: Moody's Takes Action on $2.8BB Debt Issued 2006-2007
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 20 tranches
and confirmed the rating of nine tranches from nine transactions
issued by CWABS and backed by Subprime mortgage loans.
Complete rating actions are:
Issuer: CWABS Asset-Backed Certificates Trust 2006-15
Cl. A-3, Confirmed at Caa3 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. A-4, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. A-5A, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. A-5B, Current Rating A2 (sf); previously on Jan. 18, 2013,
Downgraded to A2 (sf)
Cl. A-5B, Underlying Rating: Confirmed at Ca (sf); previously on
July 22, 2016, Ca (sf) Placed Under Review for Possible Upgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Affirmed
at A2, Outlook Stable on Aug. 8, 2016,)
Cl. A-6, Confirmed at Caa3 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Issuer: CWABS Asset-Backed Certificates Trust 2007-10
Cl. 1-A-1, Upgraded to B2 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. 1-A-2, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-3, Upgraded to Caa1 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-4, Upgraded to Caa2 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Issuer: CWABS Asset-Backed Certificates Trust 2007-11
Cl. 1-A-1, Upgraded to Caa1 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. 1-A-2, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-3, Upgraded to Caa1 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-4, Upgraded to Caa2 (sf); previously on April 14, 2010,
Downgraded to C (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2007-12
Cl. 1-A-1, Upgraded to B1 (sf); previously on July 22, 2016,
Caa2 (sf) Placed Under Review for Possible Upgrade
Cl. 1-A-2, Upgraded to Ca (sf); previously on April 14, 2010,
Downgraded to C (sf)
Cl. 2-A-3, Upgraded to Caa2 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-4, Upgraded to Caa2 (sf); previously on April 14, 2010,
Downgraded to C (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2007-13
Cl. 1-A, Upgraded to Caa2 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Issuer: CWABS Asset-Backed Certificates Trust 2007-4
Cl. A-3, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. A-5, Confirmed at Ca (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. A-6, Confirmed at Caa3 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. A-4W , Current Rating A2 (sf); previously on Jan. 18, 2013,
Downgraded to A2 (sf)
Cl. A-4W, Underlying Rating: Confirmed at Ca (sf); previously on
July 22, 2016, Ca (sf) Placed Under Review for Possible Upgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Affirmed
at A2, Outlook Stable on Aug. 8, 2016,)
Cl. A-5W , Current Rating A2 (sf); previously on Jan. 18, 2013,
Downgraded to A2 (sf)
Cl. A-5W, Underlying Rating: Confirmed at Ca (sf); previously on
July 22, 2016, Ca (sf) Placed Under Review for Possible Upgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Affirmed
at A2, Outlook Stable on Aug. 8, 2016)
Cl. A-6W, Current Rating A2 (sf); previously on Jan. 18, 2013,
Downgraded to A2 (sf)
Cl. A-6W, Underlying Rating: Confirmed at Caa3 (sf); previously
on July 22, 2016, Caa3 (sf) Placed Under Review for Possible
Upgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Affirmed
at A2, Outlook Stable on August 8, 2016)
Issuer: CWABS Asset-Backed Certificates Trust 2007-7
Cl. A-1, Upgraded to B2 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-3, Upgraded to Caa2 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-4, Upgraded to Caa3 (sf); previously on April 14, 2010,
Downgraded to C (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2007-8
Cl. 1-A-1, Upgraded to Caa2 (sf); previously on July 22, 2016,
Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-3, Upgraded to Caa2 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-4, Upgraded to Caa3 (sf); previously on April 14, 2010,
Downgraded to C (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2007-9
Cl. 1A, Upgraded to Caa3 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2A3, Upgraded to Caa1 (sf); previously on July 22, 2016,
Ca (sf) Placed Under Review for Possible Upgrade
Cl. 2A4, Upgraded to Caa2 (sf); previously on April 14, 2010,
Downgraded to C (sf)
RATINGS RATIONALE
The rating upgrades are primarily due to receipt of funds from the
CWRMBS settlement and the related increase in total credit
enhancement available to the bonds.
In addition, some of the upgrades reflect corrections to the
cash-flow models used by Moody's in rating certain transactions.
In previous actions, the cash flow models for CWABS Asset-Backed
Certificates Trust 2007-12 Class 1-A-2 and Class 2-A-3, and CWABS
Asset-Backed Certificates Trust 2007-13 Class 1-A applied
inaccurate loss allocation rules to these certificates. This error
has now been corrected, and today's rating actions reflect this
change.
In previous actions, the cash flow models for CWABS Asset-Backed
Certificates Trust 2007-10 Class 2-A-3 and Class 2-A-4. CWABS
Asset-Backed Certificates Trust 2007-7 Class 2-A-3, and CWABS
Asset-Backed Certificates Trust 2007-9 Class 2-A-3 and Class 2-A-4
underestimated the amount of future modeled excess spread available
to the bonds. This error has now been corrected, and today's
rating actions reflect this change.
The rating confirmations are primarily due to the low current
overall levels of credit enhancement available to the bonds in
spite of settlement funds received by those transactions
The rating actions conclude the review actions for these
transactions announced on July 22nd, and reflect the recent
performance of the underlying pools and 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 4.9% in October 2016 from 5.0% in
October 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.
DRYDEN 33 SENIOR: S&P Assigns BB Rating on Class E-R Notes
----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Dryden 33 Senior Loan Fund, a
collateralized loan obligation (CLO) originally issued in 2014 that
is managed by Prudential Investment Management Inc. S&P withdrew
its ratings on the original class A, B, C, D, and E notes following
payment in full on the Nov. 22, 2016, refinancing date.
On the refinancing date, the proceeds from the class A-R, B-R, C-R,
D-R, and E-R replacement note issuances were used to redeem the
original class A, B, C, D, and E notes as outlined in the
transaction document provisions. Therefore, S&P withdrew its
ratings on the original notes in line with their full redemption,
and S&P is assigning ratings to the replacement notes.
The replacement notes are being issued via a supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Extend the stated maturity, reinvestment period, non-call
period, and weighted average life test date by 3.25 years.
-- Amend the documents to comply with the Volcker Rule.
-- Incorporate the formula version of Standard & Poor's CDO
Monitor tool and update the S&P Global Ratings recovery and
industry methodology to conform to the current criteria.
-- Upsize the transaction to $1 billion from $800 million.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
The assigned ratings reflect S&P's opinion that the credit support
available is commensurate with the associated rating levels.
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.
RATINGS ASSIGNED
Dryden 33 Senior Loan Fund
Amount
Replacement class Rating (mil $)
A-R AAA (sf) 630.00
B-R AA (sf) 113.00
C-R A (sf) 80.00
D-R BBB (sf) 51.00
E-R BB (sf) 44.00
Subordinated notes NR 96.70
RATINGS WITHDRAWN
Dryden 33 Senior Loan Fund
Rating Amount
Original class To From (mil $)
A NR AAA (sf) 504.00
B NR AA (sf) 90.40
C NR A (sf) 64.00
D NR BBB (sf) 40.80
E NR BB (sf) 35.20
NR--Not rated.
DRYDEN 33 SENIOR: S&P Assigns Prelim. BB Rating on Cl. E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-R, C-R, D-R, and E-R replacement notes from Dryden 33 Senior
Loan Fund, a collateralized loan obligation (CLO) managed by PGIM
Inc. The replacement notes will be issued via a proposed
supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels. The class A-R, B-R, and C-R notes will be issued at a
spread lower than the original notes, and the class D-R and E-R
notes will be issued at a spread higher than the original notes.
On the Nov. 22, 2016, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, S&P anticipates withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw its
preliminary ratings on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Upsize the transaction to $1 billion from $800 million.
-- Extend the reinvestment period and legal final maturity by
3.25 years.
-- Include provisions to comply with the Volcker Rule.
-- Incorporate the non-model version of S&P's CDO Monitor, and
update the recovery and industry tables to conform to S&P's
current criteria.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement Notes
Class Amount Interest
(mil. $) rate (%)
A-R 630.00 LIBOR + 1.43
B-R 113.00 LIBOR + 1.85
C-R 80.00 LIBOR + 2.50
D-R 51.00 LIBOR + 4.35
E-R 44.00 LIBOR + 7.54
Original Notes
Class Amount Interest
(mil. $) rate (%)
A 504.00 LIBOR + 1.48
B 90.40 LIBOR + 2.00
C 64.00 LIBOR + 2.85
D 40.80 LIBOR + 3.65
E 35.20 LIBOR + 4.50
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
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 further rating actions
as it deems necessary.
PRELIMINARY RATINGS ASSIGNED
Dryden 33 Senior Loan Fund
Replacement class Rating Amount (mil. $)
A-R AAA (sf) 630.00
B-R AA (sf) 113.00
C-R A (sf) 80.00
D-R BBB (sf) 51.00
E-R BB (sf) 44.00
Subordinated notes NR 96.70
NR--Not rated.
FLAGSHIP CREDIT 2015-1: S&P Affirms BB- Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings raised its ratings on 38 classes of notes from
nine Flagship Credit Auto Trust (FCAT) and CarFinance Capital Auto
Trust (CFCAT) series. In addition, S&P affirmed the rating on one
class of notes from FCAT 2015-1.
The rating actions reflect collateral performance to date and S&P's
expectations regarding future collateral performance, as well as
each transaction's structure and credit enhancement. Additionally,
S&P incorporated secondary credit factors, including credit
stability, payment priorities under various scenarios, and sector-
and issuer-specific analyses. Considering all these factors, S&P
believes the notes' creditworthiness remains consistent with the
raised and affirmed ratings.
In July 2016, S&P reviewed its assessment of the rating cap on the
FCAT and CFCAT transactions. S&P's conclusion was that it can now
assign ratings as high as 'AAA (sf)' to FCAT and CFCAT transactions
where there had previously been a cap of 'AA (sf)'.
Series FCAT 2013-1, FCAT 2013-2, FCAT 2014-1, and FCAT 2014-2 are
performing better than S&P had initially expected. As a result,
S&P lowered its loss expectation because of lower-than-expected
default frequencies and S&P's view of future collateral
performance. For FCAT 2015-1, the performance appears to be in
line with S&P's initial expectation, and S&P is maintaining its
original expected loss for this transaction pending further
collateral performance. CFCAT 2013-2 is CarFinance's best
performing transaction and, as a result, S&P lowered its initial
expected loss. However, S&P has observed deteriorating performance
for each subsequent transaction. CFCAT 2014-1, CFCAT 2014-2, and
CFCAT 2015-1 are performing worse than S&P had initially expected;
as a result, S&P raised its loss expectation because of
higher-than-expected default frequencies and S&P's view of future
collateral performance (see tables 1 and 2).
Table 1
Collateral Performance (%)
As of the November 2016 distribution date
Pool Current 60+ day
Series Mo. factor CNL delinq.
FCAT 2013-1 43 16.10 9.63 7.54
FCAT 2013-2 37 24.58 8.87 7.19
FCAT 2014-1 31 34.46 7.51 6.43
FCAT 2014-2 25 45.98 6.26 5.16
FCAT 2015-1 20 56.30 5.28 5.21
CFCAT 2013-2 37 21.00 9.51 7.71
CFCAT 2014-1 32 30.01 9.56 6.59
CFCAT 2014-2 27 38.84 8.57 6.84
CFCAT 2015-1 21 50.30 7.19 6.49
Mo.--Month.
CNL--Cumulative net loss.
Delinq.—Delinquencies.
Table 2
CNL Expectations (%)
Original Revised
lifetime lifetime
Series CNL exp. CNL exp
FCAT 2013-1 12.80-13.30 10.75-11.25
FCAT 2013-2 12.50-13.00 11.25-11.75
FCAT 2014-1 12.75-13.25 11.50-12.00
FCAT 2014-2 12.50-13.00 11.75-12.25
FCAT 2015-1 12.50-13.00 12.50-13.00
CFCAT 2013-2 12.00-12.50 11.50-12.00
CFCAT 2014-1 11.00-12.00 12.75-13.25
CFCAT 2014-2 11.00-12.00 13.00-13.50
CFCAT 2015-1 11.00-12.00 13.25-13.75
CNL exp.--Cumulative net loss expectations.
Each transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. Each also has
credit enhancement in the form of a nonamortizing reserve account,
overcollateralization (O/C), subordination for the higher-rated
tranches, and excess spread. Each transaction's reserve amount and
O/C are at the specified target or floor.
In addition, since the transactions closed, the credit support for
each series has increased as a percentage of the amortizing pool
balance. Each transaction was structured with a nonamortizing
reserve account, O/C, and subordination. The raised and affirmed
ratings reflect S&P's view that the total credit support as a
percentage of the amortizing pool balance, compared with S&P's
expected remaining losses, is commensurate with each raised or
affirmed rating.
Table 3
Hard Credit Support (%)
As of the November 2016 distribution date
Total hard Current total hard
credit support credit support
Series Class at issuance(i) (% of current)(i)
FCAT 2013-1 C 9.58 55.60
FCAT 2013-1 D 4.00 20.92
FCAT 2013-2 A 24.79 100.18
FCAT 2013-2 B 17.95 72.34
FCAT 2013-2 C 9.13 36.50
FCAT 2013-2 D 4.25 16.63
FCAT 2014-1 A 30.76 90.97
FCAT 2014-1 B 18.82 56.32
FCAT 2014-1 C 10.07 30.92
FCAT 2014-1 D 6.73 21.21
FCAT 2014-1 E 4.00 13.30
FCAT 2014-2 A 29.75 69.13
FCAT 2014-2 B 18.25 43.73
FCAT 2014-2 C 8.75 22.75
FCAT 2014-2 D 5.00 14.47
FCAT 2014-2 E 3.50 11.17
FCAT 2015-1 A 29.75 56.93
FCAT 2015-1 B 18.25 36.50
FCAT 2015-1 C 8.75 19.62
FCAT 2015-1 D 5.00 12.96
FCAT 2015-1 E 3.50 10.30
CFCAT 2013-2 B 17.50 80.82
CFCAT 2013-2 C 11.50 52.24
CFCAT 2013-2 D 8.00 35.58
CFCAT 2013-2 E 4.00 16.53
CFCAT 2014-1 B 16.00 53.65
CFCAT 2014-1 C 10.45 35.16
CFCAT 2014-1 D 6.25 21.16
CFCAT 2014-1 E 4.00 13.66
CFCAT 2014-2 A 19.99 54.65
CFCAT 2014-2 B 13.49 37.91
CFCAT 2014-2 C 9.49 27.61
CFCAT 2014-2 D 6.24 19.24
CFCAT 2014-2 E 3.49 12.15
CFCAT 2015-1 A 20.00 43.77
CFCAT 2015-1 B 13.50 30.85
CFCAT 2015-1 C 9.50 22.90
CFCAT 2015-1 D 6.25 16.44
CFCAT 2015-1 E 3.50 10.98
(i)Calculated as a percentage of the total gross receivable pool
balance, consisting of a reserve account, overcollateralization,
and, if applicable, subordination.
S&P incorporated a cash flow analysis to assess the loss coverage
level, giving credit to excess spread. S&P's various cash flow
scenarios included forward-looking assumptions on recoveries,
timing of losses, and voluntary absolute prepayment speeds that S&P
believes are appropriate given each transaction's performance to
date.
Aside from S&P's break-even cash flow analysis, it also conducted
sensitivity analyses for these series to determine the impact that
a moderate ('BBB') stress scenario would have on S&P's ratings if
losses began trending higher than S&P's revised base-case loss
expectation. In S&P's view, the results demonstrated that all of
the classes have adequate credit enhancement at the raised or
affirmed rating levels.
S&P will continue to monitor the performance of all of the
outstanding transactions to ensure that the credit enhancement
remains sufficient, in S&P's view, to cover its cumulative net loss
expectations under our stress scenarios for each of the rated
classes.
RATINGS RAISED
Flagship Credit Auto Trust
Rating
Series Class To From
2013-1 C AAA (Sf) A+ (sf)
2013-1 D A+ (sf) BB (sf)
2013-2 A AAA (Sf) AA (sf)
2013-2 B AAA (Sf) AA- (sf)
2013-2 C AA+ (sf) BBB (sf)
2013-2 D BBB+ (sf) BB (sf)
2014-1 A AAA (Sf) AA (sf)
2014-1 B AAA (Sf) A+ (sf)
2014-1 C A+ (sf) BBB (sf)
2014-1 D BBB+ (sf) BB+ (sf)
2014-1 E BBB- (sf BB- (sf)
2014-2 A AAA (Sf) AA (sf)
2014-2 B AAA (Sf) A (sf)
2014-2 C A- (sf) BBB (sf)
2014-2 D BBB (sf) BB (sf)
2014-2 E BB+ (sf) BB- (sf)
2015-1 A AAA (sf) AA (sf)
2015-1 B AA (sf) A (sf)
2015-1 C BBB+ (sf) BBB (sf)
2015-1 D BBB- (sf) BB (sf)
CarFinance Capital Auto Trust
Rating
Series Class To From
2013-2 B AAA (Sf) AA (sf)
2013-2 C AAA (Sf) A- (sf)
2013-2 D AA (sf) BB+ (sf)
2013-2 E BBB (sf) B (sf)
2014-1 B AAA (Sf) AA- (sf)
2014-1 C AA (sf) A- (sf)
2014-1 D A- (sf) BB (sf)
2014-1 E BBB (sf) BB- (sf)
2014-2 A AAA (Sf) AA (sf)
2014-2 B AA+ (sf) A (sf)
2014-2 C A+ (sf) BBB+ (sf)
2014-2 D BBB+ (sf) BB+ (sf)
2014-2 E BBB- (sf) BB- (sf)
2015-1 A AAA (Sf) A+ (sf)
2015-1 B AA- (sf) A- (sf)
2015-1 C A (sf) BBB (sf)
2015-1 D BBB+ (sf) BB (sf)
2015-1 E BB (sf) BB- (sf)
RATING AFFIRMED
Flagship Credit Auto Trust
Series Class Rating
2015-1 E BB- (sf)
FLATIRON CLO 2007-1: Moody's Affirms Ba3 Rating on Class E Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Flatiron CLO 2007-1 Ltd.:
$14,000,000 Class C Deferrable Mezzanine Term Notes Due 2021,
Upgraded to Aa2 (sf); previously on Dec. 23, 2015, Upgraded to
A2 (sf)
$15,000,000 Class D Deferrable Mezzanine Term Notes Due 2021,
Upgraded to Baa2 (sf); previously on Dec. 23, 2015, Upgraded to
Baa3 (sf)
Moody's also affirmed the ratings on these notes:
$228,600,000 Class A-1a Senior Term Notes Due 2021 (current
outstanding balance of $59,370,067), Affirmed Aaa (sf);
previously on December 23, 2015 Affirmed Aaa (sf)
$25,400,000 Class A-1b Senior Term Notes Due 2021, Affirmed
Aaa (sf); previously on Dec. 23, 2015, Affirmed Aaa (sf)
$29,000,000 Class B Senior Term Notes Due 2021, Affirmed
Aaa (sf); previously on Dec. 23, 2015, Upgraded to Aaa (sf)
$11,500,000 Class E Deferrable Junior Term Notes Due 2021,
Affirmed Ba3 (sf); previously on Dec. 23, 2015, Affirmed
Ba3 (sf)
Flatiron CLO 2007-1 Ltd., issued in August 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans. The transaction's reinvestment period ended
in October 2014.
RATINGS RATIONALE
These rating actions are primarily a result of recent deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since December 2015. The Class
A-1a notes have been paid down by approximately 59.9% or $88.5
million since that time. Based on Moody's calculations, the OC
ratios for the Class A/B (or Senior Par Coverage Test), Class C and
Class D notes are reported at 145.31%, 129.39%, and 115.8%,
respectively, versus December 2015 levels of 125.86%, 117.71%, and
110.08%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since December 2015. Based on Moody's calculations, the weighted
average rating factor is currently 2821 compared to 2520 in
December 2015.
The rating actions also reflect the correction of a prior error. In
the December 2015 rating action, Moody's incorrectly modeled the
amount of notes' interest payable from the principal waterfall.
This error has now been corrected, and today's rating actions
reflect this change.
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
October 2016.
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) 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% (2257)
Class A-1a: 0
Class A-1b: 0
Class B: 0
Class C: +2
Class D: +2
Class E: +1
Moody's Adjusted WARF + 20% (3385)
Class A-1a: 0
Class A-1b: 0
Class B: 0
Class C: -2
Class D: -2
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the collateral pool as having a performing
par and principal proceeds balance of $163.7 million, defaulted par
of $4.3 million, a weighted average default probability of 17.68%
(implying a WARF of 2821), a weighted average recovery rate upon
default of 50.23%, a diversity score of 42 and a weighted average
spread of 3.18% (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. Include this language when deal has
exposure to SF assets: 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.
FORTRESS CREDIT V: S&P Affirms BB Rating on Class F Notes
---------------------------------------------------------
S&P Global Ratings raised its ratings on the class A-2, B, and C
notes and affirmed its ratings on the class A-1F, A-1R, A-1T, D, E,
and F notes from Fortress Credit Opportunities V CLO Ltd., a U.S.
middle-market collateralized loan obligation (CLO) transaction that
closed in October 2014 and is managed by Fortress Investment Group
LLC.
The rating actions follow S&P's review of the transaction's
performance, which used data from the Sept. 27, 2016, trustee
report. The transaction is scheduled to remain in its reinvestment
period until Oct. 15, 2018. The review also takes into account the
updated recovery rate tables in S&P's Corporate Cash Flow and
Synthetic Criteria.
The upgrades primarily reflect a substantial level of credit
support as well as seasoning of the underlying collateral.
The transaction has benefited from collateral seasoning, with the
reported weighted average life decreasing to 3.43 years from 3.89
years in January 2015. This seasoning has decreased the overall
credit risk profile, which, in turn, provided more cushion to the
tranche ratings.
Although S&P's cash flow analysis indicated higher ratings for the
class B, C, D, E, and F notes, its rating actions factored in
additional sensitivity runs that considered the exposure to
specific distressed industries and the relative credit quality
migration since S&P's effective date affirmations, and which also
allowed for volatility in the underlying portfolio given that the
transaction is still in its reinvestment period.
The affirmations of the ratings on the class A-1F, A-1R, A-1T, D,
E, and F notes reflect S&P's belief that the credit support
available is commensurate with the current rating levels.
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 S&P
deems necessary.
RATINGS RAISED
Fortress Credit Opportunities V CLO Ltd.
Rating
Class To From
A-2 AAA (sf) AA+ (sf)
B AA+ (sf) AA (sf)
C A+ (sf) A (sf)
RATINGS AFFIRMED
Fortress Credit Opportunities V CLO Ltd.
Class Rating
A-1F AAA (sf)
A-1R AAA (sf)
A-1T AAA (sf)
D BBB (sf)
E BBB- (sf)
F BB (sf)
FREDDIE MAC 2016-SC02: Moody's Assigns Ba2 Rating on Cl. M-2 Debt
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to two
classes of residential mortgage-backed securities (RMBS) issued by
Freddie Mac Whole Loan Securities Trust, Series 2016-SC02 (FWLS
2016-SC02). The ratings range from Baa1 (sf) to Ba2 (sf). The
certificates are backed by two pools of fixed-rate super conforming
prime residential mortgage loans. The collateral pools consist of
loans acquired by Freddie Mac from four sellers (Fremont Bank
(37.0%), Caliber Home Loans (28.9%), Wells Fargo (20.0%), and
Quicken Loans (14.2%) pursuant to the terms of the Freddie Mac
Single-Family Seller/Servicer Guide. Freddie Mac will serve in a
number of capacities with respect to the Trust. Freddie Mac will
be the Guarantor of the Senior Certificates, Seller, Master
Servicer, Master Document Custodian and Trustee.
The complete rating actions are:
Issuer: Freddie Mac Whole Loan Securities, Series 2016-SC02
Cl. M-1, Definitive Rating Assigned Baa1 (sf)
Cl. M-2, Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss on pool 1 average 0.45% in a base-case
scenario and reach 6.05% at a stress level consistent with Aaa
rating on the senior classes. Moody's expected losses on pool 2
average 0.85% in a base-case scenario and reach 11.40% at a stress
level consistent with Aaa rating on the senior classes. Moody's
aggregate expected loss on the combined collateral is 0.55%, and
reaches 7.10% at a stress level consistent with Aaa rating.
Moody's arrived at these expected losses using its MILAN model.
Moody's Aaa stress loss for pool 1 is consistent with prime jumbo
transactions we have recently rated. The lower FICO scores and
slightly higher CLTV on pool 2 contributed to the higher loss
expectations on the pool. In Moody's analysis, it considered the
observed loss severity trends on Freddie Mac loans. Moody's did
not make any adjustments related to servicers and originators'
assessment. However, Moody's decreased its base case and Aaa loss
expectation by 5% due to the strong representation and warranties
provider (Freddie Mac).
Collateral Description
The FWLS 2016-SC02 transaction is backed by a total of 866
fixed-rate super conforming prime residential mortgage loans with a
balance of $459,921,310. Pool 1 is backed by 664 loans with a
balance of $349,208,289 and pool 2 is backed by 202 loans with a
balance of $110,713,020. The collateral pools consist of loans
acquired by Freddie Mac from multiple sellers pursuant to the terms
of the Freddie Mac Single-Family Seller/Servicer Guide. The
weighted average CLTV is 71.8% for the aggregate pool, and 70.9%
and 74.5% for pool 1 and pool 2 loans respectively. The weighted
average FICO is 762 and 742 for pool 1 and pool 2 loans
respectively.
Third-Party Review(TPR)
Clayton conducted a review of credit, property valuations,
regulatory compliance (regulatory compliance was conducted only for
loans in the sample which were in states with assignee liability
laws and or regulations) and data accuracy checks for 222 mortgage
loans (from an initial pool of 885 loans). Moody's reviewed the
TPR reports and there were no exceptions for credit, property
valuations, and regulatory compliance. The data accuracy
exceptions were minor and did not pose a material risk.
Representations & Warranties (R&Ws)
Freddie Mac will make certain representations and warranties with
respect to the mortgage loans and will be the only party from which
the trust may seek repurchase of a mortgage loan as a result of any
material breach that provides for repurchase as a remedy. Freddie
Mac's Aaa senior ratings are underpinned by strong government
support. Moody's believes that the US Government will stand behind
obligations of the government-sponsored enterprises (GSEs). The
loan-level R&Ws are strong and, in general, meet the baseline set
of credit-neutral R&Ws we have identified for US RMBS.
Structural considerations
The securitization has a two-pool 'Y' structure that distributes
principal on a pro rata basis between the senior and subordinate
classes subject to performance triggers, and sequentially amongst
the subordinate certificates. The transaction has two distinct
features: recoupment of unpaid interest on stop advance loans and
shifting certain principal payments, subject to limits, to cover
interest shortfalls to the rated subordinate bonds due to interest
rate modifications and extra-ordinary expenses.
In this transaction, Freddie Mac will stop advancing principal and
interest on any real-estate owned (REO) property or loans that are
180 days or more delinquent. This will decrease the amount of
interest remitted to the trust and could result in interest
shortfalls to the bonds. However, interest accrued but not paid on
the stop advance loans will be recovered from the liquidation
proceeds (for liquidated loans), borrower payments, modification or
repurchases and added to the interest remittance amount. This will
result in subsequent recoveries of any interest shortfalls on
subordinates bonds in the order of their payment priority.
Also, in this transaction, the certificates are exposed to interest
shortfalls due to interest rate modifications and extra-ordinary
expenses. If the interest accrued on the class B certificate is
insufficient to absorb the reduction in interest amount caused by
modification and extra-ordinary expenses, and to the extent that
the class B certificate is outstanding, the transaction allows for
certain principal payments (up to subordinate percentage of
scheduled principal) to be re-directed to cover interest shortfall
to the rated bonds, with a corresponding write-down of Class B
principal balance. As a result, before Classes M-1 or M-2 suffer
any unrecoverable interest shortfall, the Class B certificate
balance has to be reduced to zero. The Class B certificate
represents 1% of the collateral.
Factors that would lead to an upgrade or downgrade of the ratings:
Downgrade
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
Upgrade
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
GALAXY XIV: S&P Assigns BB Rating on Class E-R Notes
----------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Galaxy XIV CLO Ltd., a
collateralized loan obligation (CLO) originally issued in 2012 that
is managed by PineBridge Investments LLC. S&P withdrew its ratings
on the transaction's original class A, B, C-1, C-2, D, and E notes
after they were fully redeemed.
On the Nov. 15, 2016, refinancing date, the proceeds from the
issuance of the replacement notes were used to redeem the original
notes. Therefore, S&P withdrew the ratings on the original notes
and are assigning ratings to the replacement notes.
The replacement notes are being issued via an amended indenture,
which, in addition to outlining the terms of the replacement notes,
will also:
-- Apply S&P Global Ratings' latest criteria, industry codes,
and recoveries;
-- Extend the end of the reinvestment period and stated
maturity of the notes by two years and non-call period by
1.5 years; and
-- Make the deal 'Volcker'-compliant.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as presented to S&P in
connection with this review, 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 or
ultimate principal, or both, 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 preliminary 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 S&P will take further rating actions
as it deems necessary.
RATINGS ASSIGNED
Galaxy XIV CLO Ltd./Galaxy XIV CLO LLC
Replacement class Rating Amount
(mil. $)
A-R AAA (sf) 318.75
B-R AA (sf) 53.25
C-R A (sf) 40.50
D-R BBB (sf) 27.50
E-R BB (sf) 22.00
Subordinated notes NR 58.00
RATINGS WITHDRAWN
Galaxy XIV CLO Ltd./Galaxy XIV CLO LLC
Rating Amount
Original class To From (mil. $)
A NR AAA (sf) 318.75
B NR AA+ (sf) 53.25
C-1 NR A (sf) 19.50
C-2 NR A (sf) 21.00
D NR BBB (sf) 27.50
E NR BB (sf) 22.00
NR--Not rated.
GALLATIN VI: Fitch Corrects Nov. 7 Ratings Release
--------------------------------------------------
Fitch Ratings issued a correction to a release published on Nov. 7,
2016 that incorrectly included the report 'Global Rating Criteria
for Single- and Multi-Name Credit-Linked Notes' (published March 8,
2016) under Applicable Criteria.
The revised statement is as follows:
Fitch Ratings has affirmed all classes of Gallatin VI 2013-2, LLC
(Gallatin VI) as follows:
-- $1,875,000 class X notes at 'AAAsf'; Outlook Stable;
-- $215,625,000 class A-1 notes at 'AAAsf'; Outlook Stable;
-- $0 class A-2 notes at 'AAAsf'; Outlook Stable;
-- $50,000,000 class A loans at 'AAAsf'; Outlook Stable;
-- $57,375,000 class B notes at 'AAsf'; Outlook Stable;
-- $19,650,000 class C notes at 'Asf'; Outlook Stable;
-- $21,250,000 class D notes at 'BBBsf'; Outlook Stable;
-- $21,250,000 class E notes at 'BBsf'; Outlook Stable.
Fitch does not rate the subordinated notes.
KEY RATING DRIVERS
The affirmations are based on the credit enhancement levels on the
transaction, the stable performance of the portfolio since the last
review in November 2015, and the cushions available in the
collateralized loan obligation's (CLO) cash flow modeling results.
Fitch's cash flow analysis indicates each class of rated notes is
passing all nine interest rate and default timing scenarios at or
above their current rating levels.
The loan portfolio par amount plus principal cash is approximately
$425.6 million, as of the Oct. 4, 2016 trustee report. The
transaction is failing the Maximum Moody's Rating Factor Test,
which must be maintained or improved through reinvestments, per the
transaction's governing documents. All other collateral quality
tests, concentration limitations, and coverage tests are in
compliance, and there are no defaulted assets in the portfolio. The
reported weighted average spread (WAS) including LIBOR floors is
4.06%, versus a minimum WAS trigger of 4.0%. The weighted average
Fitch rating of the portfolio is 'B/B-', as compared to 'B' at the
last review and closing date. Fitch currently considers 9.3% of the
collateral assets to be rated in the 'CCC' and below category
versus 3.7% at the last review, based on Fitch's Issuer Default
Rating (IDR) Equivalency Map. The percentage of the performing
portfolio considered to have strong recovery prospects or a
Fitch-assigned Recovery Rating of 'RR2' or higher has decreased to
90.4% from 94% at the last review.
The Stable Outlook on each class of notes of Gallatin VI reflects
the expectation that the notes have sufficient levels of credit
protection to withstand potential deterioration in the credit
quality of the portfolio.
RATING SENSITIVITIES
The ratings of the notes may be sensitive to the following: asset
defaults, portfolio migration, including assets being downgraded to
'CCC', portions of the portfolio being placed on Rating Watch
Negative, overcollateralization or interest coverage test breaches,
or breach of concentration limitations or portfolio quality
covenants. Fitch conducted rating sensitivity analysis on the
closing date of Gallatin VI, incorporating increased levels of
defaults and reduced levels of recovery rates, among other
sensitivities.
Initial Key Rating Drivers and Rating Sensitivity are further
described in the New Issue Report published on April 8, 2014.
Gallatin VI is an arbitrage cash flow CLO that is managed by MP
Senior Credit Partners L.P (MPSCP), with a four-year reinvestment
period ending in January 2018 and a two-year non-call period, which
ended in January 2016. During the reinvestment period,
discretionary sales are permitted at any time and are limited to
25% of the portfolio balance, as measured at the beginning of the
preceding 12-month period. The manager also has the ability to
reinvest unscheduled principal proceeds and sales proceeds from the
disposal of credit risk obligations after the reinvestment period,
subject to certain conditions.
This review was conducted under the framework described in the
report 'Global Rating Criteria for CLOs and Corporate CDOs' using
Fitch's Portfolio Credit Model (PCM) to project future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model under
various combinations of default timing and interest rate stress
scenarios, as described in the report. The cash flow model was
customized to reflect the transaction's structural features.
DUE DILIGENCE USAGE
No third-party due diligence was reviewed in relation to this
rating action.
GE COMMERCIAL 2004-C3: Moody's Hikes Class K Certs Rating to B3
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on one class and
affirmed the ratings on two classes in GE Commercial Mortgage
Corporation 2004-C3, Commercial Mortgage Pass-Through Certificates,
Series 2004-C3 as follows:
-- Cl. K, Upgraded to B3 (sf); previously on Mar 23, 2016
Affirmed C (sf)
-- Cl. L, Affirmed C (sf); previously on Mar 23, 2016 Affirmed
C (sf)
-- Cl. X-1, Affirmed Caa3 (sf); previously on Mar 23, 2016
Affirmed Caa3 (sf)
RATINGS RATIONALE
The rating on Class K was upgraded due to realized losses that were
lower than Moody's had previously expected, as well as an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 87% since Moody's last review.
The rating on Class L was affirmed because the ratings are
consistent with Moody's expected loss. Class L has already
experienced a 80% realized loss as result of previously liquidated
loans.
The rating on the IO class, Class X-1, was affirmed based on the
credit performance of its referenced classes.
Moody's rating action reflects a base expected loss of 0% of the
current balance, compared to 25.4% 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 2.9%
of the original pooled balance, compared to 3.4% 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.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model. 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 November 10, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 99.8% to $3.4
million from $1.38 billion at securitization. The certificates are
collateralized by two mortgage loans.
Seventeen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $40 million (for an average loss
severity of 23%). There are currently no loans on the watchlist or
in special servicing.
The largest loan is the Greens at Marion Ph. II & III Loan ($2.9
million -- 87% of the pool), which is secured by a 216-unit
multifamily property located 12 miles outside of Memphis, TN in
Marion, Arkansas. As of November 2016, the property was 95%
occupied, compared to 96% in December 2015. The loan has amortized
61% since securitization and has a maturity date in July 2019.
Moody's LTV and stressed DSCR are 30% and 3.11X, respectively,
compared to 34% and 2.68X 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 other remaining loan is the Moberly Manor Phase II Loan
($453,225 -- 13% of the pool), which is secured by a 72-unit
apartment complex located in Bentonville, Arkansas. As of November
2016, the property was 100% occupied, the same as in December 2015
and September 2014. The loan has amortized 75% since securitization
and has a maturity date in July 2019. Moody's LTV and stressed DSCR
are 17% and 4.00X, respectively, compared to 21% and 4.00X at the
last review.
GERMAN AMERICAN 2016-CD2: Fitch to Rate 2 Tranches 'BB-'
--------------------------------------------------------
Fitch Ratings has issued a presale report on German American
Capital Corp.'s CD 2016-CD2 mortgage trust commercial mortgage
pass-through certificates, series 2016-CD2.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $17,465,263 class A-1 'AAAsf'; Outlook Stable;
-- $69,061,053 class A-2 'AAAsf'; Outlook Stable;
-- $34,742,105 class A-SB 'AAAsf'; Outlook Stable;
-- $252,631,579 class A-3 'AAAsf'; Outlook Stable;
-- $308,873,684 class A-4 'AAAsf'; Outlook Stable;
-- $721,789,474b class X-A 'AAAsf'; Outlook Stable;
-- $39,015,789 class A-M 'AAAsf'; Outlook Stable;
-- $721,789,474c class V1-A 'AAAsf'; Outlook Stable;
-- $76,811,579ab class X-B 'AA-sf'; Outlook Stable;
-- $76,811,579 class B 'AA-sf'; Outlook Stable;
-- $76,811,579c class V1-B 'AA-sf'; Outlook Stable;
-- $42,673,684ab class X-C 'A-sf'; Outlook Stable;
-- $42,673,684 class C 'A-sf'; Outlook Stable;
-- $42,673,684c class V1-C 'A-sf'; Outlook Stable;
-- $57,304,211ab class X-D 'BBB-sf'; Outlook Stable;
-- $57,304,211a class D 'BBB-sf'; Outlook Stable;
-- $57,304,211c class V1-D 'BBB-sf'; Outlook Stable;
-- $28,043,158ab class X-E 'BB-sf'; Outlook Stable;
-- $28,043,158a class E 'BB-sf'; Outlook Stable;
-- $10,972,632ab class X-F 'B-sf'; Outlook Stable;
-- $10,972,632a class F 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest only.
(c) Exchangeable certificates
Expected ratings do not reflect final ratings and are based on
information provided by the issuer as of Nov. 11, 2016. A vertical
credit risk retention interest representing 5% of each class (as of
the closing date) is expected to be retained as part of risk
retention compliance. Fitch does not expect to rate the $37,797,120
class X-G, the $37,797,120 class G, the $76,812,910 class V1-E or
the $975,391,857 class V2.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 30 loans secured by 37
commercial properties having an aggregate principal balance of
approximately $975.4 million as of the cut-off date. The loans were
contributed to the trust by German American Capital Corporation and
Citigroup Global Markets Realty Corp.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 91.1% of the properties
by balance and cash flow analysis of 92.4% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.19x, a Fitch stressed loan-to-value (LTV) of 105.8%,
and a Fitch debt yield of 8.49%. Fitch's aggregate net cash flow
represents a variance of 12.4% to issuer cash flows.
KEY RATING DRIVERS
Fitch Leverage: The pool has leverage statistics in-line with
recent Fitch-rated multiborrower transactions. The pool's Fitch
DSCR and LTV for the trust are 1.19x and 105.8%, respectively,
while the 2016 YTD averages are 1.20x and 105.7%. Excluding
credit-opinion loans, the pool's Fitch DSCR and LTV are 1.17x and
110.7%, respectively.
Concentrated by Loan Size: The top 10 loans compose 66.9% of the
pool, which is worse than the 2015 and 2016 YTD averages of 49.3%
and 54.5%, respectively. The pool's loan concentration index (LCI)
is 563, which is above the 2016 YTD average of 418. For this
transaction, the losses estimated by Fitch's deterministic test at
'AAAsf' exceeded Fitch's base model loss estimate. Due to the
exceptionally high property quality (84.7% of the top 10 loans
received a property quality grade of 'B+' or higher) and strong
location (65.5% of the top 10 are located within the New York Metro
market), Fitch's concluded loss estimate at 'AAAsf' is 100 basis
points lower than indicated by Fitch's deterministic test.
Investment-Grade Credit-Opinion Loans: Two loans representing 11%
of the pool have investment-grade credit opinions, above the 2016
YTD average of 7.3%. 10 Hudson Yards (6.9% of the pool) received an
investment-grade credit opinion of 'BBBsf*' on a stand-alone basis.
667 Madison Avenue (4.1% of the pool) received an investment-grade
credit opinion of 'BBB-sf*' on a stand-alone basis.
Weak Amortization: Eleven loans (58.2%) are full-term interest-only
and seven loans (25.9%) are partial interest-only. Fitch-rated
transactions in 2016 YTD had an average full-term interest-only
percentage of 32.4% and a partial interest-only percentage of 36%.
Based on the scheduled balance at maturity, the pool will pay down
by only 5.5%, which is significantly below the 2016 YTD average of
10.4%.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 8.5% below
the most recent year's net operating income (NOI); for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to CD
2016-CD2 certificates and found that the transaction displays
average sensitivities to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'AAsf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'Asf' could
result. The presale report includes a detailed explanation of
additional stresses and sensitivities on page 12.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with due diligence information from Ernst &
Young LLP. The due diligence focused on a comparison and
re-computation of certain characteristics with respect to each of
the mortgage loans. Fitch considered this information in its
analysis and the findings did not have an impact on our analysis.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by accessing the appendix referenced under 'Related Research'
below. The appendix also contains a comparison of these RW&Es to
those Fitch considers typical for the asset class as detailed in
the Special Report titled 'Representations, Warranties and
Enforcement Mechanisms in Global Structured Finance Transactions,'
dated May 31, 2016.'
GLOBAL MORTGAGE 2004-A: Moody's Lowers Rating on Class B4 Debt to C
-------------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight
tranches from one transaction, backed by Prime Jumbo RMBS loans,
issued by Global Mortgage Securitization 2004-A Ltd.
Complete rating actions are:
Issuer: Global Mortgage Securitization 2004-A Ltd.
Cl. A1, Downgraded to Ba2 (sf); previously on Dec. 15, 2015,
Upgraded to Baa3 (sf)
Cl. A2, Downgraded to Ba2 (sf); previously on Dec. 15, 2015,
Upgraded to Baa3 (sf)
Cl. A3, Downgraded to Ba2 (sf); previously on Dec. 15, 2015,
Upgraded to Baa3 (sf)
Cl. B1, Downgraded to Caa1 (sf); previously on Feb. 6, 2015,
Downgraded to B1 (sf)
Cl. B2, Downgraded to Caa2 (sf); previously on June 15, 2012,
Downgraded to B3 (sf)
Cl. B3, Downgraded to Ca (sf); previously on June 15, 2012,
Downgraded to Caa3 (sf)
Cl. B4, Downgraded to C (sf); previously on June 15, 2012,
Downgraded to Ca (sf)
Cl. X-A1, Downgraded to Ba2 (sf); previously on Dec. 15, 2015,
Upgraded to Baa3 (sf)
RATINGS RATIONALE
The rating actions primarily reflect the recent performance of the
underlying pool and Moody's updated loss expectation on the pool.
The ratings downgraded are due to the erosion of enhancement
available to the bonds. The downgrades are also the result of a
correction to the pool loss projection used by Moody's in rating
this transaction. In the December 15, 2015 rating action,
incorrect delinquency data was provided by the trustee, leading to
an understated pool loss projection. The delinquency data has
since been revised, and the rating action reflects the corrected
delinquency information and associated projected pool losses.
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 4.9% in October 2016 from 5.0% in
October 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.
GO FINANCIAL 2015-2: DBRS Confirms BB(low) Rating on Class C Notes
------------------------------------------------------------------
DBRS, Inc. reviewed six ratings from two U.S. structured finance
asset-backed securities transactions. Of the outstanding publicly
rated classes reviewed, five were upgraded and one was confirmed.
For the rating that was confirmed, performance trends are such that
credit enhancement levels are sufficient to cover DBRS's expected
losses at its current rating level. For the ratings that were
upgraded, performance trends are such that credit enhancement
levels are sufficient to cover DBRS's expected losses at their new
respective rating levels.
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- The transaction parties’ capabilities with regard to
origination, underwriting and servicing.
-- The credit quality of the collateral pool and historical
performance.
Issuer: GO Financial Auto Securitization
Debt Rated Action Rating
---------- ------ ------
Series 2015-1 Notes, Class A Upgraded AAA (sf)
Series 2015-2 Notes, Class A Upgraded AA (low) (sf)
Series 2015-1 Notes, Class B Upgraded A (sf)
Series 2015-2 Notes, Class B Upgraded BBB (high) (sf)
Series 2015-1 Notes, Class C Upgraded BBB (low) (sf)
Series 2015-2 Notes, Class C Confirmed BB (low) (sf)
GREENWICH CAPITAL 2004-GG1: S&P Affirms B+ Rating on Cl. G Certs
----------------------------------------------------------------
S&P Global Ratings affirmed its ratings on two classes of
commercial mortgage pass-through certificates from Greenwich
Capital Commercial Funding Corp.'s series 2004-GG1, a U.S.
commercial mortgage-backed securities (CMBS) 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 affirmations reflect S&P's expectation that the available
credit enhancement for these classes will be within its estimate of
the necessary credit enhancement required for the current ratings.
The affirmations also reflect S&P's views regarding the current and
future performance of the transaction's collateral, the transaction
structure, and liquidity support available to the classes.
While available credit enhancement levels may suggest positive
rating movements on classes F and G, S&P's analysis also considered
the liquidity support available to these classes and their overall
exposure to the previously-specially serviced Aegon Center loan
(aggregate A note and B note balance of $103.1 million, 89.1%).
The loan is secured by a 759,650 sq.-ft. office property with an
attached parking garage located in Louisville, Ky. As of the Sept.
30, 2016, rent roll, the office component was 71.5% occupied.
TRANSACTION SUMMARY
As of the Nov. 14, 2016, trustee remittance report, the collateral
pool balance was $115.7 million, which is 4.4% of the pool balance
at issuance. The pool currently includes five loans (reflecting
the Aegon Center A and B notes as one loan), down from 125 loans at
issuance. One loan has been defeased ($0.6 million, 0.5%), one
loan ($10.5 million, 9.1%) is with the special servicer, and the
Aegon Center loan is on the master servicer's watchlist. The
master servicer, Wells Fargo Bank N.A., reported financial
information for all of the nondefeased loans in the pool, of which
99.6% was year-end 2015 data, and the remainder was partial-year
2016 data.
S&P calculated a 1.02x S&P Global Ratings' weighted average debt
service coverage (DSC) and 108.9% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using a 7.51% S&P Global Ratings'
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the specially serviced
asset, the defeased loan, and the Aegon Center B note
($21.1 million, 18.2%).
To date, the transaction has experienced $78.6 million in principal
losses, or 3.0% of the original pool trust balance. S&P expects
losses to reach approximately 3.1% 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
specially serviced asset.
CREDIT CONSIDERATIONS
As of the Nov. 14, 2016, trustee remittance report, the 510
Glenwood Avenue loan ($10.5 million, 9.1%) was with the special
servicer, CWCapital Asset Management LLC. The loan has a reported
total exposure of $10.9 million and is secured by a 67,369-sq.-ft.
office building in Raleigh, N.C. The loan was transferred to the
special servicer on Oct. 5, 2011, due to monetary default and has
been deemed non-recoverable by the master servicer. Based on the
special servicer's comments, the trust has agreed to a
$13.9 million payoff that is expected to occur by January 2017.
Based on the July 2016 property inspection report provided by the
servicer, the property is 100% occupied. The reported DSC as of
year-end 2015 is 0.66x. S&P expects a minimal loss (less than 25%)
upon the eventual resolution of this loan.
RATINGS LIST
Greenwich Capital Commercial Funding Corp.
Commercial mortgage pass-through certificates series 2004-GG1
Rating
Class Identifier To From
F 396789FY0 BBB+ (sf) BBB+ (sf)
G 396789FZ7 B+ (sf) B+ (sf)
GSR MORTGAGE 2007-2F: Moody's Hikes Cl. 1A-1 Debt Rating to Caa1
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches backed by Prime Jumbo RMBS loans, issued by miscellaneous
issuers.
Complete rating actions are:
Issuer: GSR Mortgage Loan Trust 2007-2F
Cl. 1A-1, Upgraded to Caa1 (sf); previously on Aug. 3, 2012,
Downgraded to Caa2 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2006-10 Trust
Cl. A-14, Upgraded to Baa2 (sf); previously on Jan. 14, 2016,
Upgraded to Ba2 (sf)
Cl. A-15, Upgraded to Baa2 (sf); previously on April 12, 2010,
Downgraded to B2 (sf)
RATINGS RATIONALE
The upgrade action on GSR Mortgage Loan Trust 2007-2F Class 1A-1 is
primarily due to the fact that an exchangeable component of this
bond, super senior support tranche Class 1A-5, was written off; the
remaining component bonds are currently rated Caa1 and thus Class
1A-1 should carry the same rating. The upgrade action on Class
A-14 of Wells Fargo Mortgage Backed Securities 2006-10 Trust is
primarily due to the strong credit enhancement compared to the
level of future projected losses on this bond. The Class A-14 is a
super senior tranche supported by the Class A-23. The upgrade of
Class A-15 of Wells Fargo Mortgage Backed Securities 2006-10 Trust
is primarily due to today's upgrade of the Class A-14 in the same
transaction. Class A-15 is an interest-only (IO) bond linked to
Class A-14; under Moody's methodology, this IO bond should
therefore carry the same rating as the referenced bond.
The upgrade of Class A-15 of Wells Fargo Mortgage Backed Securities
2006-10 Trust also reflects the correction of an error. The rating
on Class A-14, the referenced bond for the Class A-15 IO bond, was
upgraded on Jan. 14, 2016; however, the rating on Class A-15 was
not changed accordingly. This has been corrected, and today's
rating action reflects this change.
The actions reflect the recent performance of the underlying pools
and Moody's updated loss expectation on these pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
The methodology used in rating the interest-only securities was
"Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in October 2015.
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 4.9% in October 2016 from 5.0% in
October 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.
GSRPM MORTGAGE 2006-1: Moody's Raises Rating on Cl. M-1 Debt to B1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches issued from GSRPM 2006-1, a transaction backed by "scratch
and dent" RMBS loans.
Complete rating actions are:
Issuer: GSRPM Mortgage Loan Trust 2006-1
Cl. A-1, Upgraded to Aa3 (sf); previously on Jan. 15, 2016,
Upgraded to A1 (sf)
Cl. A-3, Upgraded to A1 (sf); previously on Jan. 15, 2016,
Upgraded to A2 (sf)
Cl. M-1, Upgraded to B1 (sf); previously on Jan. 15, 2016,
Upgraded to B3 (sf)
RATINGS RATIONALE
The ratings upgraded are a result of an increase in credit
enhancement available to the bonds. The actions reflect the recent
performance of the underlying pool and Moody's updated loss
expectation on the pool.
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 4.9% in October 2016 from 5.0% in
October 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.
HEMPSTEAD CLO: Fitch Affirms 'BBsf' Rating on Class D Notes
-----------------------------------------------------------
Fitch Ratings has affirmed all classes of Hempstead CLO LP as
follows:
-- $383,500,000 class A-1 notes at 'AAAsf'; Outlook Stable;
-- $47,320,000 class A-2 notes at 'AAsf'; Outlook Stable;
-- $69,500,000 class B notes at 'Asf'; Outlook Stable;
-- $31,100,000 class C notes at 'BBB-sf'; Outlook Stable;
-- $26,700,000 class D notes at 'BBsf'; Outlook Stable.
Fitch does not rate the income notes.
KEY RATING DRIVERS
The affirmations are based on the credit enhancement levels on the
transaction the stable performance of the portfolio since the last
review in November 2015 and the cushions available in the
collateralized loan obligation's (CLO) cash flow modeling results.
Fitch's cash flow analysis indicates each class of rated notes is
passing all nine interest rate and default timing scenarios at or
above their current rating levels.
The loan portfolio par amount plus principal cash is approximately
$658.7 million, as of the Oct. 5, 2016 trustee report. All
collateral quality tests, concentration limitations, and coverage
tests are in compliance. The portfolio includes one defaulted
assets at 0.2% of the portfolio balance (excluding principal cash).
The reported weighted average spread (WAS) including LIBOR floors
is 4.3%, versus a minimum WAS trigger of 4.2%. The weighted average
Fitch rating of the portfolio remains in the 'B/B-' range since
last quarter and closing date. Fitch currently considers 8% of the
performing collateral assets to be rated in the 'CCC' and below
category, based on Fitch's Issuer Default Rating (IDR) Equivalency
Map. The portfolio is invested in 98.1% senior secured loans and
1.9% second lien loans. The percentage of the performing portfolio
considered to have strong recovery prospects or a Fitch-assigned
Recovery Rating of 'RR2' or higher has decreased to 89.1% from
90.7% at the last review.
The Stable Outlook on each class of notes of Hempstead CLO reflects
the expectation that the notes have sufficient levels of credit
protection to withstand potential deterioration in the credit
quality of the portfolio.
RATING SENSITIVITIES
The ratings of the notes may be sensitive to the following: asset
defaults, portfolio migration, including assets being downgraded to
'CCC', portions of the portfolio being placed on Rating Watch
Negative, overcollateralization or interest coverage test breaches,
or breach of concentration limitations or portfolio quality
covenants. Fitch conducted rating sensitivity analysis on the
closing date of Hempstead, incorporating increased levels of
defaults and reduced levels of recovery rates, among other
sensitivities.
Initial Key Rating Drivers and Rating Sensitivity are further
described in Fitch's press release published Dec. 26, 2013.
Hempstead CLO is an arbitrage cash flow collateralized loan
obligation (CLO) that is managed by Guggenheim Partners Investment
Management, LLC (GPIM). The transaction remains in its reinvestment
period, which is scheduled to end in January 2018.
This review was conducted under the framework described in the
report 'Global Rating Criteria for CLOs and Corporate CDOs' using
Fitch's Portfolio Credit Model (PCM) to project future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model under
various combinations of default timing and interest rate stress
scenarios, as described in the report. The cash flow model was
customized to reflect the transaction's structural features.
HILTON USA 2016-SFP: Moody's Assigns B3 Rating on Class F Certs
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to eight
classes of CMBS securities, issued by Hilton USA Trust 2016-SFP,
Commercial Mortgage Pass-Through Certificates, Series 2016-SFP:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. X-CP*, Definitive Rating Assigned A2 (sf)
Cl. X-E*, Definitive Rating Assigned B3 (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B3 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The Certificates are collateralized by a single loan backed by a
first lien commercial mortgage secured by two adjacent full-service
hotels, the Hilton San Francisco Union Square (Hilton Union Square)
and the Hilton Parc 55 San Francisco (Parc 55 and collectively the
Properties). The ratings are based on the collateral and the
structure of the transaction.
The Hilton Union Square is a full-service hotel originally
constructed in 1964 and features four interconnected buildings,
known as Tower 1, 2, and 3 and the Plaza Building. The Hilton
Union Square is one of the largest hotels on the West Coast of the
United States with 1,919 rooms and occupies an entire city block.
The property offers approximately 130,000 SF of meeting space, a
16th floor swimming pool, fitness center, business center with
on-site Federal Express office, 505 parking spaces, two food &
beverage outlets and substantial banquet and catering operations.
The food and beverage outlets include the 250-seat Urban Tavern, a
full-service restaurant that also has a private dining option, Herb
N' Kitchen, a grab-and-go market located in the lobby, the spacious
lobby lounge, and the 46th floor lounge known as CityScape. The
Property's 130,000 SF of meeting space includes three ballrooms,
one of which, at nearly 30,000 SF, occupies an entire floor of the
Property. Hilton Union Square has the most meeting space of any
hotel in the market. As of Aug. 31, 2016, the Hilton Union Square
reported 88.4% occupancy with a $260.04 ADR resulting in a $229.82
RevPAR.
The Parc 55 is a full-service hotel originally constructed in 1984,
is located adjacent to the Hilton Union Square and was acquired by
Hilton from Blackstone in February 2015. Parc 55 provides 1,024
rooms occupying almost an entire city block, and offers
approximately 27,565 SF of meeting space, fitness center, business
center with on-site Federal Express office, a leased parking garage
and three food & beverage options. The food and beverage outlets
include the 208-seat Cable 55 Restaurant & Lounge, a three meal
restaurant offering classic American dishes, Kin Khao, a Michelin
Star rated restaurant serving Thai food, and Barbary Coast, a
coffee shop that serves breakfast and lunch. As of Aug. 31, 2016,
the Parc 55 reported 88.3% occupancy with a $253.61 ADR resulting
in a $223.99 RevPAR.
The adjacent Properties are located in San Francisco CBD,
approximately one block southwest of Union Square and one block
north of Market Street. The Properties are within walking distance
to Union Square, Nob Hill, Chinatown, the Theater District, the
Powell-Mason Cable Car line as well as numerous high-end department
stores and retail shops. The Properties are approximately one half
mile from Moscone Convention Center, a three-building conference
venue covering more than 20 acres and offering over 700,000 SF of
exhibit space.
Moody's approach to rating this transaction involved the
application of both our Large Loan and Single Asset/Single Borrower
CMBS methodology and our IO Rating methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also considers a range of qualitative issues as well as the
transaction's structural and legal aspects.
The credit risk of commercial real estate loans is determined
primarily by two factors: 1) the probability of default, which is
largely driven by the DSCR, and 2) and the severity of loss in the
event of default, which is largely driven by the LTV of the
underlying loan.
The first mortgage balance of $725,000,000 represents a Moody's LTV
of 106.5%. The Moody's First Mortgage Actual DSCR is 2.28X and
Moody's First Mortgage Actual Stressed DSCR is 1.01X.
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
Moody's review incorporated the use of the excel-based Large Loan
Model, which it uses for single borrower and large loan
multi-borrower transactions. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from our Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, and property type. These aggregated proceeds are then
further adjusted for any pooling benefits associated with loan
level diversity, other concentrations and correlations.
Moody's analysis also uses the CMBS IO calculator which references
the following inputs to calculate the proposed IO rating based on
the published methodology: original and current bond ratings and
credit estimates; original and current bond balances grossed up for
losses for all bonds the IO(s) reference(s) within the transaction;
and IO type corresponding to an IO type as defined in the published
methodology.
Moody's Parameter Sensitivities: If Moody's value of the collateral
used in determining the initial rating were decreased by 5.0%,
14.3%, and 22.7%, the model-indicated rating for the currently
rated Aaa (sf) classes would be Aa1 (sf), Aa2 (sf), and A2 (sf),
respectively. Parameter Sensitivities are not intended to measure
how the rating of the security might migrate over time; rather they
are designed to provide a quantitative calculation of how the
initial rating might change if key input parameters used in the
initial rating process differed. The analysis assumes that the
deal has not aged. Parameter Sensitivities only reflect the
ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be
assigned in each case could vary from the information presented in
the Parameter Sensitivity analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating to
the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed and
may have a significant effect on yield to investors.
The ratings do not represent any assessment of (i) the likelihood
or frequency of prepayment on the mortgage loans, (ii) the
allocation of net aggregate prepayment interest shortfalls, (iii)
whether or to what extent prepayment premiums might be received, or
(iv) in the case of any class of interest-only certificates, the
likelihood that the holders thereof might not fully recover their
investment in the event of a rapid rate of prepayment of the
mortgage loans.
INWOOD PARK: S&P Raises Rating on Class E Notes to BB+
------------------------------------------------------
S&P Global Ratings raised its ratings on the class C, D, and E
notes from Inwood Park CDO Ltd. S&P also removed the ratings on
the class C and D notes from CreditWatch, where it placed them with
positive implications on Aug. 22, 2016. At the same time, S&P
affirmed its ratings on the class A-1B, A-2, and B notes from the
same transaction.
The rating actions follow S&P's review of the transaction's
performance using data from the Oct. 11, 2016, trustee report.
The upgrades reflect the improved credit support at the prior
rating levels due to large paydowns on the senior notes. The
affirmations reflect S&P's view that the credit support available
is commensurate with the current rating levels.
The upgrades reflect the transaction's $389.27 million in
collective paydowns to the class A-1A, A-1B, and A-2 notes since
our October 2014 rating actions. In this transaction, the class
A-1 notes receive payments pro rata with the class A-2 notes.
However, within the class A-1 notes, the class A-1A and A-1B notes
are paid sequentially. As a result, the class A-1A notes have paid
down in full since S&P's last rating action, while the class A-1B
and A-2 notes now have 11.60% and 2.32%, respectively, of their
original outstanding balances remaining. With the exception of the
class E overcollateralization (O/C) ratio, these paydowns generally
resulted in improved reported O/C ratios since the September 2014
trustee report, which S&P used for its previous rating actions:
-- The class A/B O/C ratio improved to 195.70% from 143.50%.
-- The class C O/C ratio improved to 146.37% from 126.16%.
-- The class D O/C ratio improved to 123.69% from 115.98%.
-- The class E O/C ratio decreased to 107.10% from 107.31%.
The collateral portfolio's credit quality has deteriorated slightly
since S&P's last rating actions, as evidenced through an increase
in low-rated collateral. Collateral obligations with ratings in
the 'CCC' category have increased, with $23.17 million reported as
of the October 2016 trustee report, compared with $16.79 million
reported as of the September 2014 trustee report. Over the same
period, the par amount of defaulted collateral has increased to
$9.51 million from $0.62 million. However, 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 underlying collateral's seasoning,
with 2.87 years reported as of the October 2016 trustee report
compared with 4.13 years reported at the time of our 2014 rating
actions.
On a standalone basis, the results of the cash flow analysis
indicated a higher rating on the class E notes than the rating
action suggests. However, because the transaction currently has
some exposure to 'CCC' rated collateral obligations, long-dated
assets (i.e., assets that mature after the CLO's stated maturity),
and loans from companies in the energy and commodities sectors,
which have come under significant pressure from falling oil and
commodity prices in the past year, S&P limited the upgrade on this
class to offset future potential credit migration in the underlying
collateral.
As of the October 2016 trustee report, the balance of collateral
with a maturity date after the transaction's stated maturity
totaled $15.69 million and represented 3.92% of the portfolio. A
CLO concentrated in long-dated assets could be exposed to market
value risk at maturity because the collateral manager may have to
sell long-dated assets for less than par to repay the CLO's
subordinate rated notes when they mature. S&P's analysis took into
account the potential market value and/or settlement related risk
arising from the potential liquidation of the remaining securities
on the transaction's legal final maturity.
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 S&P
deems necessary.
RATING AND CREDITWATCH ACTIONS
Inwood Park CDO Ltd.
Rating
Class To From
C AAA (sf) AA+ (sf)/Watch Pos
D AAA (sf) BBB+ (sf)/Watch Pos
E BB+ (sf) BB (sf)
RATINGS AFFIRMED
Inwood Park CDO Ltd.
Class Rating
A-1B AAA (sf)
A-2 AAA (sf)
B AAA (sf)
JP MORGAN 2004-C1: Moody's Raises Rating on Class M Certs to Ba2
----------------------------------------------------------------
Moody's Investors Service has upgrade the ratings on four classes
and affirmed the ratings on three classes in J.P. Morgan Chase
Commercial Mortgage Securities Trust, Commercial Pass-Through
Certificates, Series 2004-C1 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 Aa3 (sf)
Cl. L, Upgraded to A2 (sf); previously on Feb. 11, 2016,
Upgraded to Baa3 (sf)
Cl. M, Upgraded to Ba2 (sf); previously on Feb. 11, 2016,
Upgraded to B2 (sf)
Cl. N, Upgraded to B3 (sf); previously on Feb. 11, 2016,
Upgraded to Caa2 (sf)
Cl. P, Affirmed C (sf); previously on Feb. 11, 2016, Affirmed
C (sf)
Cl. X-1, Affirmed Caa2 (sf); previously on Feb. 11, 2016,
Downgraded to Caa2 (sf)
RATINGS RATIONALE
The ratings on four P&I classes, Classes K, L, M, and N, were
upgraded based primarily on an increase in credit support resulting
from loan paydowns and amortization as well as an increase in
defeasance. The deal has paid down 7.2% since Moody's last review
and defeasance comprises approximately 25% of the pool.
The rating on Class J 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 the Class P was affirmed because the ratings are consistent with
Moody's expected loss.
The rating on the IO class, Class X-1, was affirmed based on the
credit performance (or the weighted average rating factor) of the
referenced classes.
Moody's rating action reflects a base expected loss of 14.3% of the
current balance, compared to 12.1% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.5% of the original
pooled balance, unchanged from 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 7, compared to 8 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 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 Nov. 15, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 98% to
$23.9 million from $1.042 billion at securitization. The
certificates are collateralized by 14 mortgage loans ranging in
size from less than 1% to over 17% of the pool, with the top ten
loans (excluding defeasance) constituting 75.5% of the pool. Four
loans, constituting 24.5% of the pool, have defeased and are
secured by US government securities.
Five loans have been liquidated with a loss from the pool,
resulting in an aggregate realized loss of $12.6 million (for an
average loss severity of 43%). Two loans, constituting 22.5% of
the pool, are currently in special servicing. The largest
specially serviced loan is the Square Lake Park Office Building
($3.5 million -- 15.0% of the pool), which is secured by a 40,563
square foot (SF) office building located in Bloomfield Hills,
Michigan. The loan transferred to special servicing in November
2013 for maturity default and the asset became REO in September
2014. As of September 2016, the property was 95% leased. This
asset has been deemed non-recoverable by the special servicer.
Moody's estimates an aggregate $3.4 million loss for the specially
serviced loans (63% expected loss on average).
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 100% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 50%. 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 17.5% 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 1.22X and 2.37X,
respectively. 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 37% of the pool balance. The
largest loan is the McKinleyville Apartments Loan
($4.2 million -- 17.7% of the pool), which is secured by a 164-unit
multifamily apartment complex located in McKinleyville, California.
As of September 2016, the property was 98% leased, compared to
100% in September 2015. Performance has recently improved due to
revenue outpacing expense growth. Moody's LTV and stressed DSCR
are 52% and 1.77X, respectively, compared to 54% and 1.70X at the
last review.
The second largest loan is the Centennial Valley II Apartments Loan
($3.05 million -- 12.8% of the pool), which is secured by a
144-unit multifamily property located in Conway, Arkansas. As of
June 2016, the property was 99% leased, compared to 97% in December
2015. Performance has declined slightly since 2013 due to an
increase in expenses while revenue has remained roughly flat.
Moody's LTV and stressed DSCR are 62% and 1.48X, respectively,
compared to 63% and 1.47X at the last review.
The third largest loan is the Eureka Office Loan ($1.6 million --
6.7% of the pool), which is secured by which is secured by a 34,090
SF suburban office property built in 1917 and renovated in 2003.
As of June 2016, the property was 100% leased, unchanged since
2014. The loan is fully amortizing and has amortized 48% since
securitization. There is significant lease rollover risk in 2018,
as the top three tenant leases (approximately 90% of the net
rentable area) expire. Moody's analysis incorporates this risk.
The loan matures in December 2023 and Moody's LTV and stressed DSCR
are 38% and 2.69X, respectively.
JP MORGAN 2005-LDP1: Fitch Hikes Class G Notes Rating to 'BBsf'
---------------------------------------------------------------
Fitch Ratings has upgraded two classes, downgraded one and affirmed
six defaulted classes of JP Morgan Chase Commercial Mortgage
Securities Corp. series 2005-LDP1 (JPMCCM 2005-LDP1) commercial
mortgage pass-through certificates.
KEY RATING DRIVERS
The upgrades to the two senior classes reflect increasing credit
enhancement and expectation of continued pay down relative to
Fitch's expected losses. Fitch modeled losses of 10.5% of the
remaining pool; expected losses on the original pool balance total
4.1%, including $114.6 million (4% of the original pool balance) in
realized losses to date. One loan is defeased (1.7% of the pool)
As of the October 2016 distribution date, the pool's aggregate
principal balance has been reduced by 98% to $45 million from $2.88
billion at issuance. Interest shortfalls are currently affecting
classes K through NR.
Concentrated Pool: Although the transaction has experienced
significant pay down, the pool is extremely concentrated with only
11 loans and one REO asset remaining. Retail properties comprise
the majority of the remaining pool at 71%. The two largest loans,
which have related sponsorship and account for 49% of the total
pool balance, are grocery anchored community shopping centers
located in Niles, IL and Virginia Beach, VA. The REO (14% of the
pool), and the transaction's only specially serviced asset, is a
162,000 sf office property located in Greenwood, IN. The special
servicer is focused on stabilizing the 79% occupied property prior
to marketing it for sale.
Maturities: No loan matures prior to 2019. The two largest loans in
the pool (49%) are scheduled to mature in December 2019.
Amortization: All performing loans are amortizing with six loans
(25% of the pool) fully amortizing over their terms. The Fitch
stressed LTV for the pool is 87.3%.
RATING SENSITIVITIES
The Stable Outlooks on classes F and G reflect the class's
sufficient credit enhancement and expectation of continued pay
down. Class F is expected to be paid in full over the next year
from scheduled amortization. Further upgrades to class G may be
limited due to the increasing concentration of the pool. Fitch ran
an additional sensitivity analysis on the pool which applied a 50%
loss to the two largest loans, both of which mature in 2019.Credit
enhancement to classes F and G remained sufficient to support the
ratings.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has upgraded the following ratings:
-- $1.3 million class F to 'AAAsf' from 'BBBsf'; Outlook
Stable;
-- $28.8 million class G to 'BBsf' from 'CCCsf'; Outlook
Stable.
Fitch has downgraded the following rating:
-- $14.9 million class H to 'Dsf' from 'Csf'; RE 80%.
Fitch has affirmed the following ratings:
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class P at 'Dsf'; RE 0%.
Classes A-1 through E have paid in full. Fitch does not rate the
class NR certificates. Fitch previously withdrew the ratings on the
interest-only class X-1 and X-2 certificates.
JP MORGAN 2006-LDP6: Moody's Affirms Caa3 Rating on Cl. X-1 Debt
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating one class and
affirmed the ratings on three classes in J.P. Morgan Chase
Commercial Mortgage Securities Corp., Commercial Pass-Through
Certificates, Series 2006-LDP6 as:
Cl. B, Upgraded to Aaa (sf); previously on June 9, 2016,
Upgraded to Baa1 (sf)
Cl. C, Affirmed B1 (sf); previously on June 9, 2016, Upgraded to
B1 (sf)
Cl. D, Affirmed C (sf); previously on June 9, 2016, Affirmed
C (sf)
Cl. X-1, Affirmed Caa3 (sf); previously on June 9, 2016,
Downgraded to Caa3 (sf)
RATINGS RATIONALE
The rating on Class B was upgraded based primarily on an increase
in defeasance and credit support resulting from loan paydowns and
amortization. The Class B certificate balance is now fully covered
by the defeased loan.
The ratings on Classes C and D were affirmed because the ratings
are consistent with Moody's expected loss.
The rating on IO Class, Class X-1, was affirmed based on the credit
performance of its referenced classes.
Moody's rating action reflects a base expected loss of 40.9% of the
current balance, compared to 25.7% at Moody's last review. Moody's
base expected loss plus realized losses is now 8.8% of the original
pooled balance, compared to 8.6% 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 "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 69% of the pool is in
special servicing and Moody's identified one troubled loan
representing 8% of the pool. In this approach, Moody's determines
a probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced and troubled loans to the most junior
class(es) and the recovery as a pay down of principal to the most
senior class(es).
DESCRIPTION OF MODELS USED
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 6, compared to 7 at Moody's last review.
Moody's analysis used the excel-based Large Loan Model. 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 Oct. 17, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $55 million
from $2.1 billion at securitization. The certificates are
collateralized by eight mortgage loans ranging in size from 3% to
20% of the pool. One loan, constituting 12.8% of the pool, has
defeased and is secured by US government securities.
One loan, constituting 8.4% 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.
Thirty-eight loans have been liquidated from the pool with a loss,
resulting in an aggregate realized loss of $165 million (for an
average loss severity of 55%). Five loans, constituting 69% of the
pool, are currently in special servicing. The largest specially
serviced loan is the Avis Centre XII Loan
($11.2 million -- 20.1% of the pool), which is secured by a 89,000
square foot (SF) office property located in Ann Arbor, Michigan.
The loan transferred to special servicing in February 2016 due to
imminent maturity default. The property was 100% leased as of
September 2016, however, the largest tenant, representing 39% of
the NRA currently has a lease expiration in the third quarter of
2017.
The second largest special serviced loan is the 1601 Belvedere, FL
Loan ($9.3 million -- 16.7% of the pool), which is secured by a
100,000 square foot (SF) office building located in West Palm
Beach, Florida. The loan transferred to special servicing in
December 2012 due to maturity default and became REO in November
2015. The property was 36% occupied as of June 2016, compared to
42% in November 2015. The special servicers strategy is to
stabilize the asset while it is being actively marketed for sale.
The remaining three specially serviced loans are secured by retail
properties. Moody's has assumed a high default probability for one
poorly performing loan, constituting 8% of the pool. Moody's
estimates an aggregate $22.7 million loss for the specially
serviced and troubled loans (a 53% expected loss on average).
The performing conduit loan in the deal represents 9.9% of the pool
balance. The Arden's Run Apartment Loan ($5.5 million) is secured
by a 240 unit student housing complex located less than a mile away
from University of Maryland Eastern Shore, in Princess Anne,
Maryland. As of June 2016, the property was 83% leased compared to
93% in December 2015 and 76% in December 2014. Operating expenses
have been high over the past three years mainly due to repairs and
utilities costs. Moody's LTV and stressed DSCR are 79% and 1.15X,
respectively, compared to 80% and 1.14X at the last review.
JP MORGAN 2014-C25: DBRS Confirms BB Rating on Class E Notes
------------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-C25
issued by J.P. Morgan Chase Commercial Mortgage Securities Trust,
Series 2014-C25:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4A1 at AAA (sf)
-- Class A-4A2 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class 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-NR at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class EC at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
All trends are Stable.
The Class A-S, Class B and Class C certificates may be exchanged
for the Class EC certificates (and vice versa).
The rating confirmations reflect the overall performance of the
transaction, which has remained in line with DBRS’s expectations
since issuance. The collateral consists of 65 fixed-rate loans
secured by 157 properties, and as of the October 2016 remittance,
there has been a collateral reduction of 0.8% since issuance. Loans
representing 97.7% of the current pool balance are reporting YE2015
figures with a weighted-average (WA) debt service coverage ratio
(DSCR) and a WA debt yield of 1.72 times (x) and 9.6%,
respectively. The DBRS underwritten WA DSCR and WA debt yield at
issuance were 1.60x and 8.9%, respectively. The largest 15 loans in
the pool collectively represent 58.6% of the transaction balance,
and those loans showed a WA net cash flow growth of 6.2% over the
DBRS underwritten figures at YE2015, with a WA DSCR and debt yield
of 1.74x and 9.7%, respectively.
There are no loans in special servicing as of the October 2016
remittance, but seven loans are on the servicer’s watchlist,
representing 7.3% of the current pool balance. Five of those loans,
representing 5.8% of the current pool balance, were flagged for
non-performance-related items pertaining to deferred maintenance or
outstanding real estate taxes and insurance payments. One loan in
the top 15 that showed a performance decline is discussed below.
The Hilton Houston Post Oak loan (Prospectus ID#6, 3.8% of the
current pool balance) is secured by a 448-key, full-service hotel
in Houston, Texas, located approximately one block north of The
Galleria mall. The property was constructed in 1982 and was
converted from a DoubleTree to a Hilton hotel in 2005. As part of
the franchise agreement with Hilton, the borrower was required to
complete an $8.4 million property improvement plan (PIP). At
issuance, approximately $2.3 million of those required renovations
had been completed and included upgrades to the lobby and common
areas, the addition of a buffet bar and the Java Jive Café, as
well as the conversion of the Brittany Bar into a three-meal
restaurant. Approximately $6.1 million of the PIP remains
incomplete, and projects scheduled for the remainder of 2016
include upgrades to the Grand Bal1room, meeting space and executive
lounges and suites; the full scope of the project is scheduled to
be completed by 2019.
This loan reported a Q2 2016 cover of 1.14x, down from 1.84x at
YE2015 and the DBRS underwritten DSCR of 1.85x. DBRS believes that
the ongoing renovations were a primary contributor to the cash flow
declines in 2016, with secondary factors that include a slight
softening in market performance as shown in the Smith Travel
Research report provided for the trailing 12 months ending August
31, 2016, which showed a decline in revenue per available room
(RevPAR) for the competitive set of 13.2% from the prior year. That
report showed that the collateral reported an occupancy rate of
65.9% and an average daily rate (ADR) of $153.43, resulting in a
RevPAR rate of $101.15. This RevPAR figure represents a 23.0%
decrease from 2015, which is attributed to the 20.1% decrease in
occupancy during that time, driven largely by the PIP renovations
that have taken rooms offline for renovations. However, ADR also
saw a 3.6% year-over-year decrease as well. As the renovation work
progresses, DBRS believes property cash flows will improve;
however, to capture the near-term increased risk associated with
the cash flow decline and softening market conditions, the loan was
modeled with a stressed cash flow and will be monitored closely for
developments.
The rating assigned to Class F differs from the higher rating
implied by the quantitative model. DBRS considers this difference
to be a material deviation, and, in this case, the sustainability
of loan performance trends was not demonstrated and, as such, was
reflected in the ratings.
JP MORGAN 2016-4: Fitch to Rate Class B-4 Certs. 'BBsf'
-------------------------------------------------------
Fitch Ratings expects to rate J.P. Morgan Mortgage Trust 2016-4
(JPMMT 2016-4) as:
-- $300,112,000 class A-1 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $300,112,000 class A-2 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $273,561,000 class A-3 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $273,561,000 class A-4 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $205,171,000 class A-5 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $205,171,000 class A-6 certificates 'AAAsf'; Outlook Stable;
-- $68,390,000 class A-7 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $68,390,000 class A-8 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $55,110,000 class A-9 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $55,110,000 class A-10 certificates 'AAAsf'; Outlook Stable;
-- $13,280,000 class A-11 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $13,280,000 class A-12 certificates 'AAAsf'; Outlook Stable;
-- $26,551,000 class A-13 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $26,551,000 class A-14 certificates 'AA+sf'; Outlook Stable;
-- $300,112,000 class A-X-1 notional certificates 'AA+sf';
Outlook Stable;
-- $300,112,000 class A-X-2 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $273,561,000 class A-X-3 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $205,171,000 class A-X-4 notional certificates 'AAAsf';
Outlook Stable;
-- $68,390,000 class A-X-5 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $55,110,000 class A-X-6 notional certificates 'AAAsf';
Outlook Stable;
-- $13,280,000 class A-X-7 notional certificates 'AAAsf';
Outlook Stable;
-- $26,551,000 class A-X-8 notional certificates 'AA+sf';
Outlook Stable;
-- $4,506,000 class B-1 certificates 'AAsf'; Outlook Stable;
-- $6,758,000 class B-2 certificates 'Asf'; Outlook Stable;
-- $4,667,000 class B-3 certificates 'BBBsf'; Outlook Stable;
-- $2,414,000 class B-4 certificates 'BBsf'; Outlook Stable.
Fitch will not be rating these certificates:
-- $3,379,570 class B-5 certificates;
-- $16,092,470 class RR exchangeable certificates.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral pool consists
of high-quality 30-year, fully amortizing loans to borrowers with
strong credit profiles, low leverage, and adequate liquid reserves.
The pool has a weighted average (WA) FICO score of 752 and an
original combined loan-to-value (CLTV) ratio of 72.2%. The
collateral attributes of the subject pool are largely consistent
with recent JPMMT transactions issued in 2015 and 2016.
Geographically Diverse Pool (Positive): The pool's primary
concentration risk is in California, where approximately 36.8% of
the collateral is located. Approximately 46.5% of the pool is
located in the top five regions in the subject pool (Los Angeles,
New York, San Francisco, Miami, and Seattle). However, these
concentrations show significant improvement over many of the JPMMT
deals rated by Fitch in 2015, in which over 50% of the pool was
concentrated in California and over 80% in the top five regions. As
a result, no geographic concentration penalty was applied.
Straightforward Deal Structure (Positive): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
To mitigate tail risk, which arises as the pool seasons and fewer
loans are outstanding, a subordination floor of 2.00% of the
original balance will be maintained for the certificates.
Additionally, there is no early stepdown test that might allow
principal prepayments to subordinate bondholders earlier than the
five-year lockout schedule.
Leakage from Reviewer Expenses (Negative): The trust is obligated
to reimburse the breach reviewer, Pentalpha Surveillance LLC
(Pentalpha), each month for any reasonable out-of-pocket expenses
incurred if the company is requested to participate in any
arbitration, legal or regulatory actions, proceedings or hearings.
These expenses include Pentalpha's legal fees and other expenses
incurred outside its annual fee schedule and are not subject to a
cap or certificateholder approval.
Furthermore, certificateholders are obligated to pay Pentalpha a
termination fee of $140,000 from year two to five, $80,000 from
year five to eight and $25,000 after year eight, to terminate the
contract. While Fitch accounted for the potential additional costs
by upwardly adjusting its loss estimation for the pool, Fitch views
this construct as adding potentially more ratings volatility than
those that do not have this type of provision.
Extraordinary Expense Adjustment (Negative): Extraordinary
expenses, which include loan file review costs, arbitration
expenses for enforcement of the reps and additional fees of
Pentalpha, will be taken out of available funds and not accounted
for in the contractual interest owed to the bondholders. This
construct can result in principal and interest shortfalls to the
bonds, starting from the bottom of the capital structure. To
account for the risk of these noncredit events reducing
subordination, Fitch adjusted its loss expectations upward by 50
bps at the 'AAAsf' level.
Tier 3 Representation and Warranty Framework (Negative): Fitch
believes the value of the rep and warranty framework is diluted by
the presence of qualifying and conditional language in conjunction
with sunset provisions, which reduces lender breach liability.
While Fitch believes the high credit-quality pool and clean
diligence results mitigate these risks, we considered the weaker
framework in our analysis.
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at the MSA level. The implied rating sensitivities
are only an indication of some of the potential outcomes and do not
consider other risk factors that the transaction may become exposed
to or may be considered in the surveillance of the transaction.
Three sets of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the subject
pool.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper market value declines at the
national level. The analysis assumes market value declines of 10%,
20% and 30%, in addition to the model-projected 4.8%. The analysis
indicates that there is some potential rating migration with higher
MVDs, compared with the model projection.
Fitch also conducted sensitivities to determine the stresses to
MVDs that would reduce a rating by one full category, to
non-investment grade, and to 'CCCsf'.
JP MORGAN 2016-4: Moody's Assigns (P)Ba3 Rating on Cl. B-4 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 26
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust 2016-4 (JPMMT 2016-4). The ratings range
from (P)Aaa (sf)-(P)Ba3 (sf).
The certificates are backed by one pool of prime quality, fixed
rate, first-lien mortgage loans, originated by various originators.
Seasoning of the pool is around 14 months. Wells Fargo Bank, N.A.
is the master servicer and U.S. Bank Trust National Association
will serve as the trustee.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2016-4
-- Cl. A-1, Assigned (P)Aaa (sf)
-- Cl. A-2, Assigned (P)Aaa (sf)
-- Cl. A-3, Assigned (P)Aaa (sf)
-- Cl. A-4, Assigned (P)Aaa (sf)
-- Cl. A-5, Assigned (P)Aaa (sf)
-- Cl. A-6, Assigned (P)Aaa (sf)
-- Cl. A-7, Assigned (P)Aaa (sf)
-- Cl. A-8, Assigned (P)Aaa (sf)
-- Cl. A-9, Assigned (P)Aaa (sf)
-- Cl. A-10, Assigned (P)Aaa (sf)
-- Cl. A-11, Assigned (P)Aaa (sf)
-- Cl. A-12, Assigned (P)Aaa (sf)
-- Cl. A-13, Assigned (P)Aa1 (sf)
-- Cl. A-14, Assigned (P)Aa1 (sf)
-- Cl. A-X-1, Assigned (P)Aaa (sf)
-- Cl. A-X-2, Assigned (P)Aaa (sf)
-- Cl. A-X-3, Assigned (P)Aaa (sf)
-- Cl. A-X-4, Assigned (P)Aaa (sf)
-- Cl. A-X-5, Assigned (P)Aaa (sf)
-- Cl. A-X-6, Assigned (P)Aaa (sf)
-- Cl. A-X-7, Assigned (P)Aaa (sf)
-- Cl. A-X-8, Assigned (P)Aa1 (sf)
-- Cl. B-1, Assigned (P)Aa3 (sf)
-- Cl. B-2, Assigned (P)A2 (sf)
-- Cl. B-3, Assigned (P)Baa2 (sf)
-- Cl. B-4, Assigned (P)Ba3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the aggregate pool is 0.50%
in a base scenario and reaches 5.95% at a stress level consistent
with the Aaa ratings.
The collateral quality for this transaction, by itself, is
consistent with other prime transactions that Moody's recently
rated. The Aaa Moody's Individual Loan Analysis (MILAN) credit
enhancement (CE), inclusive of concentration adjustments, for this
pool is 5.40%. Moody's increased MILAN model's CE by 0.55% for
qualitative factors and adjustments not factored in the model.
Loan-level adjustments included: adjustments to borrower
probability of default for higher and lower borrower DTIs, channel
of originations, self-employed borrowers, and at a pool level, for
the default risk of HOA properties in super lien states. The
adjustment to our Aaa stress loss above the model output also
includes adjustments related to servicers and originators
assessments, and representations and warranties framework. Moody's
based the MILAN model on stressed trajectories of home prices,
unemployment rates and interest rates, at a monthly frequency over
a 10-year period.
Collateral Description
The JPMMT 2016-4 transaction is a securitization of 437 first lien
residential mortgage loans with an unpaid principal balance of
$321,836,570. This transactions has a comparatively high seasoning
(14 months), high percentage of loan concentration (top 20 largest
loans constitute 11% of total collateral) and diversified
geographical concentration. None of the loans is with prepayment
penalty. There are 41 originators in the transaction. The largest
originators in the pool by balance are Quicken Loans Inc. (28.07%)
and Caliber mortgage loans (14.42%). No other single originator was
responsible for 10% or more of the aggregate pool balance.
Shellpoint Mortgage Servicing will service all of the mortgage
loans.
Third-party Review and Reps & Warranties
Three third party due diligence firms verified the accuracy of the
loan-level information that the sponsor gave us. These firms
conducted detailed credit, collateral, and regulatory reviews on
100% of the mortgage pool. The TPR results indicated compliance
with the originators' underwriting guidelines for the vast majority
of loans, no material compliance issues (except for a few
TRID-related issues), and no appraisal defects. The loans that had
exceptions to the originators' underwriting guidelines had good
compensating factors and senior credit signoff. The originators and
the sellers have provided unambiguous representations and
warranties (R&Ws) including an unqualified fraud R&W. There is
provision for binding arbitration in the event of dispute between
investors and the R&W provider concerning R&W breaches.
Although the TPR report identified compliance-related exceptions
relating to the TILA-RESPA Integrated Disclosure (TRID) rule, we
did not believe the majority to be material because either the
sponsor or originator corrected the errors or the errors are of a
type that would not likely lead to damages for the RMBS trust.
Trustee and Master Servicer
The transaction trustee is U.S. Bank National Association. The
custodian functions will be performed by Wells Fargo Bank, N.A. The
paying agent and cash management functions will be performed by
Wells Fargo Bank, N.A., rather than the trustee. In addition, Wells
Fargo, as Master Servicer, is responsible for servicer oversight,
and termination of servicers and for the appointment of successor
servicers. In addition, Wells Fargo is committed to act as
successor if no other successor servicer can be found.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to increased performance
volatility, known as tail risk. The transaction provides for a
credit enhancement floor of 2.0% of the closing pool balance, which
mitigates tail risk by protecting the senior bonds from eroding
credit enhancement over time.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
JP MORGAN 2016-ASH: Moody's Assigns (P)B3 Rating on Class F Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to seven
classes of commercial mortgage backed securities, issued by J.P.
Morgan Chase Commercial Mortgage Securities Trust 2016-ASH,
Commercial Mortgage Pass-Through Certificates, Series 2016-ASH.
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
Cl. F, Assigned (P)B3 (sf)
Cl. X-CP*, Assigned (P)A2 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The Certificates are collateralized by a single loan backed by a
first lien mortgages on a portfolio of 18 hotel properties in the
full-service, select-service, and extended-stay segments. The
Borrowers are comprised on 18 bankruptcy-remote, special purpose
entities, each of which is a Delaware limited partnerships owned by
the Sponsor, Ashford Hospitality Limited Partnership.
Moody's ratings are based on the collateral and the structure of
the transaction.
Single Borrower Rating Approach: Moody's approach to rating this
transaction involved the application of both Moody's Single
Borrower methodology and Moody's IO Rating methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying property with the credit protection
offered by the structure. The structure's credit enhancement is
quantified by the maximum deterioration in property value that the
securities are able to withstand under various stress scenarios
without causing an increase in the expected loss for various rating
levels. In assigning single borrower ratings, Moody's also
considers a range of qualitative issues as well as the
transaction's structural and legal aspects.
Leverage and Debt Service Coverage: The credit risk of the loan is
determined primarily by two factors: 1) Moody's assessment of the
probability of default, which is largely driven by the DSCR, and 2)
Moody's assessment of the severity of loss in the event of default,
which is largely driven by the LTV of the underlying loan.
The first mortgage balance of $415,000,000 represents a Moody's LTV
of 109.2% which is below other standalone property loans that have
previously been assigned comparable underlying ratings by Moody's.
The Moody's First Mortgage Actual DSCR is 2.12X and Moody's First
Mortgage Actual Stressed DSCR is 1.09X. The financing is subject
to a mezzanine loan totaling $35,000,000. The Moody's Total Debt
LTV (inclusive of the mezzanine loan) is 118.4%, while Moody's
First Total Debt Actual DSCR is 1.81X, and Moody's Total Debt
Actual Stressed DSCR is 1.01X.
The collateral under the mortgage loan is comprised of a pool of 18
hotel properties diversified across full-service (6 hotels, 44.1%
of ALA), select-service (8 hotels, 38.1% of ALA) and extended-stay
(4 hotels, 17.8% of ALA) chain scale segments. The portfolio is
geographically diversified across 7 states and 10 MSA, with no
single state representing more than 41.9% (California) of the
allocated loan amount and no single MSA representing more than
32.5% (San Francisco-Oakland-Hayward, CA) of the allocated mortgage
loan amount. The loan's property-level Herfindal Index score is
13.1 based on allocated loan amount.
As of Sept. 30, 2016, the portfolio's overall occupancy rate for
the trailing twelve months was 76.7%, ADR (average daily rate) was
$151.21, and RevPAR (revenue per available room) was $116.02.
Additionally, the portfolio's Occupancy, ADR, and RevPAR
penetration for the trailing twelve months was 104.0%, 115.0% and
119.6% respectively.
The transaction also contains non-sequential prepayment provisions.
So long as there is no event of default under the Mortgage Loan or
Mezzanine Loan, principal prepayments attributable to the Mortgage
Loan will be allocated pro rata among the outstanding principal
balance of each of the Loan Components of the Mortgage Loan until
30% of the initial loan amount of the Mortgage Loan has been
prepaid in the aggregate. As such, principal prepayments
attributable to the Mortgage Loan would be applied pro-rata to
Certificates A through F until 30% of the initial loan balance has
been prepaid.
Moody's rating approach considers sequential pay in connection with
a prepayment or collateral release as a credit neutral benchmark.
Although the loan's release premium mitigates the risk of a ratings
downgrade due to adverse selection, the pro rata payment structure
limits ratings upgrade potential as mezzanine classes are prevented
from building enhancement. The benefit received from pooling
through cross-collateralization is also reduced.
The principal methodology used in this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in October 2015.
Moody's review incorporated the use of the excel-based Large Loan
Model, which it uses for single borrower and large loan
multi-borrower transactions. 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. These aggregated proceeds are then
further adjusted for any pooling benefits associated with loan
level diversity, other concentrations and correlations. Moody's
analysis also uses the CMBS IO calculator which references the
following inputs to calculate the proposed IO rating based on the
published methodology: original and current bond ratings and credit
estimates; original and current bond balances grossed up for losses
for all bonds the IO(s) reference(s) within the transaction; and IO
type corresponding to an IO type as defined in the published
methodology.
Moody's Parameter Sensitivities: If Moody's value of the collateral
used in determining the initial rating were decreased by 5%, 14%,
or 22%, the model-indicated rating for the currently rated (P) Aaa
(sf) class would be (P) Aa1 (sf), (P) Aa2 (sf), or (P) Aa3 (sf),
respectively. Parameter Sensitivities are not intended to measure
how the rating of the security might migrate over time; rather they
are designed to provide a quantitative calculation of how the
initial rating might change if key input parameters used in the
initial rating process differed. The analysis assumes that the
deal has not aged. Parameter Sensitivities only reflect the
ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be
assigned in each case could vary from the information presented in
the Parameter Sensitivity analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's and (b) must be construed solely
as a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating to
the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan paydowns or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed and
may have a significant effect on yield to investors.
The ratings do not represent any assessment of (i) the likelihood
or frequency of prepayment on the mortgage loans, (ii) the
allocation of net aggregate prepayment interest shortfalls, (iii)
whether or to what extent prepayment premiums might be received, or
(iv) in the case of any class of interest-only certificates, the
likelihood that the holders thereof might not fully recover their
investment in the event of a rapid rate of prepayment of the
mortgage loans.
KEYCORP STUDENT 2004-A: Moody's Hikes Cl. II-C Debt Rating to Ba2
-----------------------------------------------------------------
Moody's Investors Service upgraded seven classes, downgraded two
classes of notes from three KeyCorp Student Loan Trusts. The
underlying collateral for these transactions includes loans
originated under the Federal Family Education Loan Program (FFELP)
and private student loans ( PSLs). The FFELP and the PSLs
collateral is separated into group I and group II, respectively,
with each group collateralizing its own set of notes with
independent reserve accounts and payment waterfalls. The residual
cash flow in each group can be used to cover any payment shortfalls
in the other group.
Complete rating actions are:
Issuer: KeyCorp Student Loan Trust 2004-A
Class I-B, Upgraded to Aaa (sf); previously on Dec. 20, 2013,
Upgraded to Aa1 (sf)
Class II-B, Upgraded to Aaa (sf); previously on Dec. 20, 2013,
Upgraded to Aa1 (sf)
Class II-C, Upgraded to Ba2 (sf); previously on Dec. 20, 2013,
Downgraded to Ba3 (sf)
Issuer: KeyCorp Student Loan Trust 2005-A
Cl. I-B, Upgraded to Aaa (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Upgrade
Cl. II-B, Upgraded to Aa3 (sf); previously on Dec. 20, 2013,
Confirmed at Baa2 (sf)
Issuer: KeyCorp Student Loan Trust 2006-A
Cl. II-A-4, Upgraded to Aaa (sf); previously on Dec. 20, 2013,
Upgraded to Aa1 (sf)
Cl. I-B, Downgraded to A1 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. II-B, Upgraded to A3 (sf); previously on Dec. 20, 2013,
Affirmed Ba3 (sf)
Cl. II-C, Downgraded to Ca (sf); previously on Dec. 20, 2013,
Upgraded to Caa2 (sf)
RATINGS RATIONALE
The downgrade of 2006-A class I-B is a result of Moody's analysis
indicating that the tranche will not pay off by final maturity
dates in some of Moody's 28 cash flow scenarios, thus causing the
tranche to incur expected losses that are higher than the expected
loss benchmarks set in Moody's idealized loss tables for the
current ratings. The low payment rates on the underlying
securitized pool of FFELP student loans are driven primarily by
persistently high levels of loans to borrowers in non-standard
payment plans, including deferment, forbearance and Income-Based
Repayment (IBR), as well as by the relatively low rates of
voluntary prepayments.
The downgrade of 2006-A class II-C is prompted by the continued
under collateralization of the group II which consists of private
student loans. The total parity ratios (i.e. the ratio of total
assets to total liabilities) for group II is around 97%.
The upgrades for 2004-A class I-B and 2005-A class I-B are the
result of Moody's analysis that indicates that these tranches are
either likely to successfully pay off by their maturity dates, or
that the expected loss for each such tranche is lower than or
consistent with, respectively, the expected loss benchmark levels
set in Moody's Idealised Cumulative Expected Loss Rates table for
the current ratings.
The upgrades for 2004-A class II-B, 2005-A class II-B and 2006-A
class II-B mainly reflect the correction of an error in the
application of deferment and forbearance assumptions. In Moody's
December 20, 2013 actions, we mistakenly applied the then current
deferment and forbearance levels for the remaining lives of
transactions, when we should have run it for a much shorter period.
As a result of the correction, cash available for distribution on
each distribution date has increased.
The upgrades for 2004-A class II-C, 2005-A class II-B and 2006-A
class II-A4, II-B are also driven by the increased levels of credit
enhancement supporting these classes. Although our expected
life-time net losses in the private loan pools supporting these
transactions have increased relative to the 2013 rating actions,
the transactions' deleveraging due to the sequential-pay structure
has offset the higher net loss projections.
The methodologies used in these ratings were "Moody's Approach to
Rating Securities Backed by FFELP Student Loans" published in
August 2016, and "Moody's Approach to Rating U.S. Private Student
Loan-Backed Securities" published in January 2010.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Among the factors that could drive the ratings up are lower than
expected borrower usage of deferment, forbearance and IBR, higher
than expected voluntary prepayment rates, prepayments with proceeds
from sponsor repurchases of student loan collateral for the FFELP
portion and lower net losses on the underlying loan pools than
Moody's expects.
Down
Among the factors that could drive the ratings down are lower than
expected levels of voluntary prepayments, higher than expected
borrower usage of deferment, forbearance and IBR, declining credit
quality of the US government for the FFELP portion and higher net
losses on the underlying loan pools than Moody's expects for the
private student loans portion.
KKR CLO 16: Moody's Assigns Ba3 Rating on Class D Notes
-------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of notes to be issued by KKR CLO 16 Ltd.
Moody's rating action is:
$325,000,000 Class A-1 Senior Secured Floating Rate Notes due
2029, Assigned (P)Aaa (sf)
$54,300,000 Class A-2 Senior Secured Floating Rate Notes due
2029, Assigned (P)Aa2 (sf)
$26,100,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned (P)A2 (sf)
$33,600,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned (P)Baa3 (sf)
$21,100,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned (P)Ba3 (sf)
The Class A-1 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."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected
losses posed to noteholders. The provisional 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 16 is a managed cash flow CLO. The Rated 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. Moody's expects the portfolio to be
approximately 100% 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 October 2016.
For modeling purposes, Moody's used these base-case assumptions:
Par amount: $500,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.5%
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
October 2016.
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-1 Notes: 0
Class A-2 Notes: -2
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-1 Notes: -1
Class A-2 Notes: -3
Class B Notes: -4
Class C Notes: -2
Class D Notes: -1
LB-UBS COMMERCIAL 2004-C1: S&P Affirms BB+ Rating on Class D Certs
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from LB-UBS
Commercial Mortgage Trust 2004-C1, a U.S. commercial
mortgage-backed securities (CMBS) transaction. In addition, S&P
affirmed its ratings on seven other classes from the same
transaction. All of the ratings remain on CreditWatch with
negative implications.
S&P lowered its ratings on classes A4, X-CL, and X-ST due to
potential interest shortfalls from the specially serviced UBS
Center – Stamford loan ($149.4 million, 74.5%). The underlying
collateral is a 712,067-sq.-ft. office property in Stamford, Conn.,
which is largely physically vacant, although it remains 100%
economically occupied by UBS, which is now in a free rent period,
having made its last rental payment in October 2016. Given that,
as well as S&P's understanding from CWCapital Asset Management LLC
(CWCapital) that the borrower does not intend to fund the loan's
ongoing debt service payments, it's highly likely that this loan
will generate significant recurring interest shortfalls that could
potentially affect the performance of these certificates. The loan
is discussed in more detail below.
S&P affirmed its ratings on the seven other classes. While S&P
expects these classes to experience liquidity interruptions related
to the UBS loan, based on current information, their potential to
experience interest shortfalls is commensurate with their current
ratings.
All 10 ratings remain on CreditWatch with negative implications to
reflect the continued potential for these classes to experience
ongoing interest shortfalls beyond durations commensurate with
their current ratings, given the uncertain resolution timing on the
UBS loan. If S&P expects any of the certificates to incur interest
shortfalls beyond the duration commensurate with their respective
ratings, S&P may take further negative rating actions in line with
its criteria "Structured Finance Temporary Interest Shortfall
Methodology," published Dec. 15, 2015. S&P initially placed its
ratings on the certificates on CreditWatch with negative
implications in July 2016.
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $200.6 million, which is 14.1% of the pool balance
at issuance. The pool currently includes four loans (the Passaic
Street Industrial Park A and B hope note is treated as a single
loan), down from 103 loans at issuance.
Two of these loans ($185.3 million, 92.4%) are with the special
servicer, CWCapital, and no loans were reported on the master
servicer's watchlist or as defeased. The master servicer, Wells
Fargo Bank N.A., reported financial information for 92.0% of the
loans in the pool, of which 81.0% was year-end 2014 data, 15.9% was
year-end 2015 data, and the remainder was partial-year 2016 data.
S&P calculated a 1.53x S&P Global Ratings weighted average debt
service coverage (DSC) and 46.4% S&P Global Ratings weighted
average loan-to-value (LTV) ratio using a 7.59% S&P Global Ratings
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the specially serviced
assets.
To date, the transaction has experienced $32.3 million in principal
losses, or 2.3% of the original pool trust balance. S&P expects
losses to reach approximately 11.2% 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
two specially serviced assets.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2016, trustee remittance report, two loans in
the pool were with the special servicer, CWCapital. Details of the
two largest specially serviced assets are:
-- The UBS Center - Stamford loan ($149.4 million, 74.5%) is
the largest remaining loan in the pool and has a total
reported exposure of $149.5 million. The loan is secured by
an office property totaling 682,327 sq. ft. in Stamford,
Conn. The loan was transferred to CWCapital on Jan. 27,
2016, because of imminent nonmonetary default. The loan was
scheduled to mature on Oct. 11, 2016. The property was
primarily occupied by UBS, which has vacated major portions
of its space and made its last rental payment this past
October. The borrower has indicated that they have not been
able to find new tenants for the property.
-- The Passaic Street Industrial Park A and B hope notes loan
($35.9 million, 17.9%) is the second-largest loan in the
pool. The loan, which has a reported $36.0 million in
total exposure, is secured by a 2,110,719-sq.-ft. industrial
warehouse property in Wood Ridge, N.J. The loan was re-
transferred to the special servicer in March 2016 due to a
capital event notice provided by the borrower. The loan was
previously transferred to the special servicer in March 2010
due to monetary default, and was modified in February 2012,
the terms of which included: the bifurcation of the single
note into a $21.7 million senior A note and a $16.1 million
subordinate B hope note, a reduction in the interest rate
payable on the A note and the full deferral of interest owed
on the B note, and the extension of the loan's maturity date
to Dec. 11, 2018. As of year-end 2015, the reported DSC and
occupancy were 2.01x and 94.4%, respectively. S&P expects a
moderate loss upon the loan's eventual resolution, which S&P
considers to be a loss between 26% and 59% of a loan's
outstanding balance.
RATINGS LIST
LB-UBS Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates series 2004-C1
Rating
Class Identifier To From
A-4 52108HYK4 AA- (sf)/Watch Neg AAA (sf)/Watch Neg
B 52108HYL2 BBB+ (sf)/Watch Neg BBB+ (sf)/Watch Neg
52108HYM0 BBB (sf)/Watch Neg BBB (sf)/Watch Neg
D 52108HYN8 BB+ (sf)/Watch Neg BB+ (sf)/Watch Neg
E 52108HYP3 BB (sf)/Watch Neg BB (sf)/Watch Neg
F 52108HYQ1 B+ (sf)/Watch Neg B+ (sf)/Watch Neg
G 52108HYR9 CCC (sf)/Watch Neg CCC (sf)/Watch Neg
H 52108HYT5 CCC- (sf)/Watch Neg CCC- (sf)/Watch Neg
X-CL 52108HZP2 AA- (sf)/Watch Neg AAA (sf)/Watch Neg
X-ST 52108HZT4 AA- (sf)/Watch Neg AAA (sf)/Watch Neg
LB-UBS COMMERCIAL 2007-C1: Fitch Affirms 'Dsf' Rating on 5 Tranches
-------------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of LB-UBS Commercial Mortgage
Trust commercial mortgage pass-through certificates, series
2007-C1.
KEY RATING DRIVERS
The affirmations reflect continued paydown and stable performance
since Fitch's last rating action. Fitch remains concerned over the
refinance risk associated with loans representing 78% of the pool's
current balance maturing in January and February of 2017.
As of the October 2016 distribution date, the pool's aggregate
principal balance has been reduced by 54.4% to $1.7 billion from
$3.7 billion at issuance. Per servicer reporting, 19 loans are
fully defeased (15.8% of the current balance). There are 12 loans
(6.4%) with the special servicer. Interest shortfalls are
currently affecting classes H through T.
Underperforming Top Five Loan: The Del Amo Financial Center loan
(3.1% of the pool) is secured by a 348,185 square foot (sf) office
complex located in Torrance, CA. The complex consists of six
separate office buildings. As of the December 2015 rent roll, the
property was 54% occupied with a servicer reported net operating
income (NOI) debt service coverage ratio (DSCR) of 0.36x. The
property was acquired by The Muller Company and GreenOak Real
Estate in June 2015. Per servicer reporting, the new sponsors have
invested significant capital to improve the quality of the property
and have been working closely with a team of brokers to lease the
vacant space. Fitch will continue to monitor the loan for
performance improvement and lease updates.
Increase in Specially Serviced Loans: The number of specially
serviced loans has increased to 12 from 10 at Fitch's prior review.
All loans are in tertiary markets with high levels of submarket
vacancy.
Concentrated Pool: The pool's three largest loans account for 47.5%
of the current balance of the pool. All three loans mature in
January 2017.
High Percentage of Interest-Only Loans: Full Term Interest-Only
loans account for 75.6% of the pool's current balance.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable. Further upgrades
are unlikely until there is an indication of the number of loans
that will repay in January and February of 2017. Downgrades are
possible if there is an increase in the number of specially
serviced loans and modeled losses are realized.
Fitch has affirmed these ratings:
-- $398.3 million class A-4 at 'AAAsf'; Outlook Stable;
-- $361.3 million class A-1A at 'AAAsf'; Outlook Stable;
-- $371.3 million class A-M at 'AAsf'; Outlook Stable;
-- $315.6 million class A-J at 'BBsf'; Outlook Stable;
-- $27.8 million class B at 'Bsf'; Outlook Stable;
-- $55.7 million class C at 'CCsf'; RE to 85% from 50%;
-- $37.1 million class D at 'CCsf'; RE 0%;
-- $18.6 million class E at 'CCsf'; RE 0%;
-- $32.5 million class F at 'Csf'; RE 0%;
-- $32.5 million class G at 'Csf'; RE 0%;
-- $41.8 million class H at 'Csf'; RE 0%;
-- $14.4 million class J at 'Dsf'; RE 0%;
-- $0 million class K at 'Dsf'; RE 0%;
-- $0 million class L at 'Dsf'; RE 0%;
-- $0 million class M at 'Dsf'; RE 0%;
-- $0 million class N at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-AB certificates have all paid in full.
Fitch does not rate the class P, Q, S, T, or BMP certificates.
Fitch previously withdrew the rating on the interest-only class
X-CL, X-CP, and X-W certificates.
LB-UBS COMMERCIAL 2007-C7: S&P Affirms B Rating on Cl. A-J Certs
----------------------------------------------------------------
S&P Global Ratings affirmed its ratings on eight outstanding
classes of commercial mortgage pass-through certificates from
LB-UBS Commercial Mortgage Trust 2007-C7, a U.S. commercial
mortgage-backed securities (CMBS) transaction.
S&P's rating actions on the principal- and interest-paying
certificates follow its analysis of the transaction, primarily
using its criteria for rating U.S. and Canadian CMBS transactions,
which included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction's
structure, and the liquidity available to the trust.
The affirmations on these certificates reflect S&P's expectation
that the available credit enhancement will be within its estimate
of the necessary credit enhancement required for the current
ratings. The affirmations also reflect S&P's views regarding the
collateral's current and future performance, the transaction
structure, and liquidity support available to the classes.
S&P affirmed its 'AAA (sf)' ratings on the classes X-CL and X-W,
which are interest-only (IO) certificates, based on S&P's criteria
for rating IO securities.
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $2.04 billion, which is 64.5% of the pool balance
at issuance. The pool currently includes 67 loans and three real
estate owned (REO) assets, down from 100 loans at issuance. Eight
of these assets ($75.6 million, 3.7%) are with the special
servicer, eight ($477.9 million, 23.4%) are defeased, and 20
($739.1 million, 36.1%) are on the master servicer's watchlist. The
master servicer, Wells Fargo Bank N.A., reported financial
information for 100.0% of the nondefeased loans in the pool, of
which 11.2% was partial 2016 data, 86.4% was year-end 2015 data and
the remainder was year-end 2014 data.
S&P calculated a 1.19x S&P Global Ratings weighted average debt
service coverage (DSC) and 89.7% S&P Global Ratings weighted
average loan-to-value (LTV) ratio using a 7.11% S&P Global Ratings
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the eight specially
serviced assets and eight defeased loans. The top 10 nondefeased
loans have an aggregate outstanding pool trust balance of
$1.1 billion (56.1%). Using adjusted servicer-reported numbers, S&P
calculated an S&P Global Ratings weighted average DSC and LTV of
1.20x and 90.3%, respectively, for the top 10 nondefeased loans.
To date, the transaction has experienced $203.8 million in
principal losses, or 6.4% of the original pool trust balance. S&P
expects losses to reach approximately 8.1% 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 eight specially serviced assets.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2016, trustee remittance report, eight assets in
the pool were with the special servicer, C-III Asset Management
LLC. Details of the two largest specially serviced assets are:
-- The Soundview Marketplace REO asset ($19.2 million, 0.9%)
has a total reported exposure of $23.4 million. The asset
is a retail property totaling 183,979 sq. ft. located in
Port Washington, N.Y. The loan was transferred to the
special servicer on March 30, 2010, because of imminent
default. The loan became REO on March 7, 2014. The special
servicer stated that asset files are under review and there
is a letter of intent for a potential tenant for the former
King Kullen space. An appraisal reduction amount (ARA) of
$22.8 million is in effect against this loan. S&P expects a
significant loss (60% or greater) upon its eventual
resolution.
-- The second largest specially serviced asset is the Bucks
Town Corp. Center loan ($15.9 million, 0.8%), which has a
total reported exposure of $18.6 million. The loan is
secured by a 141,714-sq.-ft. office building in Langhorne,
Pa. The loan was transferred to the special servicer on
Nov. 15, 2013, due to payment default. The special servicer
indicated that foreclosure has been rescheduled and expects
it to close this year. The reported DSC and occupancy as of
year-end 2015 were 0.39x and 46.3%, respectively. An ARA of
$10.4 million is in effect against this loan. S&P expects a
significant loss upon this loan’s eventual resolution.
The six remaining assets with the special servicer each has
individual balance that represents less than 0.7% of the total pool
trust balance. S&P estimated losses for the eight specially
serviced assets, arriving at a weighted-average loss severity of
70.3%.
RATINGS LIST
LB-UBS Commercial Mortgage Trust 2007-C7
Commercial mortgage pass-through certificates series 2007-C7
Rating
Class Identifier To From
A-3 52109RBM2 AAA (sf) AAA (sf)
A-1A 52109RBN0 AAA (sf) AAA (sf)
A-M 52109RBP5 A- (sf) A- (sf)
A-J 52109RBQ3 B (sf) B (sf)
B 52109RBR1 B- (sf) B- (sf)
C 52109RBS9 CCC+ (sf) CCC+ (sf)
X-W 52109RBX8 AAA (sf) AAA (sf)
X-CL 52109RAJ0 AAA (sf) AAA (sf)
LCM XVII: S&P Affirms BB Rating on Class E Replacement Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, and
C-R replacement notes from LCM XVII L.P., a U.S. collateralized
loan obligation (CLO) transaction managed by LCM Asset Management
LLC. S&P withdrew its ratings on the transaction's original class
A, B-1, B-2, and C notes after they were fully redeemed. S&P also
affirmed its ratings on the class D and E notes, which were not
part of the refinancing.
On the Nov. 21, 2016, refinancing date, the proceeds from the
replacement note issuance were used to redeem the original notes,
as outlined in the transaction document provisions. Therefore, S&P
withdrew the ratings on the transaction's original notes in line
with their full redemption and assigned ratings to the
transaction's replacement notes. The ratings reflect S&P's opinion
that the credit support available is commensurate with the
associated rating levels.
S&P will continue to review whether, in its view, the ratings
assigned to the transaction remain consistent with the credit
enhancement available to support them, and S&P will take rating
actions as it deems necessary.
RATINGS ASSIGNED
LCM XVII L.P.
Replacement class Rating Amount (mil. $)
A-R AAA (sf) 255.00
B-R AA (sf) 53.00
C-R A (sf) 22.00
RATINGS WITHDRAWN
LCM XVII L.P.
Rating
Original class To From Amount (mil. $)
A NR AAA (sf) 255.00
B-1 NR AA (sf) 29.00
B-2 NR AA (sf) 24.00
C NR A (sf) 22.00
RATINGS AFFIRMED
LCM XVII L.P.
Class Rating Amount (mil. $)
D BBB (sf) 18.00
E BB (sf) 20.00
UNAFFECTED CLASS
LCM XVII L.P.
Class Rating Amount (mil. $)
Subordinated notes NR 42.50
NR--Not rated.
LNR CDO III: Moody's Lowers Class B Notes Rating to 'C'
-------------------------------------------------------
Moody's Investors Service has downgraded the rating on the
following notes issued by LNR CDO III Collateralized Debt
Obligations, Series 2005-1, Ltd.:
-- Cl. B, Downgraded to C (sf); previously on Dec 10, 2015
Affirmed Ca (sf)
Moody's has also affirmed the ratings on the following notes:
-- Cl. A, Affirmed Caa3 (sf); previously on Dec 10, 2015
Affirmed Caa3 (sf)
-- Cl. C, Affirmed C (sf); previously on Dec 10, 2015 Affirmed
C (sf)
-- Cl. D-FL, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
-- Cl. E-FL, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
-- Cl. E-FX, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
-- Cl. F-FL, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
-- Cl. F-FX, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
-- Cl. G-FL, Affirmed C (sf); previously on Dec 10, 2015
Affirmed C (sf)
RATINGS RATIONALE
Moody's has downgraded the rating of one class of notes due to an
additional $54.9 million in implied losses since last review
reducing the enhancement of the affected class. Moody's has also
affirmed the ratings of eight classes because key transaction
metrics are commensurate with the existing ratings. The rating
action is the result of Moody's on-going surveillance of commercial
real estate collateralized debt obligation (CRE CDO and Re-Remic)
transactions.
LNR CDO III is a static cash CRE CDO transaction and is solely
backed by a portfolio of commercial mortgage backed securities
(CMBS). As of the October 28, 2016 payment date, the aggregate note
balance of the transaction, excluding preferred shares, has
decreased to $577.9 million from $986.3 million at issuance, as a
result of the principal paydown directed to the senior most
outstanding class of notes. The paydown was the result of the both
full and partial amortization of the underlying collateral.
Currently, the transaction has implied under-collateralization of
$572.8 million, compared to $518.0 million at last review,
primarily due to implied losses on the collateral.
Moody's has identified the following as key indicators of the
expected loss in CRE CLO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these as actual parameters for static
deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 7053,
compared to 7009 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 and 3.6% compared to 5.4% at last
review, A1-A3 and 0.0% compared to 1.9% at last review, Baa1-Baa3
and 8.7% compared to 8.5% at last review, Ba1-Ba3 and 3.2% compared
to 2.4% at last review, B1-B3 and 16.2% compared to 10.8% at last
review, Caa1-Ca/C and 68.3% compared to 71.1% at last review.
Moody's modeled a WAL of 2.1 years, the same as at last review The
WAL is based on assumptions about extensions on the look-through
underlying CMBS loan collateral.
Moody's modeled a fixed WARR of 0.0%, the same as at last review.
Moody's modeled a MAC of 100.0%, the same as at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the recovery rates of the underlying collateral and credit
assessments. Increasing the recovery rate of 100% of the collateral
pool by 10.0% would result in an average modeled rating movement on
the rated notes of zero notch upward (e.g., one notch up implies a
ratings movement of Baa3 to Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
MADISON PARK XXIV: S&P Assigns Prelim. BB- Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Madison Park
Funding XXIV Ltd./Madison Park Funding XXIV LLC's $691.50 million
floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed by broadly syndicated speculative-grade senior secured term
loans.
The preliminary ratings are based on information as of Nov. 17,
2016. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term
loans that are governed by collateral quality tests. The
credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Madison Park Funding XXIV Ltd./Madison Park Funding XXIV LLC
Class Rating Amount
(mil. $)
A AAA (sf) 465.00
B AA (sf) 102.50
C (deferrable) A (sf) 56.50
D (deferrable) BBB- (sf) 31.50
E (deferrable) BB- (sf) 36.00
Subordinated notes NR 67.68
NR--Not rated.
MARINER CLO 2015-1: S&P Raises Rating on Class E Notes to BB+
-------------------------------------------------------------
S&P Global Ratings raised its ratings on the class B-1, B-2, C, D,
and E notes from Mariner CLO 2015-1 LLC. S&P also removed these
ratings from CreditWatch, where it had placed them with positive
implications on Aug. 22, 2016. At the same time, S&P affirmed its
'AAA (sf)' rating on the class A notes from the same transaction.
The rating actions follow S&P's review of the transaction's
performance, which used data from the Oct. 7, 2016, trustee
report.
The upgrades reflect the stable performance of the portfolio and
the transaction's $76.35 million in paydowns to the class A notes
since S&P's October 2015 rating actions. These paydowns resulted
in increases to the overcollateralization (O/C) ratios since the
September 2015 trustee report, which S&P used for its previous
rating actions:
-- The class A/B O/C ratio improved to 133.24% from 130.07%.
-- The class C O/C ratio improved to 123.96% from 121.80%.
-- The class D O/C ratio improved to 116.18% from 114.77%.
-- The class E O/C ratio improved to 110.41% from 109.52%.
The upgrades and affirmation on the class A note reflect the stable
credit quality of the portfolio and the increases to the O/C
ratios.
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 S&P
deems necessary.
RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE
Mariner CLO 2015-1 LLC
Rating
Class To From
B-1 AAA (sf) AA (sf)/Watch Pos
B-2 AAA (sf) AA (sf)/Watch Pos
C AA+ (sf) A (sf)/Watch Pos
D A+ (sf) BBB (sf)/Watch Pos
E BB+ (sf) BB (sf)/Watch Pos
RATING AFFIRMED
Mariner CLO 2015-1 LLC
Class Rating
A AAA (sf)
MCAP 2014-1: Fitch Affirms 'BBsf' Rating on Class F Notes
---------------------------------------------------------
Fitch Ratings has affirmed all classes of MCAP CMBS Issuer
Corporation's commercial mortgage pass-through certificates, series
2014-1 (MCAP 2014-1). All currencies are denominated in Canadian
dollars (CAD).
KEY RATING DRIVERS
The affirmations reflect generally stable performance of the pool
since issuance. With the exception of the fourth and eighth largest
loans, which have been designated as Fitch Loans of Concern, all
other loans in the top 15 continue to perform within Fitch's
expectations at issuance.
As of the November 2016 distribution date, the pool's aggregate
principal balance has been reduced by 5.2% to $212.4 million from
$224 million at issuance. No loans have transferred to special
servicing since issuance.
Loans of Concern: Fitch has designated two loans (combined, 11.2%
of pool) as Fitch Loans of Concern, both of which are among the top
15 loans. The fourth and eighth largest loans, 1 & 20 Royal Gate
Boulevard and 1177 11 Avenue SW, have both experienced significant
occupancy declines since Fitch's last rating action.
The 1 & 20 Royal Gate Boulevard loan (6.5% of pool) is secured by a
284,135 square foot (sf) mixed-use industrial/office building
located in Vaughan, ON. Property occupancy in 2016 declined to
63.3% from 84.2% in September 2015 after the largest tenant,
Silicor Materials (34% of the net rentable area [NRA]), vacated
upon its December 2015 lease expiration. The loss of the largest
tenant was partially offset by a new lease with Ideal Warehouse
(13.1% of NRA), which commenced in December 2015 and expires June
2026. The borrower had provided an upfront $1.95 million letter of
credit at origination to mitigate the imminent lease rollover
during the loan term. According to the servicer, the vacant space
is currently being marketed, but no new leasing offers have been
presented to date. The loan, which is scheduled to mature in July
2019, carries a partial recourse guarantee (50% of loan balance)
from the sponsor, Augend Investments Limited.
The 1177 11 Avenue SW loan (4.7%) is secured by a 61,925 sf office
building with ground level retail located in Calgary, AB. Property
occupancy declined to 39.8% after the largest tenant, ThyssenKrupp
Industrial Solutions (45% of NRA), vacated upon its June 2016 lease
expiration. The tenant had already previously downsized its space
from 60% of the NRA at issuance to 45% in 2015. According to the
servicer, the borrower continues to market the property's vacancies
and is currently in preliminary stages of discussions with a
potential tenant. The loan, which has an upcoming maturity in
February 2017, carries a partial recourse guarantee (50% of loan
balance) from the sponsor, Riaz Mamdani.
Canadian Loan Attributes: The ratings reflect strong Canadian
commercial real estate loan performance, including a low
delinquency rate and low historical losses of less than 0.1%, as
well as positive loan attributes such as short amortization
schedules, recourse to the borrower, and additional guarantors.
Significant Amortization: The pool has a weighted average
amortization term of 25.2 years, which represents faster
amortization than U.S. conduit loans. There are no partial or full
interest-only loans. The pool's scheduled maturity balance
represents a paydown of 7.8% of the November 2016 balance and 12.6%
of the balance at issuance.
Loans with Recourse: Of the pool, 82.9% of the loans feature full
or partial recourse to the borrowers and/or sponsors.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to increasing
credit enhancement and the generally stable performance of the
pool. Future upgrades are possible should the performance of the
Fitch Loans of Concern improve and as the 2017 and 2018 maturing
loans (19.4% and 8.6% of the pool, respectively) pay off as
expected. Downgrades may be possible should the performance of the
Fitch Loans of Concern continue to decline further.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $177.7 million class A at 'AAAsf'; Outlook Stable;
-- $5.6 million class B at 'AAsf'; Outlook Stable;
-- $8.1 million class C at 'Asf'; Outlook Stable;
-- $7 million class D at 'BBBsf'; Outlook Stable;
-- $3.4 million class E at 'BBB-sf'; Outlook Stable;
-- $2.8 million class F at 'BBsf'; Outlook Stable;
-- $2.8 million class G at 'Bsf'; Outlook Stable.
Fitch does not rate the interest-only class X, or the $5 million
non-offered class H.
MERCER FIELD: Fitch Affirms 'BBsf' Rating on Class E Notes
----------------------------------------------------------
Fitch Ratings has upgraded the class B and exchangeable combination
notes (the combination notes) and affirmed the class A, C, D and E
notes issued by Mercer Field CLO LP (Mercer Field CLO). Fitch has
also revised the Outlooks on the Class C, D and E notes to Positive
from Stable.
KEY RATING DRIVERS
The rating actions are based on the stable performance of the
underlying portfolio, the credit enhancement available to the
notes, and the cushions available in the collateralized loan
obligation's (CLO) cash flow modelling results. Fitch's cash flow
analysis also indicates each class of notes is passing all nine
interest rate and default timing scenarios at or above their
current rating levels.
The total loan portfolio par amount plus $149.3 million principal
cash is approximately $1.07 billion, as of the October 2016 trustee
report. There is one defaulted loan comprising 0.3% of the
portfolio, and the transaction continues to pass all coverage tests
and collateral quality tests. The weighted average spread (WAS) of
the portfolio has tightened to 4.2% from 4.5% in the last review in
November 2015, relative to a minimum WAS trigger of 4.0%. The
portfolio, excluding cash, is invested in 98.1% senior secured
loans and 1.9% senior secured bonds, and approximately 86.6% of the
portfolio has strong recovery prospects or a Fitch-assigned
recovery rating of 'RR2' or higher. The performing portfolio
remains in the 'B/B-' range, according to Fitch's Issuer Default
Rating (IDR) Equivalency Map.
The class B notes are able to pass the 'AAAsf' rating stress with
significant cushion in Fitch's cash flow analysis, while the
performance of the combination notes reflects an improved credit
profile given the amortization of the notes since inception. The
combination notes consist of underlying components from the class
C, D, E and the unrated income notes (collectively, the underlying
Mercer Field CLO components) and a Fannie Mae (FNMA) principal-only
strip scheduled to mature in May 2030. To date, the combination
notes have received approximately $92 million (28% of the original
balance) in proceeds from the underlying Mercer Field CLO
components. As a result, the combination notes are able to pass at
its current rating level, without the credit support of the FNMA
strip.
The Stable Outlooks reflect the notes' robust cushions available to
withstand future potential deterioration in the underlying
portfolio. The Positive Outlooks for the class C, D, E and
combination notes reflect Fitch's expectations of improved
performance of the notes in the near term.
RATING SENSITIVITIES
The ratings of the notes may be sensitive to the following: asset
defaults, portfolio migration, including assets being downgraded to
'CCC', portions of the portfolio being placed on Rating Watch
Negative, overcollateralization or interest coverage test breaches,
or breach of concentration limitations or portfolio quality
covenants. Fitch conducted rating sensitivity analysis on the
closing date of Mercer Field CLO LP, incorporating increased levels
of defaults and reduced levels of recovery rates, among other
sensitivities.
Initial Key Rating Drivers and Rating Sensitivity are further
described in the New Issue Report published on January 18, 2013.
Mercer Filed CLO is an arbitrage cash flow CLO that is managed by
Guggenheim Partners Investment Management, LLC (GPIM), with a
four-year reinvestment period ending in December 2016 and an 18
month noncall period, which ended in June 2014. The manager has the
ability to reinvest unscheduled principal proceeds and sales
proceeds from the disposal of credit risk or credit improved
obligations after the reinvestment period, subject to certain
conditions.
This review was conducted under the framework described in the
report 'Global Rating Criteria for CLOs and Corporate CDOs' using
Fitch's Portfolio Credit Model (PCM) to project future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model under
various combinations of default timing and interest rate stress
scenarios, as described in the report. The cash flow model was
customized to reflect the transaction's structural features.
DUE DILIGENCE USAGE
No third-party due diligence was reviewed in relation to this
rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A comparison of the transaction's Representations, Warranties, and
Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that
asset class is also available by accessing the reports and links
indicated below.
Fitch has upgraded the following ratings:
-- $154,350,000 class B notes to 'AAAsf' from 'AAsf'; Outlook
Stable;
-- $240,168,278 exchangeable combination notes to 'BBB+sf' from
'BBB-sf'; Outlook maintained at Positive.
Fitch has affirmed the following ratings:
-- $556,500,000 class A notes 'AAAsf'; Outlook Stable;
-- $78,750,000 class C notes 'Asf'; Outlook revised to Positive
from Stable;
-- $65,100,000 class D notes 'BBBsf'; Outlook revised to
Positive from Stable;
-- $60,480,000 class E notes 'BBsf'; Outlook revised to
Positive from Stable.
Fitch does not rate the income notes.
MORGAN STANLEY 2006-HQ9: S&P Lowers Rating on Class F Certs to D
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on the classes E and F
commercial mortgage pass-through certificates from Morgan Stanley
Capital I Trust 2006-HQ9, a U.S. commercial mortgage-backed
securities (CMBS) transaction. At the same time, S&P affirmed its
ratings on four classes 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 assets in the
pool, the transaction’s structure, and the liquidity available to
the trust.
The downgrade on class F reflects current interest shortfalls that
S&P expects will remain outstanding for the foreseeable future, as
well as credit support erosion that we anticipate will occur upon
the eventual resolution of the 12 assets ($109.2 million, 66.0%)
with the special servicer. The downgrade on class E reflects the
reduced liquidity support available to the class due to shortfalls
impacting the trust.
According to the Oct. 17, 2016, trustee remittance report, the
current monthly interest shortfalls totaled $138,405 and resulted
primarily from:
-- Interest not advance totaling $59,410;
-- Appraisal subordinate entitlement reduction amounts totaling
$47,385; and
-- Special servicing fees totaling $19,034 and workout fees
totaling $11,356.
The current interest shortfalls affected classes subordinate to and
including class F.
The affirmations reflect S&P's expectation that the available
credit enhancement for these classes will be within its estimate of
the necessary credit enhancement required for the current ratings.
The affirmations also reflect S&P's views regarding the current and
future performance of the transaction's collateral, the transaction
structure, and liquidity support available to the classes.
While available credit enhancement levels suggest positive rating
movements on classes A-J, B, C, and D, S&P's analysis also
considered the susceptibility to reduced liquidity support from the
12 specially serviced assets and the two loans on the master
servicer's watchlist ($24.1 million, 14.6%).
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $165.4 million, which is 6.4% of the pool balance
at issuance. The pool currently includes 16 loans and two real
estate-owned (REO) assets, down from 202 loans at issuance. Twelve
of these assets are with the special servicer, and two are on the
master servicer's combined watchlist. The master servicers, Wells
Fargo Bank N.A. and Midland Loan Services Inc., reported financial
information for 91.4% of the loans in the pool, of which 71.4% was
year-end 2015 data, and the remainder was year-end 2014 data.
"We calculated a 0.91x S&P Global Ratings' weighted average debt
service coverage (DSC) and 108.1% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using a 7.78% S&P Global Ratings'
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the specially serviced
assets. The top 10 loans have an aggregate outstanding pool trust
balance of $151.4 million (91.5%). Using adjusted servicer-reported
numbers, we calculated a S&P Global Ratings' weighted average DSC
and LTV of 0.87x and 113.3%, respectively, for four of the top 10
loans. The remaining loans are specially serviced and discussed.
To date, the transaction has experienced $156.3 million in
principal losses, or 6.1% of the original pool trust balance. S&P
expects losses to reach approximately 7.6% 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 assets.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2016, trustee remittance report, 12 assets in
the pool are with the special servicer, C-III Asset Management LLC
(C-III). Details of the two largest specially serviced assets,
both of which are part of the top 10 asset in the pool, are:
-- Gateway Shopping Center loan ($60.0 million, 36.3%) is the
largest loan in the transaction and has a total reported
exposure of $60.6 million. The collateral is a 257,844-sq.-
ft. retail property in West Bloomfield, Mich. The loan was
transferred to the special servicer on June 15, 2016, due to
litigation filed by the borrower. The occupancy reported as
of Oct. 31, 2016, is 76.0%, down from 100% as of year-end
2015. The debt service coverage ratio (DSCR) reported as of
year-end 2015 is 1.16x. S&P expects a minimal loss upon
this loan's eventual resolution
-- The One Chatham Center REO asset ($13.0 million, 7.9%) is
the fourth-largest asset in the transaction and has a total
current exposure of $16.5 million. The asset is a 236,019-
sq.-ft. office building in Pittsburgh, Pa. The loan was
transferred to special servicer on March 14, 2014, because
the borrower stated that it could no longer fund property
shortfalls. The property became REO in June 3, 2015. The
asset has been deemed non-recoverable by the master
servicer. S&P expects significant loss upon the asset's
eventual resolution.
The 10 remaining assets with the special servicer each have
individual balances that represent less than 7.6% of the total pool
trust balance. S&P estimated losses for the 12 specially serviced
assets, arriving at a weighted-average loss severity of 34.7%.
With respect to the specially serviced assets 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
Morgan Stanley Capital I Trust 2006-HQ9
Commercial mortgage pass-through certificates series 2006-HQ9
Rating
Class Identifier To From
A-J 61750CAH0 A- (sf) A- (sf)
B 61750CAJ6 BBB+ (sf) BBB+ (sf)
C 61750CAK3 BBB- (sf) BBB- (sf)
D 61750CAL1 BB+ (sf) BB+ (sf)
E 61750CAM9 B+ (sf) BB (sf)
F 61750CAN7 D (sf) B+ (sf)
MORGAN STANLEY 2016-BNK2: S&P Assigns B+ Rating on 4 Tranches
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Morgan Stanley Capital I
Trust 2016-BNK2's $725.6 million commercial mortgage pass-through
certificates series 2016-BNK2.
The note issuance is a commercial mortgage-backed securities
transaction backed by 40 commercial mortgage loans with an
aggregate principal balance of $725.6 million, secured by the fee
and leasehold interests in 43 properties across 15 states and
Washington, D.C.
The ratings reflect the credit support provided by the transaction
structure, S&P's view of the underlying collateral's economics, the
trustee-provided liquidity, the collateral pool's relative
diversity, and our overall qualitative assessment of the
transaction.
RATINGS ASSIGNED
Morgan Stanley Capital I Trust 2016-BNK2
Class Rating(i) Amount ($)
A-1 AAA (sf) 31,400,000
A-2 AAA (sf) 45,700,000
A-SB AAA (sf) 50,600,000
A-3 AAA (sf) 160,000,000
A-4 AAA (sf) 194,805,000
X-A AAA (sf) 482,505,000(ii)
X-B AA (sf) 85,300,000(ii)
A-S AAA (sf) 52,558,000
B AA (sf) 32,742,000
C A (sf) 31,879,000
X-D(iii) BBB- (sf) 37,050,000(ii)
D(iii) BBB- (sf) 37,050,000
E-1(iii)(iv) BB+ (sf) 9,047,000
E-2(iii)(iv) BB (sf) 9,047,000
E(iii)(iv) BB (sf) 18,094,000
F-1(iii)(iv) BB- (sf) 3,446,500
F-2(iii)(iv) BB- (sf) 3,446,500
F(iii)(iv) BB- (sf) 6,893,000
EF(iii)(iv) BB-(sf) 24,987,000
G-1(iii)(iv) B+ (sf) 6,031,000
G-2(iii)(iv) B+ (sf) 6,031,000
G(iii)(iv) B+ (sf) 12,062,000
EFG(iii)(iv) B+ (sf) 37,049,000
H-1(iii)(iv) NR 7,755,027
H-2(iii)(iv) NR 7,755,028
H(iii)(iv) NR 15,510,055
RR(iii) NR 36,278,582
(i)The certificates will be issued to qualified institutional
buyers according to Rule 144A of the Securities Act of 1933.
(ii)Notional balance.
(iii)Non-offered certificates.
(iv)Class E is exchangeable for replacement certificates E-1 and
E-2; class F is exchangeable for replacement certificates F-1 and
F-2; class EF is exchangeable for replacement certificates E-1,
E-2, F-1, and F-2; class G is exchangeable for replacement
certificates G-1 and G-2; class EFG is exchangeable for replacement
certificates E-1, E-2, F-1, F-2, G-1, and, G-2; and class H is
exchangeable for replacement certificates H-1 and H-2. NR--Not
rated.
MORGAN STANLEY 2016-C31: Fitch Assigns BB-sf Rating on Cl. X-E Debt
-------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to the Morgan Stanley Bank of America Merrill Lynch Trust
Series 2016-C31 commercial mortgage pass-through certificates:
-- $50,100,000 class A-1 'AAAsf'; Outlook Stable;
-- $27,600,000 class A-2 'AAAsf'; Outlook Stable;
-- $69,700,000 class A-SB 'AAAsf'; Outlook Stable;
-- $17,811,000 class A-3 'AAAsf'; Outlook Stable;
-- $210,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $292,019,000 class A-5 'AAAsf'; Outlook Stable;
-- $667,230,000b class X-A 'AAAsf'; Outlook Stable;
-- $110,808,000b class X-B 'AA-sf'; Outlook Stable;
-- $65,531,000 class A-S 'AAAsf'; Outlook Stable;
-- $45,277,000 class B 'AA-sf'; Outlook Stable;
-- $44,085,000 class C 'A-sf'; Outlook Stable;
-- $52,425,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $25,021,000ab class X-E 'BB-sf'; Outlook Stable;
-- $10,723,000ab class X-F 'B-sf'; Outlook Stable;
-- $52,425,000a class D 'BBB-sf'; Outlook Stable;
-- $25,021,000a class E 'BB-sf'; Outlook Stable;
-- $10,723,000a class F 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $42,894,169ab class X-G 'NR';
-- $42,894,169a class G 'NR'.
a - Privately placed pursuant to Rule 144A.
b - Notional amount and interest only.
KEY RATING DRIVERS
Fitch Leverage: The transaction has slightly higher leverage than
other recent Fitch-rated transactions. The Fitch debt service
coverage ratio (DSCR) for the trust of 1.19x is similar to the
year-to-date (YTD) 2016 average of 1.19x; however, the Fitch loan
to value (LTV) for the trust of 107.5% is slightly higher than the
YTD 2016 average of 105.8%. Excluding credit-opinion loans, the
pool's Fitch DSCR and LTV are 1.17x and 110.1%, respectively.
Comparatively, the YTD 2016 average Fitch DSCR and LTV for
Fitch-rated deals, excluding credit-opinion and co-op loans, are
1.15x and 109.9%.
Investment-Grade Credit-Opinion Loans: Two loans in the pool,
International Square (3.2% of pool) and The Shops at Crystals (1.6%
of pool), have investment-grade credit opinions. International
Square has an investment-grade credit opinion of 'AA-sf*' on a
stand-alone basis. The Shops at Crystals has an investment-grade
credit opinion of 'BBB+sf*' on a stand-alone basis. The two loans
have a weighted average Fitch DSCR and LTV of 1.64x and 54.5%,
respectively. The proportion of credit-opinion loans in this pool
is below the YTD 2016 average of 7.4%.
Above-Average Amortization: Based on the scheduled balance at
maturity, the pool will pay down 13.9%, which is above the YTD 2016
average of 10.3%. Five loans, representing 10.8% of the pool, are
full-term interest only, and 21 loans, representing 46.9% of the
pool, are partial interest only. The remainder of the pool is made
up of 34 balloon loans, representing 42.2% of the pool, with loan
terms of five to 10 years.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 12.0% below
the most recent year's net operating income (NOI); for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to MSBAM
2016-C31 certificates and found that the transaction displays
average sensitivities to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'A-sf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'BBBsf'
could result.
MORGAN STANLEY 2016-SNR: S&P Gives Prelim. BB- Rating on E Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Morgan
Stanley Capital Citigroup Trust 2016-SNR's $555.0 million
commercial mortgage pass-through certificates.
The certificate issuance is a commercial mortgage-backed securities
transaction backed by a $555.0 million mortgage loan, secured by a
first lien on the borrowers' fee interest in a portfolio of 64
skilled nursing facilities containing 7,786 licensed beds. The
properties are located in eight states.
The preliminary ratings are based on information as of Nov. 21,
2016. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of the collateral's
historical and projected performance, the sponsor's and manager's
experience, the trustee-provided liquidity, the loan's terms, and
the transaction's structure.
PRELIMINARY RATINGS ASSIGNED
Morgan Stanley Capital Citigroup Trust 2016-SNR
Class Rating Amount ($)
A AAA (sf) 242,000,000
X-NCP AA- (sf) 13,500,000(i)
X-CP AA- (sf) 76,500,000(i)
B AA- (sf) 90,000,000
C A- (sf) 98,800,000
D BBB- (sf) 104,200,000
E BB+ (sf) 20,000,000
(i)Notional balance. For the purpose of calculating the interest
on the interest-only certificates, the class B has been divided
into two distinct portions. The class X-NCP certificates will be
equal to the portion balance of the class B portion 1 and the class
X-CP certificates will be equal to the portion balance of the class
B portion 2.
MORGAN STANLEY 2016-UBS12: Fitch to Rate Cl. X-E Debt 'BB-sf'
-------------------------------------------------------------
Fitch Ratings has issued a presale report on the Morgan Stanley
Capital I Trust 2016-UBS12 commercial mortgage pass-through
certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $38,800,000 class A-1 'AAAsf'; Outlook Stable;
-- $54,700,000 class A-2 'AAAsf'; Outlook Stable;
-- $56,000,000 class A-SB 'AAAsf'; Outlook Stable;
-- $190,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $237,609,000 class A-4 'AAAsf'; Outlook Stable;
-- $577,109,000b class X-A 'AAAsf'; Outlook Stable;
-- $132,941,000b class X-B 'A-sf'; Outlook Stable;
-- $50,497,000 class A-S 'AAAsf'; Outlook Stable;
-- $40,191,000 class B 'AA-sf'; Outlook Stable;
-- $42,253,000 class C 'A-sf'; Outlook Stable;
-- $49,466,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $23,703,000ab class X-E 'BB-sf'; Outlook Stable;
-- $10,306,000ab class X-F 'B-sf'; Outlook Stable;
-- $49,466,000a class D 'BBB-sf'; Outlook Stable;
-- $23,703,000a class E 'BB-sf'; Outlook Stable;
-- $10,306,000a class F 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
-- $30,916,736ab class X-G;
-- $30,916,736a class G.
a) Privately placed pursuant to Rule 144A.
b) Notional amount and interest-only.
The expected ratings are based on information provided by the
issuer as of Nov. 9, 2016.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 42 loans secured by 72
commercial properties having an aggregate principal balance of
$824,441,736 as of the cut-off date. The loans were contributed to
the trust by UBS AG, Morgan Stanley Mortgage Capital Holdings LLC,
Bank of America, National Association, and Natixis Real Estate
Capital LLC.
KEY RATING DRIVERS
Concentrated Pool by Loan Size: The top 10 loans comprise 62.4% of
the pool, which is worse than the 2015 and year-to-date (YTD) 2016
averages of 49.3% and 54.5%, respectively. The pool's loan
concentration index (LCI) is 507, which is above the 2015 and YTD
2016 averages of 367 and 418, respectively. For this transaction,
the losses estimated by Fitch's deterministic test at 'AAAsf'
exceeded Fitch's base modeled loss estimate; therefore, Fitch's
concluded loss estimate at 'AAAsf' is based on Fitch's
deterministic test.
Average Fitch Leverage: The pool's leverage statistics are in line
with those of other recent Fitch-rated, fixed-rate multiborrower
transactions. The pool's Fitch debt service coverage ratio (DSCR)
of 1.24x is slightly better than the YTD 2016 average Fitch DSCR of
1.20x. The pool's Fitch loan to value (LTV) of 106.6% is slightly
worse than the YTD 2016 average Fitch LTV of 105.7%.
Property Quality: The pool's collateral exhibited above-average
quality with 74.4% of Fitch-inspected properties (62.0% of the
pool) receiving property quality grades of 'B+' or better, compared
to 2016 YTD levels of 50.1%. Four properties, representing 31.7% of
the Fitch site inspection sample and 26.4% of the pool, received a
property quality grade of 'A-' or better, compared to 2016 YTD
levels of 18.4%. Two properties, accounting for 0.8% of
Fitch-inspected properties, received a property quality grade of
'C'.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 9.1% below
the most recent year's net operating income (NOI; for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to MSC
2016-UBS12 certificates and found that the transaction displays
average sensitivity to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'A+sf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could
result.
NAVIENT SOLUTIONS: Moody's Takes Actions on 17 FFELP Transactions
-----------------------------------------------------------------
Moody's Investors Service has confirmed the ratings of 12 classes
of notes, upgraded the ratings of 8 classes of notes, and
downgraded the ratings of 36 classes of notes issued in 17 student
loan securitizations sponsored or administered by Navient
Solutions, Inc. The securitizations, and the underlying notes in
SLM Student Loan ABS Repackaging Trust 2009-I, are backed by
student loans originated under the Federal Family Education Loan
Program (FFELP) that are guaranteed by the US government for a
minimum of 97% of defaulted principal and accrued interest.
The complete rating actions are:
Issuer: SLM Student Loan Trust 2003-2
Class A-5, Confirmed at Aaa (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-6, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-7, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-8, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-9, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class B, Downgraded to Ba3 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review Direction Uncertain
Issuer: SLM Student Loan Trust 2003-5
Class A-5, Downgraded to A1 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-6, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-7, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-8, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class A-9, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Class B, Downgraded to Ba3 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review Direction Uncertain
Issuer: SLM Student Loan Trust 2003-7
Cl. B, Upgraded to Baa2 (sf); previously on May 27, 2016,
Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. A-5A, Downgraded to Baa3 (sf); previously on June 22, 2015,
Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-5B, Downgraded to Baa3 (sf); previously on June 22, 2015,
Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2003-10
Cl. A-4, Downgraded to A1 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Ba3 (sf); previously on June 14, 2016,
Aa2 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2003-12
Cl. A-5, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Confirmed at Aa2 (sf); previously on June 14, 2016,
Aa2 (sf) Placed Under Review Direction Uncertain
Cl. B, Downgraded to Baa3 (sf); previously on June 14, 2016,
A3 (sf) Placed Under Review Direction Uncertain
Issuer: SLM Student Loan Trust 2004-2
Cl. A-6, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A3 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2004-5
Cl. A-5, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Downgraded to Aa3 (sf); previously on June 22, 2015,
Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aa3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2004-10
Cl. A-6A, Upgraded to Aaa (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Upgrade
Cl. A-6B, Upgraded to Aaa (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Upgrade
Cl. A-7A, Upgraded to Aa1 (sf); previously on June 22, 2015,
Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. A-7B, Upgraded to Aa1 (sf); previously on June 22, 2015,
Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. A-8, Downgraded to Baa3 (sf); previously on May 27, 2016,
Baa2 (sf) Placed Under Review for Possible Upgrade
Cl. B, Upgraded to Ba1 (sf); previously on May 27, 2016, B1 (sf)
Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2005-9
Cl. A-6, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-7a, Confirmed at Aa3 (sf); previously on June 14, 2016,
Aa3 (sf) Placed Under Review Direction Uncertain
Cl. A-7b, Confirmed at Aa3 (sf); previously on June 14, 2016,
Aa3 (sf) Placed Under Review Direction Uncertain
Cl. B, Downgraded to Baa2 (sf); previously on June 14, 2016,
A2 (sf) Placed Under Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-4
Cl. A-6, Upgraded to Aa1 (sf); previously on May 27, 2016,
Aa2 (sf) Placed Under Review for Possible Upgrade
Cl. B, Downgraded to Baa2 (sf); previously on May 27, 2016,
Aa3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2006-6
Cl. A-4, Downgraded to Aa2 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa1 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2006-7
Cl. A-5, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6A, Downgraded to Aa1 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6B, Downgraded to Aa1 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6C, Downgraded to Aa1 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa1 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-10
Cl. A-6, Downgraded to Aa1 (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A3 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2007-4
Cl. A-5, Downgraded to A1 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to A1 (sf); previously on June 14, 2016,
Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2A, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2B, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Student Loan Trust 2007-5
Cl. A-5, Confirmed at Aaa (sf); previously on June 14, 2016,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Downgraded to Aa3 (sf); previously on June 22, 2015,
Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Upgraded to Aaa (sf); previously on June 22, 2015,
Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Baa3 (sf); previously on June 22, 2015,
Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLC Student Loan Trust 2008-1
Cl. B, Confirmed at Aa2 (sf); previously on June 14, 2016,
Aa2 (sf) Placed Under Review for Possible Upgrade
Issuer: SLM Student Loan ABS Repackaging Trust 2009-I
Float Rate Cl. A Notes, Confirmed at Aaa (sf); previously on
June 22, 2015, Aaa (sf) Placed Under Review for Possible
Downgrade
RATINGS RATIONALE
Some of the notes in rating actions were placed on watch in June
2016 in connection with the application of Moody's updated FFELP
methodology. Under the new methodology, Moody's derives the
expected loss of each tranche by running its standard 28 cash flow
scenarios and using the weights associated with each scenario.
The downgrades are primarily the result of Moody's analysis that
indicates that the tranches will not pay off by their final
maturity dates under some or all of 28 cash flow scenarios, thus
causing the tranches to incur expected losses that are higher than
the expected loss benchmarks set in Moody's Idealized Cumulative
Expected Loss Rates table for the previous ratings. The low
payment rates on the underlying securitized pools of FFELP student
loans are driven primarily by persistently high levels of loans to
borrowers in non-standard payment plans, including deferment,
forbearance and Income-Based Repayment (IBR), as well as by the
relatively low rates of voluntary prepayments.
The downgrades of Class B notes in SLM Student Loan Trust 2003-2,
2003-5 and 2003-10 also reflect significant excess spread
compression under some or all of 28 cash flow scenarios. Because
these transactions have a significant portion of auction-rate
securities or reset-rate notes, whose coupon rates increased as a
result of failed auctions or failed remarketing, respectively,
their excess spread has declined considerably. Under some or all
of our scenarios these transactions would pay out more interest
than the underlying collateral generates, which would then erode
the collateral base and cause the transactions to become
undercollateralized. As a result, the Class B notes may not be
fully repaid by their final maturity dates.
For transactions with exposure to cross currency swaps, Moody's
incorporated the risk of additional losses on the notes in the
event that they become unhedged following a swap counterparty
default. Moody's also took into account structural features of the
transactions that may reduce the impact of such disruption.
The downgrades of some lowest payment priority Class A notes result
in these notes being rated lower than the subordinated Class B
notes in the affected securitizations. Although transaction
structures stipulate that Class B interest is diverted to pay Class
A principal upon default on the Class A notes, Moody's analysis
indicates that the cash flow available to make payments on the
Class B notes will be sufficient to make all required payments to
Class B noteholders by the Class B final maturity dates, which
occur much later than the final maturity dates of the downgraded
Class A notes.
The upgrades and confirmations are primarily the result of Moody's
analysis that indicates that these tranches are either likely to
successfully pay off by their maturity dates, or that the expected
loss for each such tranche is lower than or consistent with,
respectively, the expected loss benchmark levels set in Moody's
Idealized Cumulative Expected Loss Rates table for the previous
ratings.
The confirmation of Class A-6 in SLM Student Loan Trust 2004-2 and
the upgrade of Class B notes in SLM Student Loan Trust 2003-7 and
2004-10 also reflect the correction of an error in calculating the
amount of investment earnings on cash residing in each
transaction's collection account before each distribution date. In
our May 27, 2016 and June 14, 2016 actions, Moody's mistakenly
assumed that interest collections from each of the collateral loan
pools for these transactions generate zero investment earnings,
when in fact they generate investment earnings at the same rate as
principal collections from the collateral loan pools. As a result
of the correction, cash available for distribution on each
distribution date has increased and the expected loss for these
tranches has reduced to a level consistent with (for Class A-6 in
SLM Student Loan Trust 2004-2) or lower than (for the Class B notes
in SLM Student Loan Trust 2003-7 and 2004-10) the expected loss
benchmark levels set in Moody's Idealized Cumulative Expected Loss
Rates table for the previous ratings.
In its rating actions Moody's also considered Navient's
demonstrated willingness and ability to protect the securities from
being in default as of their final maturity dates. Specifically,
Navient has consistently exercised its option to purchase all
remaining student loans from the trusts at or below the 10% pool
factor and pay off the notes. Navient has also amended 34
transactions to add the ability to purchase an additional 10% of
the initial pool balance. In the event that Navient does not
exercise the option to purchase the loans at 10% pool factor, the
Indenture trustee may initiate a sale of the underlying student
loan pools, which will take place only if proceeds from the sale
will be sufficient to pay off all outstanding notes. Navient has
also amended some transactions to establish a revolving credit
facility that enables the trust to borrow money from Navient
Corporation on a subordinated basis in order to pay off the notes.
Finally, Navient amended 26 transactions to extend maturity dates
for tranches that appeared to have significant risk of not paying
off within the previous final maturities.
Today's actions reflect Moody's assumption that the events giving
rise to non-recurring fees and expenses that the Indenture trustee
might sustain, as a result of litigation or other unforeseen
circumstances, are not likely to occur during the term of the
transactions, as evidenced by historical experience in the
transactions backed by FFELP student loans. Therefore, Moody's has
not included such fees and expenses in its cash flow modeling
analysis. To account for a small probability of such events,
however, Moody's qualitatively assessed sufficiency of the cash
flows to pay the trustees' non-recurring fees and expenses. This
analysis focused in particular on estimating the amount of residual
cash flows generated by the pools of student loans after their
balance declines to 10% of the initial balance (10% pool factor),
at which time the pools are expected to generate significantly
diminished amounts of cash to cover those non-recurring fees and
expenses.
The principal methodology used in these ratings was "Moody's
Approach to Rating Securities Backed by FFELP Student Loans"
published in August 2016.
Up
Moody's could upgrade the ratings if tranches final maturities are
extended, the paydown speed of the loan pool increases as a result
of lower than expected borrower usage of deferment, forbearance and
IBR, higher than expected voluntary prepayment rates, or
prepayments with proceeds from sponsor repurchases of student loan
collateral. Moody's could also upgrade the rating owing to a
build-up in credit enhancement, or an improvement of the credit
quality of the swap providers.
Down
Moody's could downgrade the ratings if the paydown speed of the
loan pool declines as a result of lower than voluntary prepayments,
and higher than expected deferment, forbearance and IBR rates,
which would threaten full repayment of the classes by their final
maturity dates. Moody's could also downgrade the rating if the
protection from Navient is not materialized within a reasonable
time frame, or the credit quality of the swap providers
deteriorate.
In addition, because the US Department of Education guarantees at
least 97% of principal and accrued interest on defaulted loans,
Moody's could downgrade the ratings of the notes if it were to
downgrade the rating on the United States government.
NEWCASTLE CDO V: Moody's Hikes Class II Notes Rating to Ba2
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the following
notes issued by Newcastle CDO V, Limited:
-- Class II Deferrable Floating Rate Notes, Upgraded to Ba2
(sf); previously on Apr 14, 2016 Affirmed B3 (sf)
-- Class III Deferrable Floating Rate Notes, Upgraded to Caa1
(sf); previously on Apr 14, 2016 Affirmed Caa3 (sf)
Moody's has downgraded the ratings on the following notes:
-- Class IV-FL Deferrable Floating Rate Notes, Downgraded to Ca
(sf); previously on Apr 14, 2016 Affirmed Caa3 (sf)
-- Class IV-FX Deferrable Fixed Rate Notes, Downgraded to Ca
(sf); previously on Apr 14, 2016 Affirmed Caa3 (sf)
RATINGS RATIONALE
Moody's has upgraded the ratings of two classes of notes due to
rapid amortization of high credit risk and defaulted assets;
improvement of the credit profile of the remaining collateral pool
as evidenced by WARF; and the redistribution of interest as
principal due to the failure of certain par value tests. Moody's
downgraded the ratings of two classes of notes due to increased
implied losses to the affected classes of notes. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation (CRE CDO and Re-Remic)
transactions.
Newcastle CDO V, Limited is a static cash transaction wholly backed
by a portfolio of: i) commercial mortgage backed securities (CMBS)
(59.1%); ii) asset backed securities (ABS) primarily in the form of
subprime RMBS (38.1%); and iii) REIT debt (2.8%). As of the
trustee's October 31, 2016 report, the aggregate note balance of
the transaction has decreased to $65.6 million from $131.4 million
at last review, with the paydown directed to the senior most
outstanding class of notes, as a result of the combination of
regular amortization, recoveries on defaulted and high credit risk
assets, and interest proceeds re-diverted as principal due to
failure of certain par value tests.
The pool contains six assets totaling $21.7 million (40.3% of the
collateral pool balance) that are listed as defaulted securities as
of the trustee's October 31, 2016 report. Three of these assets
(97.4% of the defaulted balance) are CMBS; and one (2.6%) is RMBS.
Moody's does expect moderate/significant losses to occur from these
defaulted securities once they are realized.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these as actual parameters for static
deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 4147,
compared to 5217 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 and 0.0% compared to 0.5% at last
review, A1-A3 and 2.8% compared to 1.9% at last review, Ba1-Ba3 and
13.5% compared to 9.6% at last review, B1-B3 and 19.9% compared to
45.2% at last review, Caa1-Ca/C and 63.8% compared to 42.9% at last
review. .
Moody's modeled a WAL of 4.6 years, compared to 3.6 years at last
review. The WAL is based on assumptions about extensions on the
underlying look-through CMBS and RMBS collateral loan exposures.
Moody's modeled a fixed WARR of 2.8%, compared to 2.2% at last
review.
Moody's modeled a MAC of 30.1%, compared to 23.4% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the ratings of the underlying collateral and assessments.
Increasing the recovery rate of 100% of the collateral pool by +10%
would result in an average modeled rating movement on the rated
notes of zero to four notches upward (e.g., one notch up implies a
ratings movement of Baa3 to Baa2). Decreasing the recovery rate of
100% of the collateral pool to 0% would result in an average
modeled rating movement on the rated notes of zero to one notches
downward (e.g., one notch down implies a ratings movement of Baa3
to Ba1).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
NRZ ADVANCE 2015-ON1: S&P Gives Prelim. BB Rating on E-T4 Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to NRZ Advance
Receivables Trust 2015-ON1's $400 million advance
receivables-backed notes series 2016-T4 and $400 million advance
receivables-backed notes series 2016-T5.
The note issuance is a servicer advance transaction backed by
servicer advance and accrued and unpaid servicing fee
reimbursements.
The preliminary ratings are based on information as of Nov. 21,
2016. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The strong likelihood of reimbursement of servicer advance
receivables given the priority of such reimbursement
payments;
-- The transaction's revolving period, during which collections
or draws on the outstanding variable-funding note may be
used to fund additional advance receivables, and the
specified eligibility requirements, collateral value
exclusions, credit enhancement test (the collateral test),
and amortization triggers intended to maintain pool quality
and credit enhancement during this period;
-- The transaction's use of predetermined, rating category-
specific advance rates for each receivable type in the pool
that discount the receivables, which are non-interest
bearing, to satisfy the interest obligations on the notes,
as well as provide for dynamic overcollateralization;
-- The projected timing of reimbursements of the servicer
advance receivables, which, in the 'AAA', 'AA', and 'A'
scenarios, reflects S&P's assumption that the servicer would
be replaced, while in the 'BBB' and 'BB' scenarios, reflects
the servicer's historical reimbursement experience;
-- The credit enhancement in the form of overcollateralization,
subordination, and the series reserve accounts;
-- The timely interest and full principal payments made under
S&P's stressed cash flow modeling scenarios consistent with
the assigned preliminary ratings; and
-- The transaction's sequential turbo payment structure that
applies during any full amortization period.
PRELIMINARY RATINGS ASSIGNED
NRZ Advance Receivables Trust 2015-ON1 (Series 2016-T4 and
2016-T5)
Class Rating Type Interest Amount
rate (mil. $)
Series 2016-T4
A-T4 AAA (sf) Term note Fixed 312.978
B-T4 AA (sf) Term note Fixed 13.687
C-T4 A (sf) Term note Fixed 16.785
D-T4 BBB (sf) Term note Fixed 50.954
E-T4 BB (sf) Term note Fixed 5.596
Series 2016-T5
A-T5 AAA (sf) Term note Fixed 304.638
B-T5 AA (sf) Term note Fixed 14.540
C-T5 A (sf) Term note Fixed 18.651
D-T5 BBB (sf) Term note Fixed 55.753
E-T5 BB (sf) Term note Fixed 6.418
OCEAN TRAILS II: Moody's Affirms Ba1 Rating on Class C Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Ocean Trails CLO II:
-- US $15,000,000 Class A-3 Floating Rate Notes Due 2022,
Upgraded to Aaa (sf); previously on October 1, 2015 Upgraded
to Aa1 (sf)
-- US $24,000,000 Class B Deferrable Floating Rate Notes Due
2022, Upgraded to A1 (sf); previously on October 1, 2015
Upgraded to A3 (sf)
Moody's also affirmed the ratings on the following notes:
-- US $190,000,000 Class A-1 Floating Rate Notes Due 2022
(current outstanding balance of $68,780,872), Affirmed Aaa
(sf); previously on October 1, 2015 Affirmed Aaa (sf)
-- US $100,000,000 Class A-1 Floating Rate Notes Due 2022
(current outstanding balance of $36,200,459), Affirmed Aaa
(sf); previously on October 1, 2015 Affirmed Aaa (sf)
-- US $12,500,000 Class A-2 Floating Rate Notes Due 2022,
Affirmed Aaa (sf); previously on October 1, 2015 Affirmed
Aaa (sf)
-- US $14,000,000 Class C Floating Rate Notes Due 2022,
Affirmed Ba1 (sf); previously on October 1, 2015 Upgraded to
Ba1 (sf)
-- US $15,000,000 Class D Floating Rate Notes Due 2022 (current
oustanding balance of $12,165,667), Affirmed B1 (sf);
previously on October 1, 2015 Affirmed B1 (sf)
Ocean Trails CLO II, 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
The rating actions reflect both performance and a correction to
Moody's modeling. The rating actions are primarily a result of
deleveraging of the senior notes and an increase in the
transaction's over-collateralization (OC) ratios since October
2015. The Class A-1 notes have been paid down by approximately 51%
or $110.1 million since that time. Based on Moody's calculation,
the OC ratios for the Class A, Class B, Class C and Class D notes
are calculated at 144.68%, 122.49%, 112.43% and 104.94%,
respectively, versus October 2015 levels of 125.65%, 114.33%,
108.63% and 104.11%, respectively.
The portfolio includes a number of investments in securities that
mature after the notes do. Based on Moody's calculation, securities
that mature after the notes do, currently make up approximately
7.2% ($13.7million) of the portfolio. These investments could
expose the notes to market risk in the event of liquidation when
the notes mature. Moody's also notes that the credit quality of the
portfolio has deteriorated since October 2015. Based on Moody's
calculation, the weighted average rating factor is currently 2785
compared to 2644 in October 2015. Despite the increase in the OC
ratios of the Class C and Class D notes, Moody's affirmed the
ratings of the notes owing to credit quality deterioration and
market risk stemming from the exposure to the long-dated assets.
These rating actions also reflect corrections to Moody's modeling.
In the October 2015 rating action, default timing profiles were
modeled incorrectly. This error has now been corrected, and today's
rating actions reflect this change.
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
October 2016.
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:
-- 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.
-- 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.
-- 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.
-- 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.
-- 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.
-- Long-dated assets: The presence of assets that mature after
the CLO's legal maturity date exposes the deal to
liquidation risk on those assets. This risk is borne first
by investors with the lowest priority in the capital
structure. Moody's assumes that the terminal value of an
asset upon liquidation at maturity will be equal to the
lower of an assumed liquidation value (depending on the
extent to which the asset's maturity lags that of the
liabilities) or the asset's current market value. The deal's
increased exposure owing to amendments to loan agreements
extending maturities continues. However, actual long-dated
asset exposures and prevailing market prices and conditions
at the CLO's maturity will drive the deal's actual losses,
if any, from long-dated assets.
-- Exposure to assets with low credit quality and weak
liquidity: The presence of assets rated Caa3 with a negative
outlook, Caa2 or Caa3 on review for downgrade or the worst
Moody's speculative grade liquidity (SGL) rating, SGL-4,
exposes the notes to additional risks if these assets
default. The historical default rate is higher than average
for these assets. Due to the deal's exposure to such assets,
which constitute around $2.0 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% (2228)
-- Class A-1: 0
-- Class A-2: 0
-- Class A-3: 0
-- Class B: +3
-- Class C: +3
-- Class D: +1
Moody's Adjusted WARF + 20% (3342)
-- Class A-1: 0
-- Class A-2: 0
-- Class A-3: 0
-- Class B: -2
-- Class C: 0
-- Class D: -2
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 $190.7 million, defaulted par of $5.1
million, a weighted average default probability of 16.93% (implying
a WARF of 2785), a weighted average recovery rate upon default of
49.71%, a diversity score of 50 and a weighted average spread of
3.17%(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.
OCP CLO 2012-2: S&P Assigns BB- Rating on Class E-R Notes
---------------------------------------------------------
S&P Global Ratings assigned its ratings to the new class A1-R, B-R,
C-R, D-R, and E-R notes from OCP CLO 2012-2 Ltd., a U.S.
collateralized loan obligation (CLO) transaction managed by Onex
Credit Partners LLC. S&P withdrew its ratings on the class A1, A2,
B, C, D, E, and Combo notes from this transaction after they were
fully redeemed.
On the Nov. 22, 2016, refinancing date, the proceeds from the new
note issuance were used to redeem the original notes as outlined in
the transaction document provisions. Therefore, S&P withdrew the
ratings on the original notes in line with their full redemption
and assigned ratings to the new notes.
The new notes were issued via a supplemental indenture and a
restated indenture, which, in addition to outlining the terms of
the new notes, reset the non-call end date, reinvestment end date,
legal final maturity date, and weighted average life test.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
The assigned ratings reflect S&P's opinion that the credit support
available is commensurate with the associated rating levels.
S&P will continue to review whether, in its view, the ratings
assigned to the transaction remain consistent with the credit
enhancement available to support them, and S&P will take rating
actions as it deems necessary.
RATINGS ASSIGNED
OCP CLO 2012-2 Ltd.
New class Rating Amount (mil $)
A1-R AAA (sf) 250.00
B-R AA (sf) 39.70
C-R A (sf) 35.00
D-R BBB (sf) 22.50
E-R BB- (sf) 20.00
Subordinate notes NR 49.50
RATINGS WITHDRAWN
OCP CLO 2012-2 Ltd.
Rating
Original class To From
A1 NR AAA (sf)
A2 NR AAA (sf)
B NR AA+ (sf)
C NR AA- (sf)
D NR BBB+ (sf)
E NR BB (sf)
Combo NR AA- (sf)
NR--Not rated.
OCTAGON INVESTMENT XI: Moody's Hikes Class D Notes Rating to Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Octagon Investment Partners XI, Ltd.:
-- US $31,000,000 Class B Senior Secured Deferrable Floating
Rate Notes Due 2021, Upgraded to Aaa (sf); previously on
July 14, 2016 Upgraded to Aa1 (sf)
-- US $19,000,000 Class C Secured Deferrable Floating Rate
Notes Due 2021, Upgraded to A2 (sf); previously on July 14,
2016 Affirmed Baa2 (sf)
-- US $16,000,000 Class D Secured Deferrable Floating Rate
Notes Due 2021, Upgraded to Ba2 (sf); previously on July 14,
2016 Affirmed Ba3 (sf)
Moody's also affirmed the ratings on the following notes:
-- US $344,500,000 Class A-1A Senior Secured Floating Rate
Notes Due 2021 (current outstanding balance of $59,378,963),
Affirmed Aaa (sf); previously on July 14, 2016 Affirmed Aaa
(sf)
-- US $37,500,000 and EUR 0 Class A-1B Redenominatable Senior
Secured Floating Rate Notes Due 2021 (current outstanding
balance of $6,561,798), Affirmed Aaa (sf); previously on
July 14, 2016 Affirmed Aaa (sf)
-- US $22,000,000 Class A-2 Senior Secured Floating Rate Notes
Due 2021, Affirmed Aaa (sf); previously on July 14, 2016
Affirmed Aaa (sf)
Octagon Investment Partners XI, Ltd., issued in July 26, 2007, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans, with material exposures to bonds
and CLO securities. The transaction's reinvestment period will end
on August 25, 2014.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since July 2016. The Class A-1
notes have been paid down by approximately 36.7% or $38.2 million
since then. Based on the trustee's October 18, 2016 report, the OC
ratios for the Class A, Class B, Class C and Class D notes are
reported at 189.01%, 139.75%, 120.50% and 107.98%, respectively,
versus June 2016 levels of 162.56%, 130.49%, 116.42% and 106.72%,
respectively. The transaction currently holds approximately $31.7
million of principal proceeds that are expected to be paid to the
Class A-1 notes on the November 2016 payment date.
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
October 2016.
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:
-- 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.
-- 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.
-- 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.
-- 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.
-- 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.
-- 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.
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% (2142)
-- Class A-1A: 0
-- Class A-1B: 0
-- Class A-2: 0
-- Class B: 0
-- Class C: +3
-- Class D: +1
Moody's Adjusted WARF + 20% (3214)
-- Class A-1A: 0
-- Class A-1B: 0
-- Class A-2: 0
-- Class B: 0
-- Class C: -2
-- Class D: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $165.7 million, defaulted par of $2.7
million, a weighted average default probability of 14.9% (implying
a WARF of 2678), a weighted average recovery rate upon default of
42.9%, a diversity score of 36 and a weighted average spread of
3.6% (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.
RAAC TRUST 2005-RP2: Moody's Hikes Cl. M-4 Debt Rating to Ba1
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 13 tranches
issued from seven transactions backed by "scratch and dent"
mortgage loans.
Complete rating actions are:
Issuer: RAAC Series 2005-RP2 Trust
Cl. M-2 Certificate, Upgraded to Aa2 (sf); previously on
Jan. 20, 2016, Upgraded to A1 (sf)
Cl. M-3 Certificate, Upgraded to A3 (sf); previously on Jan. 20,
2016, Upgraded to Baa3 (sf)
Cl. M-4 Certificate, Upgraded to Ba1 (sf); previously on
Jan. 20, 2016, Upgraded to B1 (sf)
Cl. M-5 Certificate, Upgraded to Ba2 (sf); previously on
Jan. 20, 2016, Upgraded to B3 (sf)
Issuer: RAAC Series 2005-RP3 Trust
Cl. M-1 Certificate, Upgraded to Aa2 (sf); previously on
Jan. 20, 2016, Upgraded to A1 (sf)
Cl. M-2 Certificate, Upgraded to B1 (sf); previously on Jan. 20,
2016, Upgraded to Caa1 (sf)
Issuer: RAAC Series 2006-RP2 Trust
Cl. A Certificate, Upgraded to Aa2 (sf); previously on Jan. 20,
2016, Upgraded to A2 (sf)
Cl. M-1 Certificate, Upgraded to Caa3 (sf); previously on May 4,
2009, Downgraded to C (sf)
Issuer: RAAC Series 2007-RP1 Trust
Cl. A Certificate, Upgraded to Baa3 (sf); previously on Jan. 20,
2016, Upgraded to Ba3 (sf)
Cl. M-1 Certificate, Upgraded to Caa2 (sf); previously on May 4,
2009, Downgraded to C (sf)
Issuer: RAAC Series 2007-RP2 Trust
Cl. A Certificate, Upgraded to Ba3 (sf); previously on Jan. 20,
2016, Upgraded to B1 (sf)
Issuer: RFSC Series 2003-RP2 Trust
M-2 Certificate, Upgraded to Ba1 (sf); previously on Jan. 20,
2016, Upgraded to B2 (sf)
Issuer: RFSC Series 2004-RP1 Trust
M-2 Certificate, Upgraded to Aa2 (sf); previously on Jan. 20,
2016, Upgraded to A1 (sf)
RATINGS RATIONALE
The upgrades are primarily due to the 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 4.9% in October 2016 from 5.0% in
October 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.
RAIT TRUST 2016-FL6: DBRS Assigns Prov. BB Rating on Class E Debt
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
secured Floating Rate Notes (the Notes), to be issued by RAIT
2016-FL6 Trust:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
The trends are Stable.
Classes A, B, C and D will be privately placed.
Classes E and F are non-offered classes.
With respect to the deferrable notes (Class C, Class D, Class E and
Class F), to the extent that interest proceeds are not sufficient
on a given payment date to pay accrued interest, interest will not
be due and payable on the payment date and will instead be deferred
and capitalized. The ratings assigned by DBRS contemplate the
timely payments of distributable interest and, in the case of
deferred interest notes, the ultimate recovery of deferred interest
(inclusive of interest payable thereon at the applicable rate, to
the extent permitted by law).
The collateral for the transaction consists of 23 recently
originated floating-rate mortgages secured by 33 transitional
commercial real estate properties totaling $257.9 million based on
current cut-off balances and $270.5 million based on the fully
funded loan amount (including the future funding non-controlling
pari passu participation interests). The loans are secured by
current cash flowing assets, most of which are in a period of
transition, with plans to stabilize and improve the asset value.
The floating-rate mortgages were analyzed to determine the
probability of loan default over the term of the loan and its
refinance risk at maturity, based on a fully extended loan term.
Due to the floating-rate nature of the loans, the index (one-month
LIBOR) was modeled at the lower of a DBRS stressed rate that
corresponded to the remaining fully extended term of the loans and
the strike price of the interest rate cap, with the respective
contractual loan spread added to determine a stressed interest rate
over the loan term. When the cut-off balances were measured against
the DBRS In-Place NCF and their respective stressed constants,
there were 16 loans, representing 71.2% of the pool, with term
DSCRs below 1.15 times (x), a threshold indicative of a higher
likelihood of term default. Additionally, to assess refinance risk,
DBRS applied its refinance constants to the balloon amounts,
resulting in 16 loans, or 78.3% of the pool having refinance DSCRs
below 1.00x relative to the DBRS Stabilized NCF. The properties are
often transitioning, with potential upside in the cash flow;
however, DBRS does not give full credit to the stabilization if
there are no holdbacks or other loan structural features in place
were insufficient to support such treatment. Furthermore, even with
structure provided, DBRS generally does not assume the assets to
stabilize above market levels.
The properties are located in primarily core – 2.3% urban and
86.5% suburban – markets that benefit from greater liquidity.
Only two loans, representing 7.3% of the pool, are located in a
tertiary market and only one loan, representing 3.9% of the pool,
is located in a rural market. Thirteen loans totaling 62.1% of the
deal balance represent acquisition financing, with borrowers
contributing equity to the transaction. Three loans, representing
25.6% of the pool, have a future funding component. As of the
cut-off date, the aggregate remaining future funding participations
totaled nearly $12.6 million and ranged from approximately $1.7
million to $6.6 million. The proceeds necessary to fulfill the
future obligations will be drawn on primarily from a Committed
Warehouse Line and will be held outside the trust, but will be pari
passu with the trust participations. The vast majority of these
future funding participations will be utilized by the borrowers to
fund property renovations and cover leasing costs. Each property
has a business plan to execute that is expected to increase net
cash flow.
The loans have been underwritten by DBRS to a stabilized cash flow
that is in some instances above the current in-place cash flow.
There is a possibility that the sponsors will not execute their
business plans as expected and the higher stabilized cash flow will
not materialize during the loan term. Failure to execute the
business plan could result in a term default or the inability to
refinance the fully funded loan balance. DBRS made relatively
conservative stabilization assumptions and in each instance
considered the business plan to be rational and the future funding
amounts to be sufficient to execute such plans. In addition, DBRS
models probability of default (POD) based on the DBRS In-Place NCF
and the fully funded loan amount (including the future funding
participation structures). The corresponding weighted-average (WA)
DBRS Debt Yield is 6.2%, which is lower than the WA DBRS Exit Debt
Yield, based on a DBRS Stabilized NCF of 8.3%. This indicates a
moderate amount of upside that is modeled.
The overall WA DBRS Term and Refinance (Refi) DSCRs of 0.93x and
0.92x, respectively, and corresponding DBRS Debt and Exit Debt
Yields of 6.2% and 8.3%, respectively, are considered high-leverage
financing. The DBRS Term and Refi DSCRs are based on the DBRS
In-Place NCF and debt service is calculated using a stressed
interest rate. The WA stressed rate used is 6.5%, which is greater
than the current WA interest rate of 5.8% (based on WA mortgage
spread and a one-month LIBOR index). Regarding the significant
refinance risk indicated by the DBRS Refi DSCR of 0.92x, credit
enhancement levels are reflective of the increased leverage that is
substantially higher than in recent fixed-rate transactions. The
assets are generally well positioned to stabilize and any realized
cash flow growth would help to offset a rise in interest rates and
also improve the overall debt yield of the loans. DBRS associates
its POD based on the assets’ in-place cash flow, which does not
assume that the stabilization plan and cash flow growth will ever
materialize.
The ratings assigned to the Notes by DBRS are based exclusively on
the credit provided by the transaction structure and underlying
trust assets. All classes will be subject to ongoing surveillance,
which could result in upgrades or downgrades by DBRS after the date
of issuance.
RESIDENTIAL REINSURANCE 2016-II: S&P Rates Class 3 Notes B-
-----------------------------------------------------------
S&P Global Ratings said that it has assigned its 'B-(sf)' and
'B(sf)' ratings to the Series 2016-II class 3 and 4 notes,
respectively, issued by Residential Reinsurance 2016 Ltd. S&P
assigned preliminary ratings to the notes on Oct. 25, 2016. The
notes cover losses in all 50 states and the District of Columbia
from tropical cyclones (including flood coverage for renters
policies), earthquakes (including fire following), severe
thunderstorms, winter storms, wildfires, volcanic eruption,
meteorite impact, and other perils on a per occurrence basis.
S&P bases its ratings on the lowest of: the natural-catastrophe
(nat-cat) risk factor, 'b-' for class 3 and 'b' class 4; S&P's
rating on the assets in the Regulation 114 trust accounts ('AAAm')
for each class of notes; and S&P's ratings on the ceding
insurer--the various operating companies in the United Services
Automobile Assn. (collectively, USAA; AA+/Stable/--).
This issuance also has a variable reset. Beginning with the
initial reset in June 2017, the attachment probability and expected
loss can be reset to maximum of 5.62% and 3.41%, respectively, for
the class 3 notes; and 3.63% and 2.03%, respectively, for the class
4 notes. S&P used this maximum attachment probability to determine
the nat-cat risk factor for the remaining risk periods.
Without taking into account the impact of the variable reset, the
nat-cat risk factor would have been 'bb-' for the class 4 notes,
while the nat cat risk factor for the class 3 notes would still be
'b-'.
RATINGS LIST
New Rating
Residential Reinsurance 2016 Ltd.
Ser 2016-II sr secured class 3 notes B-(sf)
Ser 2016-II sr secured class 4 notes B(sf)
SALEM FIELDS: Moody's Assigns Ba3 Rating on 2 Tranches
------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Salem Fields CLO, Ltd.
Moody's rating action is:
$2,700,000 Class X Senior Secured Floating Rate Notes due 2028,
Assigned Aaa (sf)
$285,000,000 Class A-1 Senior Secured Floating Rate Notes due
2028, Assigned Aaa (sf)
$49,700,000 Class A-2 Senior Secured Floating Rate Notes due
2028, Assigned Aa2 (sf)
$22,700,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes due 2028, Assigned A2 (sf)
$30,400,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2028, Assigned Baa3 (sf)
$9,000,000 Class D-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2028, Assigned Ba3 (sf)
$12,900,000 Class D-2 Mezzanine Secured Deferrable Floating Rate
Notes due 2028, Assigned Ba3 (sf)
The Class X Notes, the Class A-1 Notes, the Class A-2 Notes, the
Class B Notes, the Class C Notes, the Class D-1 Notes and the Class
D-2 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.
Salem Fields is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10% of the portfolio may consist of second lien loans and unsecured
loans. The portfolio is approximately 90% ramped as of the closing
date.
Guggenheim Partners Investment Management, LLC will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. Thereafter, the Manager may reinvest up to
50% of 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 income
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 October 2016.
For modeling purposes, Moody's used these base-case assumptions:
Par amount: $445,300,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2975
Weighted Average Spread (WAS): 3.95%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.75%
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
October 2016.
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 2975 to 3421)
Rating Impact in Rating Notches
Class X Notes: 0
Class A-1 Notes: 0
Class A-2 Notes: -2
Class B Notes: -2
Class C Notes: -1
Class D-1 Notes: -1
Class D-2 Notes: -1
Percentage Change in WARF -- increase of 30% (from 2975 to 3868)
Rating Impact in Rating Notches
Class X Notes: 0
Class A-1 Notes: -1
Class A-2 Notes: -3
Class B Notes: -3
Class C Notes: -2
Class D-1 Notes: -1
Class D-2 Notes: -1
SARATOGA INVESTMENT 2013-1: S&P Assigns BB Rating on Cl. E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, D-R, and E-R replacement notes from Saratoga Investment
Corp. CLO 2013-1 Ltd., a U.S. collateralized loan obligation (CLO)
transaction managed by Saratoga Investment Advisors LLC. S&P
withdrew its ratings on the transaction's original class A-1, A-2,
B, C, D, E, and F notes after they were fully redeemed.
On the Nov. 15, 2016, refinancing date, the proceeds from the
replacement note issuance were used to redeem the original notes,
as outlined in the transaction document provisions. Therefore, S&P
withdrew the ratings on the transaction's original notes in line
with their full redemption and assigned ratings to the class A-1-R,
A-2-R, B-R, C-R, D-R, and E-R replacement notes. The ratings
reflect S&P's opinion that the credit support available is
commensurate with the associated rating levels. S&P is not rating
the class F-R notes.
S&P will continue to review whether, in its view, the ratings
assigned to the transaction remain consistent with the credit
enhancement available to support them, and S&P will take rating
actions as it deems necessary.
RATINGS ASSIGNED
Saratoga Investment Corp. CLO 2013-1 Ltd.
Replacement class Rating
A-1-R AAA (sf)
A-2-R AAA (sf)
B-R AA (sf)
C-R A (sf)
D-R BBB (sf)
E-R BB (sf)
RATINGS WITHDRAWN
Saratoga Investment Corp. CLO 2013-1 Ltd.
Original class Rating
To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR AA (sf)
C NR A (sf)
D NR BBB (sf)
E NR BB (sf)
F NR B (sf)
NR--Not rated.
SARATOGA INVESTMENT 2013-1: S&P Gives Prelim BB Rating on E-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, D-R, and E-R replacement notes from
Saratoga Investment Corp. CLO 2013-1 Ltd./Saratoga Investment Corp.
CLO 2013-1 Inc., a collateralized loan obligation (CLO) originally
issued in 2008 that is managed by Saratoga Investment Advisors LLC.
The replacement notes will be issued via a proposed supplemental
indenture. The class X notes are not being refinanced because they
have paid down.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels. The replacement notes are expected to be issued at a
higher spread over LIBOR than the respective original classes. The
transaction's reinvestment period and legal final maturity are also
being extended by two years.
On the Nov. 15, 2016, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, S&P anticipates withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw its
preliminary ratings on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- The replacement classes are expected to be issued at a
higher spread than the original notes.
-- The stated maturity, reinvestment period, non-call period,
and weighted average life test date will all be extended
approximately two years. The transaction is being amended
to comply with the Volcker Rule.
-- The transaction will incorporate the formula version of
Standard & Poor's CDO Monitor tool and update the S&P Global
Ratings recovery methodology to conform to the current
criteria.
-- The senior management fee will be reduced to 0.10%, and the
subordinate management fee will be increased to 0.40%.
-- The class E overcollateralization (O/C) test level will be
increased to 104.50%, and the interest diversion test will
be removed.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement Notes
Class Amount Interest
(mil. $) rate (%)
A-1-R 170.00 LIBOR + 1.55
A-2-R 20.00 LIBOR + 1.75
B-R 44.80 LIBOR + 2.70
C-R 16.00 LIBOR + 3.36
D-R 14.00 LIBOR + 4.70
E-R 13.10 LIBOR + 6.65
F-R 4.50 LIBOR + 8.50
Original Notes
Class Amount Interest
(mil. $) rate (%)
A-1 170.00 LIBOR + 1.30
A-2 20.00 LIBOR + 1.50
B 44.80 LIBOR + 2.00
C 16.00 LIBOR + 2.90
D 14.00 LIBOR + 3.50
E 13.10 LIBOR + 4.50
F 4.50 LIBOR + 5.75
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
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 further rating actions
as it deems necessary.
PRELIMINARY RATINGS ASSIGNED
Saratoga Investment Corp. CLO 2013-1 Ltd./Saratoga Investment Corp.
CLO 2013-1 Inc.
Replacement class Rating Amount (mil. $)
A-1-R AAA (sf) 170.00
A-2-R AAA (sf) 20.00
B-R AA (sf) 44.80
C-R A (sf) 16.00
D-R BBB (sf) 14.00
E-R BB (sf) 13.10
F-R NR 4.50
Subordinated notes NR 30.00
NR--Not rated.
SCHOONER TRUST 2007-8: Moody's Affirms Ba1 Rating on Class F Certs
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on four classes,
downgraded the rating on one class and affirmed the ratings on nine
classes in Schooner Trust Commercial Mortgage Pass-Through
Certificates, Series 2007-8 as:
Cl. A-1, Affirmed Aaa (sf); previously on Dec. 11, 2015,
Affirmed Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Dec. 11, 2015,
Affirmed Aaa (sf)
Cl. A-J, Affirmed Aaa (sf); previously on Dec. 11, 2015,
Affirmed Aaa (sf)
Cl. B, Upgraded to Aaa (sf); previously on Dec. 11, 2015,
Affirmed Aa2 (sf)
Cl. C, Upgraded to Aa3 (sf); previously on Dec. 11, 2015,
Affirmed A2 (sf)
Cl. D, Upgraded to A3 (sf); previously on Dec. 11, 2015,
Affirmed Baa2 (sf)
Cl. E, Upgraded to Baa1 (sf); previously on Dec. 11, 2015,
Affirmed Baa3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on Dec. 11, 2015, Affirmed
Ba1 (sf)
Cl. G, Affirmed Ba2 (sf); previously on Dec. 11, 2015, Affirmed
Ba2 (sf)
Cl. H, Affirmed Ba3 (sf); previously on Dec. 11, 2015, Affirmed
Ba3 (sf)
Cl. J, Affirmed B1 (sf); previously on Dec. 11, 2015, Affirmed
B1 (sf)
Cl. K, Affirmed B3 (sf); previously on Dec. 11, 2015, Affirmed
B3 (sf)
Cl. L, Downgraded to Caa2 (sf); previously on Dec. 11, 2015,
Affirmed Caa1 (sf)
Cl. XC, Affirmed Ba3 (sf); previously on Dec. 11, 2015, Affirmed
Ba3 (sf)
RATINGS RATIONALE
The ratings on four P&I classes were 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 11% since Moody's last review. In
addition, loans constituting 75% of the pool that have debt yields
exceeding 10% are scheduled to mature within the next 12 months.
The rating on Class L was downgraded due to realized and
anticipated losses from specially serviced and troubled loans that
were higher than Moody's had previously expected.
The ratings on eight 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, Class XC, 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 3.5% of the
current balance, compared to 2.7% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.5% of the original
pooled balance, compared to 1.9% 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 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 16, compared to 19 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 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 Oct. 12, 2016, distribution date, the transaction's
aggregate certificate balance has decreased by 38% to
$322.8 million from $518.1 million at securitization. The
certificates are collateralized by 41 mortgage loans ranging in
size from less than 1% to 14% of the pool, with the top ten loans
constituting 67.8% of the pool. Two loans, constituting 13.2% of
the pool, have investment-grade structured credit assessments. One
loan, constituting 1.7% of the pool, has defeased and is secured by
Canadian government securities.
Twelve loans, constituting 28.2% 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.
One loan has been liquidated from the pool, resulting in a realized
loss of $1.32 million (for a loss severity of 41.5%). One loan,
constituting 2.1% of the pool, is currently in special servicing.
The specially serviced loan is the Days Inn Hotel, formerly known
as the Best Western Grand Mountain,
($6.82 million -- 2.1% of the pool), which is secured by an 81 room
limited service hotel located in Grande Cache, Alberta. The loan
transferred to special servicing in March 2016 for imminent default
and has been delinquent seven of the last 12 months. As of
December 2015, the occupancy was 43%, down from 62% in 2014 and 55%
in 2013.
Moody's has assumed a high default probability for one poorly
performing loan, constituting just over 1% of the pool, and has
estimated an aggregate loss of $3.52 million (a 34% expected loss
on average) from specially serviced and troubled loans.
Moody's received full year 2015 operating results for 100% of the
pool. Moody's weighted average conduit LTV is 85%, compared to 83%
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 9.6% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.0%.
Moody's actual and stressed conduit DSCRs are 1.37X and 1.19X,
respectively, compared to 1.41X and 1.24X 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 largest loan with a structured credit assessment is the Atrium
on Bay Pooled Interest Loan ($37.2 million -- 11.5% of the pool),
which represents a pari passu interest in a $111.7 million first
mortgage loan. The loan is secured by a 1.05 million square foot
(SF) mixed-use complex located in Toronto, Ontario. There is also
a $74 million B note secured by the property that is held outside
the trust. H&R REIT acquired the subject property in June 2011.
The property was 96% leased as of December 2015. The other pari
passu interests are held in REALT 2007-1 and REALT 2007-2. Moody's
structured credit assessment and stressed DSCR are aa1 (sca.pd) and
1.90X, respectively.
The other loan with a structured credit assessment is the 107
Woodlawn Road West Loan ($5.53 million -- 1.7% of the pool), which
is secured by a 618,000 SF industrial facility in Guelph, Ontario.
The property is 100% leased to Synnex Canada, a distributor of
technology products to resellers, through February 2019. The loan
is amortizing on a 15 year schedule and has paid down 54% since
securitization. Moody's structured credit assessment and stressed
DSCR are aaa (sca.pd) and 2.73X, respectively.
The top three conduit loans represent 29% of the pool balance. The
largest loan is the Londonderry Mall Loan ($44.7 million -- 13.9%
of the pool), which is secured by a 777,000 SF two-level enclosed
regional shopping center in Edmonton, Alberta. The loan represents
a pari passu interest in a $67 million first mortgage loan. In
2014, the mall announced a $130 million renovation project, which
would include interior and exterior improvements, with a completion
date in the fall of 2017. As of December 2015, the property was
63% leased, down from 76% at yearend 2014. Moody's LTV and stressed
DSCR are 91% and 1.01X, respectively.
The second largest loan is the Mega Centre Cote-Vertu Loan ($24.1
million -- 7.5% of the pool), which is secured by a 277,000 SF
retail property built in 1973 and renovated most recently in 2013.
The property, located in Montreal, Quebec, is anchored by Walmart
Canada. As of December 2015, the property was 98% leased, compared
to 95% at yearend 2014. Moody's LTV and stressed DSCR are 89% and
1.03X, respectively.
The third largest loan is the Atrium II Loan ($23.9 million -- 7.4%
of the pool), which is secured by a eight story, 110,000 SF office
building in Calgary, Alberta. As of December 2015, the property
was 78% leased, unchanged from the prior year and down from 85% in
2013. Property performance has improved due to a decrease in
expenses. Moody's LTV and stressed DSCR are 138% and 0.71X,
respectively.
SHACKLETON 2016-IX: S&P Assigns BB Rating on Class E Notes
----------------------------------------------------------
S&P Global Ratings assigned its ratings to Shackleton 2016-IX CLO
Ltd./Shackleton 2016-IX CLO LLC's $370.00 million floating-rate
notes.
The note issuance is a collateralized loan obligation transaction
backed by broadly syndicated speculative-grade senior secured term
loans.
The rating reflects S&P's view of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term
loans that are governed by collateral quality tests. The
credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
Shackleton 2016-IX CLO Ltd./Shackleton 2016-IX CLO LLC
Class Rating Amount
(mil. $)
X AAA (sf) 2.00
A AAA (sf) 254.00
B AA (sf) 50.00
C (deferrable) A (sf) 24.00
D (deferrable) BBB (sf) 20.00
E (deferrable) BB (sf) 20.00
Class 1 sub notes NR 39.50
Class 2 sub notes NR 3.00
NR--Not rated.
SHELLPOINT CO-ORIGINATOR 2016-1: Moody's Rates Cl. B-4 Certs Ba2
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 64
classes of residential mortgage-backed securities (RMBS) issued by
Shellpoint Co-Originator Trust 2016-1. The ratings range from
(P)Aaa (sf) to (P)Ba2 (sf).
The certificates are backed by two pools of prime quality, fixed
and adjustable rate, first-lien mortgage loans originated by
various originators. The first pool consists of 30-year fixed and
adjustable rate mortgages (Group 1) and the second pool consists of
15-year fixed rate mortgages (Group 2). Shellpoint Mortgage
Servicing is the primary servicer, Wells Fargo Bank, N.A. is the
master servicer and Wilmington Savings Fund Society, FSB, d/b/a
Christiana Trust is the trustee.
The complete rating actions are:
Issuer: Shellpoint Co-Originator Trust 2016-1
Cl. 1A-1, Assigned (P)Aaa (sf)
Cl. 1A-2, Assigned (P)Aaa (sf)
Cl. 1A-3, Assigned (P)Aaa (sf)
Cl. 1A-4, Assigned (P)Aaa (sf)
Cl. 1A-5, Assigned (P)Aaa (sf)
Cl. 1A-6, Assigned (P)Aaa (sf)
Cl. 1A-7, Assigned (P)Aaa (sf)
Cl. 1A-8, Assigned (P)Aaa (sf)
Cl. 1A-9, Assigned (P)Aaa (sf)
Cl. 1A-10, Assigned (P)Aaa (sf)
Cl. 1A-11, Assigned (P)Aaa (sf)
Cl. 1A-12, Assigned (P)Aaa (sf)
Cl. 1A-13, Assigned (P)Aaa (sf)
Cl. 1A-14, Assigned (P)Aaa (sf)
Cl. 1A-15, Assigned (P)Aaa (sf)
Cl. 1A-16, Assigned (P)Aaa (sf)
Cl. 1A-17, Assigned (P)Aaa (sf)
Cl. 1A-18, Assigned (P)Aaa (sf)
Cl. 1A-19, Assigned (P)Aa1 (sf)
Cl. 1A-20, Assigned (P)Aa1 (sf)
Cl. 1A-21, Assigned (P)Aa1 (sf)
Cl. 1A-22, Assigned (P)Aaa (sf)
Cl. 1A-23, Assigned (P)Aaa (sf)
Cl. 1A-24, Assigned (P)Aaa (sf)
Cl. 1A-IO1, Assigned (P)Aaa (sf)
Cl. 1A-IO2, Assigned (P)Aaa (sf)
Cl. 1A-IO3, Assigned (P)Aaa (sf)
Cl. 1A-IO4, Assigned (P)Aaa (sf)
Cl. 1A-IO5, Assigned (P)Aaa (sf)
Cl. 1A-IO6, Assigned (P)Aaa (sf)
Cl. 1A-IO7, Assigned (P)Aaa (sf)
Cl. 1A-IO8, Assigned (P)Aaa (sf)
Cl. 1A-IO9, Assigned (P)Aaa (sf)
Cl. 1A-IO10, Assigned (P)Aaa (sf)
Cl. 1A-IO11, Assigned (P)Aaa (sf)
Cl. 1A-IO12, Assigned (P)Aaa (sf)
Cl. 1A-IO13, Assigned (P)Aaa (sf)
Cl. 1A-IO14, Assigned (P)Aaa (sf)
Cl. 1A-IO15, Assigned (P)Aaa (sf)
Cl. 1A-IO16, Assigned (P)Aaa (sf)
Cl. 1A-IO17, Assigned (P)Aaa (sf)
Cl. 1A-IO18, Assigned (P)Aaa (sf)
Cl. 1A-IO19, Assigned (P)Aaa (sf)
Cl. 1A-IO20, Assigned (P)Aa1 (sf)
Cl. 1A-IO21, Assigned (P)Aa1 (sf)
Cl. 1A-IO22, Assigned (P)Aa1 (sf)
Cl. 1A-IO23, Assigned (P)Aaa (sf)
Cl. 1A-IO24, Assigned (P)Aaa (sf)
Cl. 1A-IO25, Assigned (P)Aaa (sf)
Cl. 2A-1, Assigned (P)Aaa (sf)
Cl. 2A-2, Assigned (P)Aaa (sf)
Cl. 2A-3, Assigned (P)Aaa (sf)
Cl. 2A-4, Assigned (P)Aaa (sf)
Cl. 2A-5, Assigned (P)Aaa (sf)
Cl. 2A-6, Assigned (P)Aaa (sf)
Cl. 2A-IO1, Assigned (P)Aaa (sf)
Cl. 2A-IO2, Assigned (P)Aaa (sf)
Cl. 2A-IO3, Assigned (P)Aaa (sf)
Cl. 2A-IO4, Assigned (P)Aaa (sf)
Cl. A-M, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A2 (sf)
Cl. B-3, Assigned (P)Baa2 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Expected cumulative net losses on Group 1 are 0.45% and reach
5.45%% at a stress level consistent with Aaa ratings. Expected
cumulative net losses for Group 2 are 0.20% and reach 2.20% at a
stress level consistent with Aaa ratings.
The collateral quality for this transaction, by itself, is
consistent with other prime transactions that Moody's recently
rated. The Aaa Moody's Individual Loan Analysis (MILAN) credit
enhancement (CE), inclusive of concentration adjustments, is 4.94%
for Group 1 and 1.93% for Group 2. Moody's increased the MILAN
model's CE by 0.51% for Group 1 and 0.27% for Group 2 for
qualitative factors and adjustments not factored in the model.
Loan-level adjustments are based on: DTI, self-employment status,
channel of origination, number of mortgaged properties, and the
presence of HOA fees for properties located in super lien states.
Moody's also made adjustments to the model output based on the
originators for the pool. Moody's based the MILAN model on
stressed trajectories of home prices, unemployment rates and
interest rates, at a monthly frequency over a 10-year period.
Collateral Description
The SCOT 2016-1 transaction is a securitization of 486 first lien
residential mortgage loans with an unpaid principal balance of
$353,680,581. The loans in this transaction have strong borrower
characteristics with a weighted average original FICO score of 765
and a weighted-average original combined loan-to-value ratio (CLTV)
of 68.6%. In addition, 30.0% of the borrowers are self-employed
and refinance loans comprise slightly over 51.0% of the aggregate
pool. The pool has a high geographic concentration with 46.7% of
the aggregate pool located in California and 17.4% located in the
Los Angeles-Long Beach-Anaheim MSA.
There are 24 originators in the transaction. The largest
originators in the pool by balance are JMAC Lending, Inc. (14.5%),
PrimeLending (13.2%), and Caliber Home Loans, Inc. (13.1%).
Moody's assess PrimeLending, Caliber Home Loans and New Penn
Financial LLC as above average originators of prime jumbo
residential mortgage loans. Bank of America acquired loans
represent approximately 96.3% of the combined pool. Moody's
currently do not have an assessment of Bank of America as an
aggregator of prime jumbo residential mortgage loans.
All of the mortgage loans in SCOT 2016-1 will be serviced by
Shellpoint Mortgage Servicing (SMS). Moody's assess SMS at SQ3+,
indicating an average servicing ability as a primary servicer of
prime residential mortgage loans. Moody's assessment reflects
Shellpoint Mortgage Servicing's above average collection abilities,
average loss mitigation results, above average foreclosure and REO
timeline management, above average loan administration and below
average servicing stability. Wells Fargo Bank, N.A. (SQ1- master
servicer assessment) will serve as the master servicer.
Third Party Review and Reps & Warranties (R&W)
Three third party review (TPR) firms verified the accuracy of the
loan-level information that the sponsor gave Moody's. These firms
conducted detailed credit, property valuation, data integrity and
regulatory reviews on 100% of the mortgage pool. The TPR results
indicate that the majority of reviewed loans were in compliance
with originators' underwriting guidelines, no material compliance
or data issues, and no appraisal defects.
New Penn and each originator of a loan acquired by Bank of America
and New Penn will provide comprehensive loan level R&W for their
respective loans. For Bank of America aggregated loans, the bank
will assign each originator's R&W to New Penn, who will assign to
the depositor, which will assign to the trust. To mitigate the
potential concerns regarding Bank of America originators' ability
to meet their respective R&W obligations, New Penn will backstop
the R&Ws for all originators' loans acquired by the bank as well as
originators' loans acquired by New Penn. New Penn's obligation to
backstop third party R&Ws will terminate 5 years after the closing
date. While Moody's acknowledges New Penn's relatively weak
financial strength, the collateral pool benefits from the diversity
of the originators that sourced the loans. In addition, Shellpoint
Partners LLC will act as guarantor for New Penn in the event that
New Penn has insufficient funds to fulfill its repurchase
obligation. Moody's notes that Shellpoint Partners' financial
strength is also weak.
Trustee and Master Servicer
The transaction trustee is Wilmington Savings Fund Society, FSB,
d/b/a Christiana Trust. The custodian and securities administrator
functions will be performed by Wells Fargo Bank, N.A. In addition,
Wells Fargo is the master servicer and is responsible for servicer
oversight, termination of servicers and for the appointment of
successor servicers. As master servicer, Wells Fargo is also
committed to act as successor if no other successor servicer can be
found. Moody's assess Wells Fargo as a SQ1- (strong) master
servicer of residential loans.
Tail Risk & Subordination Floor
The transaction has a shifting interest structure that allows
subordinated bonds to receive principal payments under certain
defined scenarios. Because a shifting interest structure allows
subordinated bonds to pay down over time as the loan pool shrinks,
senior bonds are exposed to increased performance volatility, known
as tail risk. The transaction provides for a senior subordination
floor of 1.40% of the closing pool balance, which mitigates tail
risk by protecting the senior bonds from eroding credit enhancement
over time.
Y-Structure with Structural Updates
The transaction is structured as a two-group Y-structure. Compared
to some Y-structures that Moody's has rated, the extent of loss
allocation across groups is limited. For example, realized losses
in a given group are allocated to the super senior bonds for that
group before the senior support bonds of the unrelated group.
In SCOT 2016-1 all funds from the two groups of mortgages are
commingled, i.e., there is only one available distribution amount.
The percentage of available principal allocated to each group of
senior certificates is based on the "principal collections" in each
respective pool. Principal collections are defined to include the
principal portion of scheduled payments whether or not received, as
well as the principal portion of prepayments, liquidation proceeds,
subsequent recoveries and other amounts. Due to this definition,
senior bonds in one group could become under-collateralized if
there are delinquencies in the unrelated group for which the
servicer has stopped advancing. This is because the delinquent
pool is entitled to receive its scheduled principal payments even
if they are not received. This could consume available funds that
are generated by the performing group's collateral.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
SHELLPOINT CO-ORIGINATOR 2016-1: Moody's Rates Cl. B-4 Certs Ba2
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 64
classes of residential mortgage-backed securities (RMBS) issued by
Shellpoint Co-Originator Trust 2016-1 (SCOT 2016-1). The ratings
range from (P)Aaa (sf) to (P)Ba2 (sf).
The certificates are backed by two pools of prime quality, fixed
and adjustable rate, first-lien mortgage loans originated by
various originators. The first pool consists of 30-year fixed and
adjustable rate mortgages (Group 1) and the second pool consists of
15-year fixed rate mortgages (Group 2). Shellpoint Mortgage
Servicing is the primary servicer, Wells Fargo Bank, N.A. is the
master servicer and Wilmington Savings Fund Society, FSB, d/b/a
Christiana Trust is the trustee.
The complete rating actions are:
Issuer: Shellpoint Co-Originator Trust 2016-1
Cl. 1A-1, Definitive Rating Assigned Aaa (sf)
Cl. 1A-2, Definitive Rating Assigned Aaa (sf)
Cl. 1A-3, Definitive Rating Assigned Aaa (sf)
Cl. 1A-4, Definitive Rating Assigned Aaa (sf)
Cl. 1A-5, Definitive Rating Assigned Aaa (sf)
Cl. 1A-6, Definitive Rating Assigned Aaa (sf)
Cl. 1A-7, Definitive Rating Assigned Aaa (sf)
Cl. 1A-8, Definitive Rating Assigned Aaa (sf)
Cl. 1A-9, Definitive Rating Assigned Aaa (sf)
Cl. 1A-10, Definitive Rating Assigned Aaa (sf)
Cl. 1A-11, Definitive Rating Assigned Aaa (sf)
Cl. 1A-12, Definitive Rating Assigned Aaa (sf)
Cl. 1A-13, Definitive Rating Assigned Aaa (sf)
Cl. 1A-14, Definitive Rating Assigned Aaa (sf)
Cl. 1A-15, Definitive Rating Assigned Aaa (sf)
Cl. 1A-16, Definitive Rating Assigned Aaa (sf)
Cl. 1A-17, Definitive Rating Assigned Aaa (sf)
Cl. 1A-18, Definitive Rating Assigned Aaa (sf)
Cl. 1A-19, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-20, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-21, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-22, Definitive Rating Assigned Aaa (sf)
Cl. 1A-23, Definitive Rating Assigned Aaa (sf)
Cl. 1A-24, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO1, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO2, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO3, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO4, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO5, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO6, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO7, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO8, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO9, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO10, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO11, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO12, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO13, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO14, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO15, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO16, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO17, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO18, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO19, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO20, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-IO21, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-IO22, Definitive Rating Assigned Aa1 (sf)
Cl. 1A-IO23, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO24, Definitive Rating Assigned Aaa (sf)
Cl. 1A-IO25, Definitive Rating Assigned Aaa (sf)
Cl. 2A-1, Definitive Rating Assigned Aaa (sf)
Cl. 2A-2, Definitive Rating Assigned Aaa (sf)
Cl. 2A-3, Definitive Rating Assigned Aaa (sf)
Cl. 2A-4, Definitive Rating Assigned Aaa (sf)
Cl. 2A-5, Definitive Rating Assigned Aaa (sf)
Cl. 2A-6, Definitive Rating Assigned Aaa (sf)
Cl. 2A-IO1, Definitive Rating Assigned Aaa (sf)
Cl. 2A-IO2, Definitive Rating Assigned Aaa (sf)
Cl. 2A-IO3, Definitive Rating Assigned Aaa (sf)
Cl. 2A-IO4, Definitive Rating Assigned Aaa (sf)
Cl. A-M, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Expected cumulative net losses on Group 1 are 0.45% and reach 5.45%
at a stress level consistent with Aaa ratings. Expected cumulative
net losses for Group 2 are 0.20% and reach 2.20% at a stress level
consistent with Aaa ratings.
The collateral quality for this transaction, by itself, is
consistent with other prime transactions that Moody's recently
rated. The Aaa Moody's Individual Loan Analysis (MILAN) credit
enhancement (CE), inclusive of concentration adjustments, is 4.94%
for Group 1 and 1.93% for Group 2. Moody's increased the MILAN
model's CE by 0.51% for Group 1 and 0.27% for Group 2 for
qualitative factors and adjustments not factored in the model.
Loan-level adjustments are based on: DTI, self-employment status,
channel of origination, number of mortgaged properties, and the
presence of HOA fees for properties located in super lien states.
Moody's also made adjustments to the model output based on the
originators for the pool. Moody's based the MILAN model on
stressed trajectories of home prices, unemployment rates and
interest rates, at a monthly frequency over a 10-year period.
Collateral Description
The SCOT 2016-1 transaction is a securitization of 486 first lien
residential mortgage loans with an unpaid principal balance of
$353,680,581. The loans in this transaction have strong borrower
characteristics with a weighted average original FICO score of 765
and a weighted-average original combined loan-to-value ratio (CLTV)
of 68.6%. In addition, 30.0% of the borrowers are self-employed
and refinance loans comprise slightly over 51.0% of the aggregate
pool. The pool has a high geographic concentration with 46.7% of
the aggregate pool located in California and 17.4% located in the
Los Angeles-Long Beach-Anaheim MSA.
There are 24 originators in the transaction. The largest
originators in the pool by balance are JMAC Lending, Inc. (14.5%),
PrimeLending (13.2%), and Caliber Home Loans, Inc. (13.1%). We
assess PrimeLending, Caliber Home Loans and New Penn Financial LLC
as above average originators of prime jumbo residential mortgage
loans. Bank of America acquired loans represent approximately
96.3% of the combined pool. Moody's currently do not have an
assessment of Bank of America as an aggregator of prime jumbo
residential mortgage loans.
All of the mortgage loans in SCOT 2016-1 will be serviced by
Shellpoint Mortgage Servicing (SMS). Moody's assess SMS at SQ3+,
indicating an average servicing ability as a primary servicer of
prime residential mortgage loans. Moody's assessment reflects
Shellpoint Mortgage Servicing's above average collection abilities,
average loss mitigation results, above average foreclosure and REO
timeline management, above average loan administration and below
average servicing stability. Wells Fargo Bank, N.A. (SQ1 master
servicer assessment) will serve as the master servicer.
Third Party Review and Reps & Warranties (R&W)
Three third party review (TPR) firms verified the accuracy of the
loan-level information that the sponsor gave Moody's. These firms
conducted detailed credit, property valuation, data integrity and
regulatory reviews on 100% of the mortgage pool. The TPR results
indicate that the majority of reviewed loans were in compliance
with the originators' underwriting guidelines, had no material
compliance or data issues, and no appraisal defects.
New Penn and each originator of a loan acquired by Bank of America
and New Penn will provide comprehensive loan level R&W for their
respective loans. For Bank of America aggregated loans, the bank
will assign each originator's R&W to New Penn, who will assign to
the depositor, which will assign to the trust. To mitigate the
potential concerns regarding Bank of America originators' ability
to meet their respective R&W obligations, New Penn will backstop
the R&Ws for all originators' loans acquired by the bank as well as
originators' loans acquired by New Penn. New Penn's obligation to
backstop third party R&Ws will terminate 5 years after the closing
date. While Moody's acknowledges New Penn's relatively weak
financial strength, the collateral pool benefits from the diversity
of the originators that sourced the loans. In addition, Shellpoint
Partners LLC will act as guarantor for New Penn in the event that
New Penn has insufficient funds to fulfill its repurchase
obligation. Moody's notes that Shellpoint Partners' financial
strength is also weak.
Trustee and Master Servicer
The transaction trustee is Wilmington Savings Fund Society, FSB,
d/b/a Christiana Trust. The custodian and securities administrator
functions will be performed by Wells Fargo Bank, N.A. In addition,
Wells Fargo is the master servicer and is responsible for servicer
oversight, termination of servicers and for the appointment of
successor servicers. As master servicer, Wells Fargo is also
committed to act as successor if no other successor servicer can be
found. Moody's assess Wells Fargo as a SQ1 (strong) master
servicer of residential loans.
Tail Risk & Subordination Floor
The transaction has a shifting interest structure that allows
subordinated bonds to receive principal payments under certain
defined scenarios. Because a shifting interest structure allows
subordinated bonds to pay down over time as the loan pool shrinks,
senior bonds are exposed to increased performance volatility, known
as tail risk. The transaction provides for a senior subordination
floor of 1.40% of the closing pool balance, which mitigates tail
risk by protecting the senior bonds from eroding credit enhancement
over time.
Y-Structure with Structural Updates
The transaction is structured as a two-group Y-structure. Compared
to some Y-structures that Moody's has rated, the extent of loss
allocation across groups is limited. For example, realized losses
in a given group are allocated to the super senior bonds for that
group before the senior support bonds of the unrelated group.
In SCOT 2016-1 all funds from the two groups of mortgages are
commingled, i.e., there is only one available distribution amount.
The percentage of available principal allocated to each group of
senior certificates is based on the "principal collections" in each
respective pool. Principal collections are defined to include the
principal portion of scheduled payments whether or not received, as
well as the principal portion of prepayments, liquidation proceeds,
subsequent recoveries and other amounts. Due to this definition,
senior bonds in one group could become under-collateralized if
there are delinquencies in the unrelated group for which the
servicer has stopped advancing. This is because the delinquent
pool is entitled to receive its scheduled principal payments even
if they are not received. This could consume available funds that
are generated by the performing group's collateral.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
SLM STUDENT 2006-1: Fitch Lowers Rating on Cl. B Notes to 'Bsf'
---------------------------------------------------------------
Fitch Ratings has taken these rating actions on SLM Student Loan
Trust 2006-1 (SLM 2006-1):
-- Class A-4 affirmed at 'AAAsf'; Outlook Stable;
-- Class A-5 downgraded to 'Bsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class B downgraded to 'Bsf' from 'AA-sf'; removed from
Rating Watch Negative and assigned Outlook Stable.
The class A-5 notes miss their legal final maturity date under both
Fitch's credit and maturity base cases. This technical default
would result in interest payments being diverted away from class B,
which would cause that note to default as well. In downgrading to
'Bsf' rather than 'CCCsf' or below, Fitch has considered
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, the revolving credit agreement in
place for the benefit of the noteholders, and the eventual full
payment of principal in modelling. Based on the current trajectory
of the pool, Fitch estimates in six to nine months the pool factor
will reach 10% which will cause the trust to stop releasing cash
and give Navient the option to call the bonds.
The trust has entered into a revolving credit agreement with
Navient by which it may borrow funds at maturity in order to pay
the off notes. Because Navient has the option but not the
obligation to lend to the trust, Fitch cannot give full
quantitative credit to this agreement. However, the agreement does
provide qualitative comfort that Navient is committed to limiting
investors' exposure to maturity risk.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of
15.75% and a 47.25% default rate under the 'AAA' credit stress
scenario. The base case default assumption of 15.75% implies a
constant default rate of 5.0% (assuming a weighted average life of
9.5 years) consistent with the trailing-12- month (TTM) average
constant default rate utilized in the maturity stresses. Fitch
applies the standard default timing curve. The claim reject rate
is assumed to be 0.50% in the base case and 3% in the 'AAA' case.
The trailing-12-month average of deferment, forbearance,
income-based repayment (prior to adjustment) and constant
prepayment rate (voluntary and involuntary) are 11.9%, 15.8%, 15.6%
and 11.3%, respectively, which are used as the starting point in
cash flow modeling. Subsequent declines or increases are modeled
as per criteria. The borrower benefit is assumed to be
approximately 0.01%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and
interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement is provided by excess spread
overcollateralization, and for the class A notes, subordination. As
of September 2016 distribution, total and senior effective parity
ratios are 100.94% (0.93% CE; inclusive of the reserve account) and
141.00% (29.08% CE), respectively. Liquidity support is provided
by a reserve account sized at the greater of 0.25% of the pool
balance and $2,502,266, currently equal to $2,502,266. The trust
will continue to release cash as long as 100.00% total parity is
maintained.
Maturity Risk: Fitch's Student Loan ABS (SLABS) cash flow model
indicates that the A-4 notes are paid in full on or prior to the
legal final maturity date under the 'AAA' rating scenarios. The
class A-5 notes, however, do not pay off before their maturity date
in any of Fitch's modeling maturity stress scenarios, including the
base cases. If the breach of the class A-5 maturity date triggers
an event of default, interest payments will be diverted away from
the class B notes, causing them to fail the base cases as well.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch
believes Navient to be an acceptable servicer of FFELP student
loans.
CRITERIA VARIATIONS
Under the 'Counterparty Criteria for Structured Finance and Covered
Bonds', dated July 18, 2016, Fitch looks to its own ratings in
analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of permitted investments for this
deal allows for the possibility of using investments not rated by
Fitch, which represents a criteria variation. Fitch does not
believe such variation has a measurable impact upon the ratings
assigned.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating, given the strong
linkage to the U.S. sovereign by nature of the reinsurance and SAP
provided by ED. Sovereign risks are not addressed in Fitch's
sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the
related lifetime default rate and basis spread assumptions. In
addition, Fitch conducted a maturity sensitivity analysis by
running different assumptions for the IBR usage and prepayment
rate. The results below should only be considered as one potential
model implied outcome as the transaction is exposed to multiple
risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf'
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf'
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B
'CCCsf'
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B
'CCCsf'
Maturity Stress Rating Sensitivity
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf'
-- CPR increase 100%: class A 'AAsf'; class B 'BBBsf'
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
The stresses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration in trust
performance. Rating sensitivity should not be used as an indicator
of future rating performance.
SLM STUDENT 2007-2: Fitch Lowers Rating on Cl. A-4 Notes to 'Bsf'
-----------------------------------------------------------------
Fitch Ratings has taken these rating actions on SLM Student Loan
Trust 2007-2 (SLM 2007-2):
-- Class A-3 downgraded to 'BBBsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class A-4 downgraded to 'Bsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class B downgraded to 'Bsf' from 'Asf'; removed from Rating
Watch Negative and assigned Outlook Stable.
The class A-3 notes miss their legal final maturity date under
Fitch's maturity 'BBB' cases. This technical default would result
in interest payments being diverted away from class B, which would
cause that note to default as well. Downgrading to 'BBBsf' rather
than 'BBsf, is because the maturity date is over two years away,
and the notes would be eligible for a one category rating tolerance
described in the U.S. FFELP Student Loan ABS criteria.
The class A-4 notes miss their legal final maturity date under both
Fitch's credit and maturity base cases. This technical default
would result in interest payments being diverted away from class B,
which would cause that note to default as well. In downgrading to
'Bsf' rather than 'CCCsf' or below, Fitch has considered
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, the revolving credit agreement in
place for the benefit of the noteholders, and the eventual full
payment of principal in modelling.
The trust has entered into a revolving credit agreement with
Navient by which it may borrow funds at maturity in order to pay
the off notes. Because Navient has the option but not the
obligation to lend to the trust, Fitch cannot give full
quantitative credit to this agreement. However, the agreement does
provide qualitative comfort that Navient is committed to limiting
investors' exposure to maturity risk.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of
14.75% and a 44.25% default rate under the 'AAA' credit stress
scenario. The base case default assumption of 14.75% implies a
constant default rate of 4.5% (assuming a weighted average life of
9.9 years) consistent with the trailing 12 month (TTM) average
constant default rate utilized in the maturity stresses. Fitch
applies the standard default timing curve. The claim reject rate
is assumed to be 0.50% in the base case and 3% in the 'AAA' case.
The trailing 12 month average of deferment, forbearance,
Income-based repayment (prior to adjustment) and constant
prepayment rate (voluntary and involuntary) are 11.3%, 16.5%, 15.9%
and 11.5%, respectively, which are used as the starting point in
cash flow modeling. Subsequent declines or increases are modeled
as per criteria. The borrower benefit is assumed to be
approximately 0.01%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and
interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement is provided by excess spread,
overcollateralization, and, for the class A notes, subordination.
As of September 2016 distribution, total and senior effective
parity ratios, respectively, are 100.46% (0.46% CE; inclusive of
the reserve account) and 116.83% (14.40% CE). Liquidity support is
provided by a reserve account sized at the greater of 0.25% of the
pool balance and $4,000,000, currently equal to $4,000,000. The
trust will continue to release cash as long as 100.00% total parity
is maintained.
Maturity Risk: Fitch's student loan ABS cash flow model indicates
that A-3 notes pass their maturity stress up to 'BB' scenarios. The
A-4 and B notes, do not pay off before their maturity date in
Fitch's modelling scenarios, including the base cases. If the
breach of the class A-3 or A-4 maturity date triggers an event of
default, interest payments will be diverted away from the class B
notes, causing them to fail the base cases as well.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch
believes Navient to be an acceptable servicer of FFELP student
loans.
CRITERIA VARIATIONS
Under the 'Counterparty Criteria for Structured Finance and Covered
Bonds', dated July 18, 2016, Fitch looks to its own ratings in
analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of permitted investments for this
deal allows for the possibility of using investments not rated by
Fitch, which represents a criteria variation. Fitch does not
believe such variation has a measurable impact upon the ratings
assigned.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating, given the strong
linkage to the U.S. sovereign by nature of the reinsurance and SAP
provided by ED. Sovereign risks are not addressed in Fitch's
sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the
related lifetime default rate and basis spread assumptions. In
addition, Fitch conducted a maturity sensitivity analysis by
running different assumptions for the IBR usage and prepayment
rate. The results below should only be considered as one potential
model implied outcome as the transaction is exposed to multiple
risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCf'; class B 'CCCsf'
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf'
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B
'CCCsf'
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B
'CCCsf'
Maturity Stress Rating Sensitivity
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf'
-- CPR increase 100%: class A 'Bsf'; class B 'CCCsf'
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
The stresses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration in trust
performance. Rating sensitivity should not be used as an indicator
of future rating performance.
SLM STUDENT 2007-3: Fitch Lowers Rating on 2 Tranches to 'Bsf'
--------------------------------------------------------------
Fitch Ratings has taken these rating actions on SLM Student Loan
Trust 2007-3 (SLM 2007-3):
-- Class A-3 downgraded to 'BBsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class A-4 downgraded to 'Bsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class B downgraded to 'Bsf' from 'Asf'; removed from Rating
Watch Negative and assigned Outlook Stable.
The class A-3 notes miss their legal final maturity date under
Fitch's maturity 'BB' cases. This technical default would result
in interest payments being diverted away from class B, which would
cause that note to default as well. Downgrading to 'BBsf' rather
than 'Bsf', is because the maturity date is over two years away,
and the notes would be eligible for a one category rating tolerance
described in the U.S. FFELP Student Loan ABS criteria.
The class A-4 notes miss their legal final maturity date under both
Fitch's credit and maturity base cases. This technical default
would result in interest payments being diverted away from class B,
which would cause that note to default as well. In downgrading to
'Bsf' rather than 'CCCsf' or below, Fitch has considered
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, the revolving credit agreement in
place for the benefit of the noteholders, and the eventual full
payment of principal in modelling.
The trust has entered into a revolving credit agreement with
Navient by which it may borrow funds at maturity in order to pay
the off notes. Because Navient has the option but not the
obligation to lend to the trust, Fitch cannot give full
quantitative credit to this agreement. However, the agreement does
provide qualitative comfort that Navient is committed to limiting
investors' exposure to maturity risk.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of
16.75% and a 50.25% default rate under the 'AAA' credit stress
scenario. The base case default assumption of 16.75% implies a
constant default rate of 5.0% (assuming a weighted average life of
9.9 years) consistent with the trailing 12 month (TTM) average
constant default rate utilized in the maturity stresses. Fitch
applies the standard default timing curve. The claim reject rate
is assumed to be 0.50% in the base case and 3% in the 'AAA' case.
The TTM average of deferment, forbearance, Income-based repayment
(prior to adjustment) and constant prepayment rate (voluntary and
involuntary) are 11.3%, 16.7%, 15.4% and 11.7%, respectively, which
are used as the starting point in cash flow modeling. Subsequent
declines or increases are modeled as per criteria. The borrower
benefit is assumed to be approximately 0.01%, based on information
provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and
interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement (CE) is provided by excess
spread, overcollateralization, and for the class A notes,
subordination. As of September 2016 distribution, total and senior
effective parity ratios, respectively, are 100.46% (0.46% CE;
inclusive of the reserve account) and 116.77% (14.36% CE).
Liquidity support is provided by a reserve account sized at the
greater of 0.25% of the pool balance and $3,003,866, currently
equal to $3,003,866. The trust will continue to release cash as
long as 100.00% total parity is maintained.
Maturity Risk: Fitch's SLABS cash flow model indicates that A-3
notes pass their maturity stress up to 'B' scenarios. The A-4 and
B notes do not pay off before their maturity date in Fitch's
modelling scenarios, including the base cases. If the breach of
the class A-3 or A-4 maturity date triggers an event of default,
interest payments will be diverted away from the class B notes,
causing them to fail the base cases as well.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch
believes Navient to be an acceptable servicer of FFELP student
loans.
CRITERIA VARIATIONS
Under the 'Counterparty Criteria for Structured Finance and Covered
Bonds', dated July 18, 2016, Fitch looks to its own ratings in
analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of permitted investments for this
deal allows for the possibility of using investments not rated by
Fitch, which represents a criteria variation. Fitch does not
believe such variation has a measurable impact upon the ratings
assigned.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating, given the strong
linkage to the U.S. sovereign by nature of the reinsurance and SAP
provided by ED. Sovereign risks are not addressed in Fitch's
sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the
related lifetime default rate and basis spread assumptions. In
addition, Fitch conducted a maturity sensitivity analysis by
running different assumptions for the IBR usage and prepayment
rate. The results below should only be considered as one potential
model implied outcome as the transaction is exposed to multiple
risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B
'CCCsf';
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B
'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- CPR increase 100%: class A 'CCCsf'; class B 'BBBsf';
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf';
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'.
It is important to note that the stresses are intended to provide
an indication of the rating sensitivity of the notes to unexpected
deterioration in trust performance. Rating sensitivity should not
be used as an indicator of future rating performance.
SLM STUDENT 2008-8: Fitch Lowers Rating on 2 Tranches to 'Bsf'
--------------------------------------------------------------
Fitch Ratings has taken these rating actions on SLM Student Loan
Trust 2008-8 (SLM 2008-8):
-- Class A-3 downgraded to 'AAsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class A-4 downgraded to 'Bsf' from 'AAAsf'; removed from
Rating Watch Negative and assigned Outlook Stable;
-- Class B downgraded to 'Bsf' from 'AA+sf'; removed from
Rating Watch Negative and assigned Outlook Stable.
The class A-3 notes miss their legal final maturity date under
Fitch's maturity 'AA' cases. This technical default would result
in interest payments being diverted away from class B, which would
cause that note to default as well. Downgrading to 'AAsf' rather
than 'Asf, is because the maturity date is over two years away, and
the notes would be eligible for a one category rating tolerance
described in the U.S. FFELP Student Loan ABS criteria.
The class A-4 notes miss their legal final maturity date under both
Fitch's credit and maturity base cases. This technical default
would result in interest payments being diverted away from class B,
which would cause that note to default as well. In downgrading to
'Bsf' rather than 'CCCsf' or below, Fitch has considered
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, the revolving credit agreement in
place for the benefit of the noteholders, and the eventual full
payment of principal in modelling.
The trust has entered into a revolving credit agreement with
Navient by which it may borrow funds at maturity in order to pay
the off notes. Because Navient has the option but not the
obligation to lend to the trust, Fitch cannot give full
quantitative credit to this agreement. However, the agreement does
provide qualitative comfort that Navient is committed to limiting
investors' exposure to maturity risk.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of
14.00% and a 42.00% default rate under the 'AAA' credit stress
scenario. The base case default assumption of 14.00% implies a
constant default rate of 4.1% (assuming a weighted average life of
10.3 years) consistent with the trailing 12 month (TTM) average
constant default rate utilized in the maturity stresses. Fitch
applies the standard default timing curve. The claim reject rate
is assumed to be 0.50% in the base case and 3% in the 'AAA' case.
The trailing 12 month average of deferment, forbearance,
Income-based repayment (prior to adjustment) and constant
prepayment rate (voluntary and involuntary) are 11.5%, 17.9%, 16.1%
and 12.1%, respectively, which are used as the starting point in
cash flow modeling. Subsequent declines or increases are modelled
as per criteria. The borrower benefit is assumed to be
approximately 0.03%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and
interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement is provided by excess spread,
overcollateralization, and for the class A notes, subordination.
As of September 2016 distribution, total and senior effective
parity ratios, respectively, are 103.37% (3.26% CE; inclusive of
the reserve account) and 112.29% (10.94% CE). Liquidity support is
provided by a reserve account sized at the greater of 0.25% of the
pool balance and $1,000,088, currently equal to $1,000,088. The
trust will continue to release cash as long as 103.09% total parity
is maintained.
Maturity Risk: Fitch's student loan ABS cash flow model indicates
that A-3 notes pass their maturity stress up to 'A' scenarios. The
A-4 and B notes, do not pay off before their maturity date in
Fitch's modeling scenarios, including the base cases. If the
breach of the class A-3 or A-4 maturity date triggers an event of
default, interest payments will be diverted away from the class B
notes, causing them to fail the base cases as well.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch
believes Navient to be an acceptable servicer of FFELP student
loans.
CRITERIA VARIATIONS
Under the 'Counterparty Criteria for Structured Finance and Covered
Bonds', dated July 18, 2016, Fitch looks to its own ratings in
analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of permitted investments for this
deal allows for the possibility of using investments not rated by
Fitch, which represents a criteria variation. Fitch does not
believe such variation has a measurable impact upon the ratings
assigned.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating, given the strong
linkage to the U.S. sovereign by nature of the reinsurance and SAP
provided by ED. Sovereign risks are not addressed in Fitch's
sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the
related lifetime default rate and basis spread assumptions. In
addition, Fitch conducted a maturity sensitivity analysis by
running different assumptions for the IBR usage and prepayment
rate. The results below should only be considered as one potential
model implied outcome as the transaction is exposed to multiple
risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf'
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf'
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B
'CCCsf'
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B
'CCCsf'
Maturity Stress Rating Sensitivity
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf'
-- CPR increase 100%: class A 'CCCsf'; class B 'BBBsf'
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
The stresses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration in trust
performance. Rating sensitivity should not be used as an indicator
of future rating performance.
SOUND POINT XIV: Moody's Assigns Ba3 Rating on Class E Notes
------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Sound Point CLO XIV, Ltd. (the "Issuer" or "Sound
Point CLO XIV").
Moody's rating action is as follows:
-- US$451,500,000 Class A Senior Secured Floating Rate Notes
due 2029 (the "Class A Notes"), Assigned Aaa (sf)
-- US$55,500,000 Class B-1 Senior Secured Floating Rate Notes
due 2029 (the "Class B-1 Notes"), Assigned Aa2 (sf)
-- US$25,000,000 Class B-2 Senior Secured Fixed Rate Notes due
2029 (the "Class B-2 Notes"), Assigned Aa2 (sf)
-- US$42,000,000 Class C Mezzanine Secured Deferrable Floating
Rate Notes due 2029 (the "Class C Notes"), Assigned A2 (sf)
-- US$35,000,000 Class D Mezzanine Secured Deferrable Floating
Rate Notes due 2029 (the "Class D Notes"), Assigned Baa3
(sf)
-- US$35,000,000 Class E Junior Secured Deferrable Floating
Rate Notes due 2029 (the "Class E Notes"), Assigned Ba3 (sf)
The Class A Notes, the Class B-1 Notes, the Class B-2 Notes, the
Class C Notes, the Class D Notes and the Class E Notes are referred
to herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Sound Point CLO XIV 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, unsecured loans and first-lien last-out loans. The
portfolio is approximately 60% ramped as of the closing date.
Sound Point Capital Management, LP (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 has issued 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 October 2016.
For modeling purposes, Moody's used the following base-case
assumptions:
-- Par amount: $700,000,000
-- Diversity Score: 55
-- Weighted Average Rating Factor (WARF): 2650
-- Weighted Average Spread (WAS): 3.90%
-- Weighted Average Coupon (WAC): 4.00%
-- Weighted Average Recovery Rate (WARR): 47.0%
-- 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
October 2016.
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 2650 to 3048)
Rating Impact in Rating Notches
-- Class A Notes: 0
-- Class B-1 Notes: -1
-- Class B-2 Notes: -1
-- Class C Notes: -1
-- Class D Notes: -1
-- Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2650 to 3445)
Rating Impact in Rating Notches
-- Class A Notes: -1
-- Class B-1 Notes: -3
-- Class B-2 Notes: -3
-- Class C Notes: -3
-- Class D Notes: -1
-- Class E Notes: -1
STEERS TRUST 2: Moody's Affirms Caa3 Ratings on 4 Trust Units
-------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
trust units issued by STEERS High-Grade CMBS Resecuritization Trust
2:
-- Series 2006-6, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
-- Series 2006-8, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
-- Series 2006-10, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
-- Series 2006-11, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
RATINGS RATIONALE
Moody's affirmed the ratings on the transaction because its key
transaction metrics are commensurate with existing ratings. The
significant amortization of the reference obligations offsets any
deterioration in credit quality (as evidence by the weighted
average rating factor and weighted average recovery rate). The
affirmation is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation (CRE CDO
Synthetic) transactions.
STEERS High-Grade CMBS Resecuritization Trust 2 is a static
synthetic transaction backed by a portfolio of credit default swaps
referencing 100% commercial mortgage backed securities (CMBS). The
CMBS reference obligations were securitized in 2005 (45.6%) and
2006 (54.4%). As of this review, 29.2% of the reference obligations
are publicly rated by Moody's.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these as actual parameters for static
deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has updated its assessments for the reference obligations
it does not rate. The rating agency modeled a bottom-dollar WARF of
1211, compared to 804 at last review. The current ratings on the
Moody's-rated reference obligations and the assessments of the
non-Moody's rated reference obligations are as follows: Aaa-Aa3 and
38.9% compared to 44.8% at last review, Baa1-Baa3 and 15.4%
compared to 18.7% at last review, Ba1-Ba3 and 6.7% compared to
19.8% at last review, B1-B3 and 39.0% compared to 16.7% at last
review.
Moody's modeled a WAL of 0.9 years, compared to 0.7 at last review.
The WAL is based on assumptions about extensions on the underlying
look-through CMBS loans in the reference obligations.
Moody's modeled a variable WARR of 12.1%, compared to 26.5% at last
review.
Moody's modeled a MAC of 49.3%, compared to 38.1% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the ratings and credit assessments of the reference obligations.
Holding all other key parameters static, notching down 100% of the
reference obligations by 1 notch would result in the modeled rating
movements of one notch downward (eg. 1 notch downward implies Baa3
to Ba1). Holding all other key parameters static, notching up 100%
of the reference obligations by 1 notch would result in the modeled
rating movements of one notch upward (eg. 1 notch upward implies
Baa3 to Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
STEERS TRUST: Moody's Affirms Caa3 Ratings on 3 Trust Units
-----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
trust units issued by STEERS High-Grade CMBS Resecuritization
Trust:
-- Series 2006-2, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
-- Series 2006-3, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
-- Series 2006-5, Affirmed Caa3 (sf); previously on Dec 10,
2015 Affirmed Caa3 (sf)
RATINGS RATIONALE
Moody's affirmed the ratings on the transaction because its key
transaction metrics are commensurate with existing ratings. The
significant amortization of the reference obligations offsets any
deterioration in credit quality (as evidence by the weighted
average rating factor and weighted average recovery rate). The
affirmation is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation (CRE CDO
Synthetic) transactions.
STEERS High-Grade CMBS Resecuritization Trust is a static synthetic
transaction backed by a portfolio of credit default swaps
referencing 100% commercial mortgage backed securities (CMBS). The
CMBS reference obligations were securitized in 2005 (45.6%) and
2006 (54.4%). As of this review, 29.2% of the reference obligations
are publicly rated by Moody's.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these as actual parameters for static
deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has updated its assessments for the reference obligations
it does not rate. The rating agency modeled a bottom-dollar WARF of
1211, compared to 804 at last review. The current ratings on the
Moody's-rated reference obligations and the assessments of the
non-Moody's rated reference obligations are as follows: Aaa-Aa3 and
38.9% compared to 44.8% at last review, Baa1-Baa3 and 15.4%
compared to 18.7% at last review, Ba1-Ba3 and 6.7% compared to
19.8% at last review, B1-B3 and 39.0% compared to 16.7% at last
review.
Moody's modeled a WAL of 0.9 years, compared to 0.7 at last review.
The WAL is based on assumptions about extensions on the underlying
look-through CMBS loans in the reference obligations.
Moody's modeled a variable WARR of 12.1%, compared to 26.5% at last
review.
Moody's modeled a MAC of 49.3%, compared to 38.1% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the ratings and credit assessments of the reference obligations.
Holding all other key parameters static, notching down 100% of the
reference obligations by 1 notch would result in the modeled rating
movements of one notch downward (eg. 1 notch downward implies Baa3
to Ba1). Holding all other key parameters static, notching up 100%
of the reference obligations by 1 notch would result in the modeled
rating movements of one notch upward (eg. 1 notch upward implies
Baa3 to Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
STRUCTURED FINANCE III: Moody's Hikes Class A Notes Rating to B2
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating on notes issued
by Structured Finance Advisors ABS CDO III, Ltd.:
-- Class A First Priority Senior Secured Floating Rate Notes
Due 2032 (current outstanding balance of $5,550,236),
Upgraded to B2 (sf); previously on October 9, 2014 Upgraded
to Caa3 (sf).
Structured Finance Advisors ABS CDO III, Ltd., issued in June 2002,
is a collateralized debt obligation backed primarily by a portfolio
of RMBS, ABS and CRE CDOs originated in 1996-2005.
RATINGS RATIONALE
The rating action is due primarily to the deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since November 2015. The Class A
notes have paid down by approximately 45%, or $4.5 million, since
that time. Based on Moody's calculation, the OC ratio applicable to
the Class A notes is currently 220.3%, versus 129.2% in November
2015. The paydown of the Class A notes is partially the result of
cash collections from certain assets treated as defaulted by the
trustee in amounts materially exceeding expectations.
The deal has also benefited from an improvement in the credit
quality of the underlying portfolio since November 2015. Based on
Moody's calculation, the weighted average rating factor is
currently 3962, compared to 5264 in November 2015.
On July 8, 2005, the trustee reported that the transaction
experienced an "Event of Default" as set forth in Section 5.1 (i)
of the indenture dated June 25, 2002. The Event of Default
continues. Holders of a majority of the controlling class have
directed the trustee to declare the notes immediately due and
payable. As a result of acceleration, the Class A notes will
receive all interest and principal proceeds until they are paid in
full.
Methodology Underlying the Rating Action
The principal methodology used in this rating was "Moody's Approach
to Rating SF CDOs," published in October 2016.
Factors That Would Lead To an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings, as described below:
-- Macroeconomic uncertainty: Primary causes of uncertainty
about assumptions are the extent of any deterioration in
either consumer or commercial credit conditions and in the
residential real estate property markets. The residential
real estate property market's uncertainties include housing
prices; the pace of residential mortgage foreclosures, loan
modifications and refinancing; the unemployment rate; and
interest rates.
-- Deleveraging: One source of uncertainty in this transaction
is whether deleveraging from principal proceeds, recoveries
from defaulted assets, and excess interest proceeds will
continue and at what pace. Faster than expected deleveraging
could have a significantly positive impact on the notes'
ratings.
-- Recovery of defaulted assets: The amount of recoveries
received from defaulted assets reported by the trustee and
those that Moody's assumes as having defaulted as well as
the timing of these recoveries create additional
uncertainty. Moody's analyzed defaulted assets assuming
limited recoveries, and therefore, realization of any
recoveries exceeding Moody's expectation in the future would
positively impact the notes' ratings.
-- Lack of portfolio granularity: The performance of the
portfolio depends to a large extent on the credit conditions
of a few large obligors Moody's rates non-investment-grade,
especially if they jump to default.
-- Amortization profile assumptions: Moody's modeled the
amortization of the underlying collateral portfolio based on
its assumed weighted average life (WAL). Regardless of the
WAL assumption, due to the sensitivity of amortization
assumption and its impact on the amount of principal
available to pay down the notes, Moody's supplemented its
analysis with various sensitivity analysis around the
amortization profile of the underlying collateral assets.
Loss and Cash Flow Analysis:
Moody's applies a Monte Carlo simulation framework in Moody's
CDOROM™ to model the loss distribution for SF CDOs. The simulated
defaults and recoveries for each of the Monte Carlo scenarios
define the reference pool's loss distribution. Moody's then uses
the loss distribution as an input in the CDOEdge™ cash flow
model.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes. Below is a summary of the impact
of different default probabilities (expressed in terms of WARF) on
all of the rated notes (by the difference in the number of notches
versus the current model output, for which a positive difference
corresponds to lower expected loss):
Caa ratings notched up by two rating notches (3040):
-- Class A: +1
-- Class B: 0
-- Class C: 0
Caa ratings notched down by two notches (4168):
-- Class A: 0
-- Class B: 0
-- Class C: 0
SYMPHONY CLO XVIII: Moody's Assigns (P)Ba3 Rating on Cl. E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of notes to be issued by Symphony CLO XVIII, Ltd.
Moody's rating action is:
$310,000,000 Class A Senior Floating Rate Notes due 2028,
Assigned (P)Aaa (sf)
$70,000,000 Class B Senior Floating Rate Notes due 2028,
Assigned (P)Aa2 (sf)
$28,750,000 Class C Deferrable Mezzanine Floating Rate Notes due
2028, Assigned (P)A2 (sf)
$31,250,000 Class D Deferrable Mezzanine Floating Rate Notes due
2028, Assigned (P)Baa3 (sf)
$20,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2028, Assigned (P)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."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected
losses posed to noteholders. The provisional 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.
Symphony XVIII is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated first-lien senior
secured corporate loans. At least 90% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10% of the portfolio may consist of second-lien loans and unsecured
loans. Moody's expects the portfolio to be approximately 70%
ramped as of the closing date.
Symphony Asset Management LLC will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four-and-a-half 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 October 2016.
For modeling purposes, Moody's used these base-case assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8 years.
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 2800 to 3220)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -1
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2800 to 3640)
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
TRADE MAPS 1: Fitch Affirms 'Bsf' Rating on Class D Notes
---------------------------------------------------------
Fitch Ratings has affirmed the following ratings for the series
2013-1 notes issued by Trade MAPS 1 Limited (Trade Maps):
-- $874.44 million class A notes at 'AAAsf';
-- $77.61 million class B notes at 'Asf';
-- $31.34 million class C notes at 'BBBsf';
-- $16.61 million class D notes at 'Bsf'.
The Rating Outlook is Stable.
Fitch's ratings address the timely payment of interest on a monthly
basis and ultimate payment of principal at legal final maturity.
Collateral on the series 2013-1 floating-rate notes consists of
local asset purchase entities (APEs) funding securities (or
offshore trust certificates), which are included in two asset
groups: Banco Santander, S.A. (Santander; Asset Group 1) and
Citibank, N.A. (Citi; Asset Group 2). Each APE funding security is
backed by a portfolio of dollar-denominated trade finance loan
receivables originated by local branches of a specific asset
group.
KEY RATING DRIVERS
Accumulation Period Commencement: The accumulation period for Citi
and Santander began on Sept. 1, 2016. Therefore, the issuer will
not acquire additional assets during this period. Funds allocable
to pay principal will be deposited into the distribution account
for the notes to be fully amortized by the expected principal
payment date, Dec. 10, 2016. As of Nov. 12, 2016, the funds
available in the distribution account are USD 768.5 million (76.8%
of the notes issued).
Increased Credit Enhancement: Asset basis credit enhancement for
all classes has significantly increased to 89.8%, 82.4%, 79.4% and
77.8% for class A, Class B, Class C and Class D, respectively, due
to the accumulation of cash in the distribution account. These
protections are considered sufficient to cover multiples of
historic defaults for each stress scenario at the current rating
levels.
Reduced Tenors: Trade finance assets (TFAs) are characterized by
short tenors. As the transaction is going through the accumulation
period, and no additional assets can be acquired, as of November
2016, weighted average remaining term is 4.49 days.
Diversified Portfolios: As of the November 2016 report date, the
portfolio remains fairly diversified, comprising 2,539 assets and
69 obligors (7,052 assets and 164 unique obligors at November
2015). The obligors are located in a variety of geographic
locations and industries. The largest country exposure is the U.S.,
at approximately 12% of the Trade MAPS portfolio balance (trade
finance assets plus cash in the distribution account), followed by
Brazil and Hong Kong with exposures of approximately 5% and 3.9%,
respectively.
No Defaults: The asset portfolios have been performing as expected
with no delinquents or charge-offs observed since closing.
'BBB-/BBB' Equivalent Asset Quality: The weighted average risk
factor (WARF) of the portfolio remained stable during the last
year, with an average WARF of 4.88 considered equivalent to
'BBB-/BBB'; current WARF is 1.50.
Negative Excess Spread Trigger: This three-consecutive-months
trigger allows for the termination of the revolving period for any
asset group, protecting investors from a deteriorating portfolio
that could kick off an amortization period with less than expected
credit enhancement. During 2016, excess spread has been
approximately 0.07% and 0.36% for Asset Group I and Asset Group II,
respectively.
Experienced Underwriters and Servicers: Citi and Santander are top
tier banks with many years of experience originating and servicing
trade finance loan portfolios. Fitch rates Citibank's Long-Term
Issuer-Default Rating (IDR) at 'A+'/Stable Outlook and Santander's
Long-Term IDR at 'A-'/Stable Outlook.
Non-shared Equity: The transaction benefits from collateralized
equity in the form of Program Subordinated Note provided by
Santander and Citi, collectively referred to as participating banks
(PBs). The equity amount is determined on a PB-specific basis
according to the credit quality of their respective portfolios and
was used only to cover the losses of each PB. At closing, the
equity portion of Citi and Santander was 2.88% and 5.00% of their
respective pool balances (equivalent to 1.42% and 2.53%,
respectively, of the Trade MAPS portfolio balance) and has remained
at that level during 2016.
Commingling Risk: Each PB's local branch or subsidiary originates
and services its own portfolio and will transfer collections to the
trust accounts on a weekly basis; or every two business days if the
servicer's Long-Term IDR is below 'A' or Short-Term IDR is below
'F1'. During this time, commingling is allowed. According to
Fitch's counterparty criteria for structured finance (SF)
transactions, both PBs are eligible indirect support counterparties
and commingling risk is considered immaterial.
Payment Interruption Risk: The transaction benefits from a reserve
account in an amount equal to six months of interest due and fees
on the series 2013-1 notes. This liquidity reserve mitigates the
payment interruption risk on the transaction, providing additional
time to notify the borrowers of the sale of the TFA and name a new
back-up servicer.
Set-off Risk: Amounts owed to the TFAs' obligors by the local
originators (Santander's or Citi's local branches) may be set off
against payments on such assets. This amount will be limited to 1%
in aggregate of each PB's pool balance for originators rated below
'A/F1'. Current set-off exposure on the indicative portfolios is
minimal and remedial actions are in place to reduce this risk.
RATING SENSITIVITIES
Ratings of the series 2013-1 notes are sensitive to decreases in
available CE as a result of higher default rates on the TFAs than
those assumed for Fitch's analysis; any downgrade to Citi's or
Santander's ratings; and a breach of any concentration limit or
transaction test.
TRIMARAN CLO VII: Moody's Affirms Ba1 Rating on Cl. B-2L Notes
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Trimaran VII CLO Ltd.:
$30,000,000 Class A-3L Floating Rate Notes due June 2021,
Upgraded to Aaa (sf); previously on March 29, 2016, Upgraded to
Aa1 (sf)
$18,500,000 Class B-1L Floating Rate Notes due June 2021,
Upgraded to A2 (sf); previously on March 29, 2016, Upgraded to
A3 (sf)
Moody's also affirmed the ratings on these notes:
$333,000,000 Class A-1L Floating Rate Notes due June 2021
(current outstanding balance of $45,523,937.84), Affirmed
Aaa (sf); previously on March 29, 2016 Affirmed Aaa (sf)
$25,000,000 Class A-1LR Floating Rate Revolving Notes due June
2021 (current outstanding balance of $3,417,713.05), Affirmed
Aaa (sf); previously on March 29, 2016, Affirmed Aaa (sf)
$35,000,000 Class A-2L Floating Rate Notes due June 2021,
Affirmed Aaa (sf); previously on March 29, 2016, Affirmed
Aaa (sf)
$12,500,000 Class B-2L Floating Rate Notes due June 2021,
Affirmed Ba1 (sf); previously on March 29, 2016, Affirmed
Ba1 (sf)
Trimaran VII CLO Ltd., issued in March 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in June
2013.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since March 2016. The Class
A-1L and Class A-1LR notes have been paid down collectively by
approximately 57% or $63.9 million since that time. Based on
Moody's calculations, the OC ratios for the Class A-2L, Class A-3L,
Class B-1L and Class B-2L notes are currently 200.3%, 147.6%,
127.0% and 116.0%, respectively, versus March 2016 levels of
156.7%, 130.2%, 118.0% and 110.9%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since March 2016. Based on Moody's calculations, the weighted
average rating factor (WARF) is currently 3201 compared to 2741 at
that time. The increase in WARF is primarily due to an increased
exposure to securities with a Corporate Family Rating of Caa1 or
lower (including adjustments for negative outlook and reviews for
downgrade), which currently represent approximately 29% of the
collateral portfolio based on Moody's calculations.
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
October 2016.
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) Exposure to assets with low credit quality and weak
liquidity: The presence of assets rated Caa3 with a negative
outlook, Caa2 or Caa3 on review for downgrade or the worst
Moody's speculative grade liquidity (SGL) rating, SGL-4,
exposes the notes to additional risks if these assets
default. The historical default rate is higher than average
for these assets. Due to the deal's exposure to one such
asset, which constitutes around $4.6 million of par, Moody's
ran a sensitivity case defaulting it.
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% (2561)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: 0
Class B-1L: +2
Class B-2L: +1
Moody's Adjusted WARF + 20% (3841)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: -1
Class B-1L: -1
Class B-2L: -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 $153.1 million, defaulted par
of $1.4 million, a weighted average default probability of 19.65%
(implying a WARF of 3201), a weighted average recovery rate upon
default of 50.76%, a diversity score of 19 and a weighted average
spread of 3.36% (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.
TRIMARAN CLO VII: Moody's Affirms Ba1 Rating on Class B-2L Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Trimaran VII CLO Ltd.:
$30,000,000 Class A-3L Floating Rate Notes due June 2021,
Upgraded to Aaa (sf); previously on March 29, 2016, Upgraded to
Aa1 (sf)
$18,500,000 Class B-1L Floating Rate Notes due June 2021,
Upgraded to A2 (sf); previously on March 29, 2016, Upgraded to
A3 (sf)
Moody's also affirmed the ratings on these notes:
$333,000,000 Class A-1L Floating Rate Notes due June 2021
(current outstanding balance of $45,523,937.84), Affirmed
Aaa (sf); previously on March 29, 2016, Affirmed Aaa (sf)
$25,000,000 Class A-1LR Floating Rate Revolving Notes due June
2021 (current outstanding balance of $3,417,713.05), Affirmed
Aaa (sf); previously on March 29, 2016, Affirmed Aaa (sf)
$35,000,000 Class A-2L Floating Rate Notes due June 2021,
Affirmed Aaa (sf); previously on March 29, 2016, Affirmed
Aaa (sf)
$12,500,000 Class B-2L Floating Rate Notes due June 2021,
Affirmed Ba1 (sf); previously on March 29, 2016, Affirmed
Ba1 (sf)
Trimaran VII CLO Ltd., issued in March 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in June
2013.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since March 2016. The Class
A-1L and Class A-1LR notes have been paid down collectively by
approximately 57% or $63.9 million since that time. Based on
Moody's calculations, the OC ratios for the Class A-2L, Class A-3L,
Class B-1L and Class B-2L notes are currently 200.3%, 147.6%,
127.0% and 116.0%, respectively, versus March 2016 levels of
156.7%, 130.2%, 118.0% and 110.9%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since March 2016. Based on Moody's calculations, the weighted
average rating factor (WARF) is currently 3201 compared to 2741 at
that time. The increase in WARF is primarily due to an increased
exposure to securities with a Corporate Family Rating of Caa1 or
lower (including adjustments for negative outlook and reviews for
downgrade), which currently represent approximately 29% of the
collateral portfolio based on Moody's calculations.
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
October 2016.
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) Exposure to assets with low credit quality and weak
liquidity: The presence of assets rated Caa3 with a negative
outlook, Caa2 or Caa3 on review for downgrade or the worst
Moody's speculative grade liquidity (SGL) rating, SGL-4,
exposes the notes to additional risks if these assets
default. The historical default rate is higher than average
for these assets. Due to the deal's exposure to one such
asset, which constitutes around $4.6 million of par, Moody's
ran a sensitivity case defaulting it.
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% (2561)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: 0
Class B-1L: +2
Class B-2L: +1
Moody's Adjusted WARF + 20% (3841)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: -1
Class B-1L: -1
Class B-2L: -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 $153.1 million, defaulted par
of $1.4 million, a weighted average default probability of 19.65%
(implying a WARF of 3201), a weighted average recovery rate upon
default of 50.76%, a diversity score of 19 and a weighted average
spread of 3.36% (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 XXV CLO: Moody's Assigns Ba3 Rating on Cl. E Notes
----------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to eight
classes of notes to be issued by Venture XXV CLO, Limited.
Moody's rating action is:
$321,000,000 Class A-1 Senior Secured Floating Rate Notes due
2029, Assigned (P) Aaa (sf)
$15,000,000 Class A-F Senior Secured Fixed Rate Notes due 2029,
Assigned (P) Aaa (sf)
$60,000,000 Class B Senior Secured Floating Rate Notes due
2029, Assigned (P) Aa2 (sf)
$12,500,000 Class C-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2029, Assigned (P) A2 (sf)
$22,000,000 Class C-F Mezzanine Secured Deferrable Fixed Rate
Notes due 2029, Assigned (P) A2 (sf)
$10,000,000 Class D-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2029, Assigned (P) Baa2 (sf)
$17,000,000 Class D-2 Mezzanine Secured Deferrable Floating Rate
Notes due 2029, Assigned (P) Baa3 (sf)
$25,500,000 Class E Junior Secured Deferrable Floating Rate
Notes due 2029, Assigned (P) Ba3 (sf)
The Class A-1 Notes, the Class A-F Notes, the Class B Notes, the
Class C-1 Notes, the Class C-F Notes, the Class D-1 Notes, the
Class D-2 Notes and the Class E Notes are referred to herein,
collectively, as the "Rated Notes."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected
losses posed to noteholders. The provisional 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.
Venture XXV is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans and
unsecured loans. Moody's expects the portfolio to be approximately
80% ramped as of the closing date.
MJX Asset Management LLC will direct the selection, acquisition and
disposition of the assets on behalf of the Issuer and may engage in
trading activity, including discretionary trading, during the
transaction's 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 October 2016.
For modeling purposes, Moody's used these base-case assumptions:
Par amount: $525,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2750
Weighted Average Spread (WAS): 4.00%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 46.5%
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
October 2016.
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 2750 to 3163)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-F Notes: 0
Class B Notes: -1
Class C-1 Notes: -2
Class C-F Notes: -2
Class D-1 Notes: -1
Class D-2 Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2750 to 3575)
Rating Impact in Rating Notches
Class A-1 Notes: -1
Class A-F Notes: -1
Class B Notes: -3
Class C-1 Notes: -4
Class C-F Notes: -4
Class D-1 Notes: -2
Class D-2 Notes: -2
Class E Notes: -1
WACHOVIA BANK 2006-C28: S&P Affirms B Rating on Class B Certs
-------------------------------------------------------------
S&P Global Ratings raised its ratings on two classes of commercial
mortgage pass-through certificates from Wachovia Bank Commercial
Mortgage Trust series 2006-C28, a U.S. commercial mortgage-backed
securities (CMBS) transaction. In addition, S&P affirmed its
ratings on three other classes from the same transaction. S&P also
discontinued its 'AA (sf)' rating on class A-1A following the full
repayment of the bond's outstanding principal balance.
S&P's rating actions on the principal- and interest-paying
certificates follow its analysis of the transaction, primarily
using its criteria for rating U.S. and Canadian CMBS transactions,
which included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction's
structure, and the liquidity available to the trust.
S&P raised its ratings on classes A-M and A-J to reflect its
expectation of the available credit enhancement for these classes,
which S&P believes is greater than its most recent estimate of
necessary credit enhancement for the respective rating levels. The
upgrades also follow S&P's views regarding the current and future
performance of the transaction's collateral and available liquidity
support. Furthermore, the upgrades reflect the trust balance's
significant reduction, as well as the full repayment of the 1180
Peachtree Street loan ($193.9 million of the original pool trust
balance). S&P's rating actions also considered the master
servicer's feedback that the Embassy Suites -- Washington D.C loan
($65.0 million of the original pool trust balance) has been repaid
in full. S&P expects the Embassy Suites loan repayment to be
reflected in the next remittance report.
The affirmations on the principal- and interest-paying certificates
reflect its expectation that the available credit enhancement for
these classes will be within S&P's estimate of the necessary credit
enhancement required for the current ratings. The affirmations
also reflect S&P's views regarding the current and future
performance of the transaction's collateral, the transaction
structure, and liquidity support available to the classes.
While available credit enhancement levels suggest further positive
rating movement on class A-J and positive rating movement on class
B, S&P's analysis also considered the bond's susceptibility to
reduced liquidity support from the 13 specially serviced assets
($328.3 million, 64.6%), which includes the Brookfield Lakes
Corporate Center, The AKI Building, and Compass Insurance Agency
loans that transferred to the special servicers following the
trustee remittance report date.
S&P affirmed its 'AAA (sf)' rating on the class IO interest-only
(IO) certificates based on S&P's criteria for rating IO
securities.
S&P discontinued its 'AA (sf)' rating on class A-1A following the
full repayment of the bond's outstanding principal balance as noted
in the Oct. 17,2016, trustee remittance report.
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $508.3 million, which is 14.1% of the pool balance
at issuance, and the pool included 26 loans and one real
estate-owned (REO) asset, down from 207 loans at issuance. Ten of
these assets are with the special servicers, and 10 ($144.9
million, 28.5%) are on the master servicer's watchlist. Subsequent
to the release of the October 2016 trustee remittance report, S&P
learned three loans transferred to the special servicers and the
Embassy Suites – Washington D.C. loan paid off. The master
servicer, Wells Fargo Bank N.A., reported financial information for
98.1% of the loans in the pool, of which 97.6% was year-end 2015
data, and the remainder was year-end 2014 data.
S&P calculated a 1.36x S&P Global Ratings weighted average debt
service coverage (DSC) and 90.3% S&P Global Ratings weighted
average loan-to-value (LTV) ratio using an 8.29% S&P Global Ratings
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the 13 specially serviced
assets and the subordinate B hope note ($9.5 million, 1.9%). The
top 10 loans have an aggregate outstanding pool trust balance of
$428.7 million (84.3%). Using adjusted servicer-reported numbers,
S&P calculated an S&P Global Ratings weighted average DSC and LTV
of 1.38x and 93.1%, respectively, for five of the top 10 loans. The
remaining loans are specially serviced.
To date, the transaction has experienced $265.7 million in
principal losses, or 7.4% of the original pool trust balance. S&P
expects losses to reach approximately 10.1% 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 13 specially serviced assets.
CREDIT CONSIDERATIONS
Thirteen assets were with the special servicers, CWCapital Asset
Management LLC (CWC) and LNR Partners LLC (LNR). Details of the
three largest specially serviced assets are:
The 500-512 Seventh Avenue loan ($98.6 million, 19.4%) has a total
reported exposure of $99.5 million. The loan is secured by a
1,169,647-sq.-ft. office building in New York. The loan was
transferred to LNR on Sept. 14, 2016, because of maturity default.
LNR indicated the lead note is working on a short-term extension to
complete its refinance efforts. The reported DSC and occupancy as
of year-end 2015 were 1.18x and 85.0%, respectively. Based on
currently available information, we expect a minimal loss upon this
loan's eventual resolution.
The Westin – Falls Church, VA asset ($58.9 million, 11.6%) has a
total reported exposure of $68.3 million. The asset is secured by
a 405-room full-service hotel in Falls Church, Va. The asset was
transferred to CWC on June 20, 2014, because of imminent monetary
default. The asset became REO on of June 8, 2016. CWC indicated
that it is pursuing a stabilization strategy once recent
renovations are completed. The reported DSC and occupancy as of
year-end 2015 were 1.17x and 65.0%, respectively. An appraisal
reduction amount of $12.0 million is in effect against this asset.
S&P expects a moderate loss upon this asset's eventual resolution.
The Brookfield Lakes Corporate Center loan ($58.3 million, 11.5%)
has a total reported exposure of $58.5 million. The loan is
secured by a 506,719-sq.-ft. office building in Brookfield, Wis.
The loan was transferred to CWCon Oct. 27,2016, because of an
imminent maturity default. The borrower required a short-term
forbearance to complete a refinance; however, the refinancing
efforts failed. The reported DSC and occupancy as of year-end 2015
were 1.07x and 85.0%, respectively. S&P expects a moderate loss
upon this loan's eventual resolution.
The 10 remaining loans with the special servicers have each
individual balances that represent less than 7.9% of the total pool
trust balance. S&P estimated losses for the 13 specially serviced
assets, arriving at a weighted average loss severity of 29.1%.
With respect to the specially serviced assets 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
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C28
Rating
Class Identifier To From
A-1A 92978MAF3 NR AA (sf)
IO 92978MAG1 AAA (sf) AAA (sf)
A-M 92978MAH9 AAA (sf) BBB (sf)
A-J 92978MAJ5 BB+ (sf) B+ (sf)
B 92978MAK2 B (sf) B (sf)
C 92978MAL0 B- (sf) B- (sf)
D 92978MAM8 D (sf) D (sf)
NR--Not rated.
WACHOVIA BANK 2007-C33: S&P Affirms CCC Rating on Cl. C Certs
-------------------------------------------------------------
S&P Global Ratings raised its ratings on three classes of
commercial mortgage pass-through certificates from Wachovia Bank
Commercial Mortgage Trust's series 2007-C33, a U.S. commercial
mortgage-backed securities (CMBS) transaction. At the same time,
S&P affirmed its ratings on five other classes from the same
transaction.
S&P's rating actions on the principal- and interest-paying
certificates follow its analysis of the transaction, primarily
using its criteria for rating U.S. and Canadian CMBS transactions,
which included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction's
structure, and the liquidity available to the trust.
S&P raised its ratings on classes A-1A, A-M, and A-J to reflect its
expectation of the available credit enhancement for these classes,
which S&P believes is greater than its most recent estimate of
necessary credit enhancement for the respective rating levels. The
upgrades also follow S&P's views regarding the current and future
performance of the transaction's collateral, available liquidity
support and the trust balance's reduction.
The affirmations on the pooled principal- and interest-paying
certificates reflect S&P's expectation that the available credit
enhancement for these classes will be within its estimate of the
necessary credit enhancement required for the current ratings, and
our views regarding the current and future performance of the
transaction's collateral.
S&P affirmed its 'AAA (sf)' rating on the class IO interest-only
(IO) certificates based on its criteria for rating IO securities.
TRANSACTION SUMMARY
As of the Oct. 17, 2016, trustee remittance report, the collateral
pool balance was $2.1 billion, which is 57.4% of the pool balance
at issuance. The pool currently includes 96 loans (reflecting
crossed loans) and seven real estate-owned (REO) assets, down from
151 loans at issuance. Ten of these assets ($234.2 million, 11.4%)
are with the special servicer, 20 ($312.0 million, 15.2%) are
defeased, and 27 ($353.8 million, 17.2%) are on the master
servicer's watchlist. The master servicer, Wells Fargo Bank N.A.,
reported financial information for all of the nondefeased loans in
the pool, of which 19.0% was partial-year 2016 data, 79.3% was
year-end 2015 data, and the remainder was year-end 2014 data.
S&P calculated a 1.22x S&P Global Ratings' weighted average debt
service coverage (DSC) and 99.1% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using a 7.64% S&P Global Ratings'
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the 10 specially serviced
assets, 20 defeased loans, and one subordinate B "hope" note
(reflecting crossed loans; $27.0 million, 1.3%). The top 10
nondefeased loans have an aggregate outstanding pool trust balance
of $1.1 billion (52.4%). Using adjusted servicer-reported numbers,
S&P calculated an S&P GlobalRatings' weighted average DSC and LTV
of 1.10x and 104.0%, respectively, for seven of the top 10
nondefeased loans. The remaining three assets are specially
serviced and are discussed below.
To date, the transaction has experienced $104.7 million in
principal losses, or 2.9% of the original pool trust balance. S&P
expects losses to reach approximately 7.3% 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 10 specially serviced assets.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2016, trustee remittance report, 10 assets in
the pool ($234.2 million, 11.4%) were with the special servicer,
Torchlight Loan Services LLC (Torchlight). Three of the largest
specially serviced assets are part of the top 10 nondefeased loans,
which are discussed below:
-- The Central/Eastern Industrial pool loan is the largest loan
with Torchlight and the fourth-largest loan in the pool,
with an $84.0 million (4.1%) pool trust balance and a
$106.2 million reported total exposure. The loan is secured
by 13 industrial properties totaling 2.1 million sq. ft.
across nine U.S. states. The loan was transferred to the
special servicer on July 23, 2010, because of imminent
monetary default. The reported DSC and occupancy as of
year-end 2015 were 0.88x and 87.0%, respectively. An
appraisal reduction amount (ARA) of $40.3 million is in
effect against this loan. S&P expects a significant loss
(60% or greater) upon the loan's eventual resolution.
-- The Village Shops at Creekside REO asset is the second-
largest asset with Torchlight and the eighth-largest asset
in the pool, with a $37.3 million (1.8%) pool trust balance
and a $52.3 million reported total exposure. The asset is a
212,722-sq.-ft. neighborhood retail center in Lawrenceville,
Ga. The loan was transferred to the special servicer on
Jan. 14, 2009, for monetary default, and the property became
REO on Jan. 4, 2011. The asset has a $39.6 million ARA in
effect. S&P expects a significant loss upon the asset's
eventual resolution.
-- The Lawrence Shopping Center REO asset is the third-largest
asset with Torchlight and the 10th-largest asset in the
pool, with a $30.1 million (1.5%) pool trust balance and a
$40.5 million reported total exposure. The asset is a
396,327-sq.-ft. retail shopping center in Lawrence Township,
N.J. The loan was transferred to the special servicer on
Oct. 26, 2011, because of imminent monetary default, and
became REO on Aug. 13, 2013. This asset has been deemed
non-recoverable by the master servicer. S&P expects a
significant loss upon the asset's eventual resolution.
The seven remaining specially serviced assets with Torchlight have
individual balances representing less than 1.0% of the total pool
trust balance. S&P estimated a 67.9% weighted average loss
severity for the 10 specially servicedassets.
RATINGS LIST
Wachovia Bank Commercial Mortgage Trust
Commecial mortgage pass-through certificates series 2007-C33
Rating
Class Identifier To From
A-4 92978NAE4 AAA (sf) AAA (sf)
A-5 92978NAF1 AAA (sf) AAA (sf)
A-1A 92978NAG9 AAA (sf) AA+ (sf)
IO 92978NAH7 AAA (sf) AAA (sf)
A-M 92978NAJ3 A- (sf) BB+ (sf)
A-J 92978NAK0 B+ (sf) B- (sf)
B 92978NAL8 B- (sf) B- (sf)
C 92978NAM6 CCC (sf) CCC (sf)
WELLS FARGO 2016-LC25: DBRS Assigns (P)BB Rating on Class F Certs
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2016-LC25 to
be issued by Wells Fargo Commercial Mortgage Trust 2016-LC25:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-D at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at B (sf)
All trends are Stable.
Classes X-D, D, E, F, and G will be privately placed.
The X-A, X-B, and X-D balances are notional. DBRS ratings on
interest-only (IO) certificates address the likelihood of receiving
interest based on the notional amount outstanding. DBRS considers
the IO certificates’ position within the transaction payment
waterfall when determining the appropriate rating.
The collateral consists of 80 fixed-rate loans secured by 135
commercial properties and multifamily properties, comprising a
total transaction balance of $954,965,554. The transaction is a
sequential-pay pass-through structure. One loan, representing 5.2%
of the pool, is shadow-rated investment grade by DBRS. Proceeds for
the shadow-rated loan are floored at its respective rating within
the pool. When 5.2% of the pool has no proceeds assigned below the
rating floor, the resulting pool subordination is diluted or
reduced below that rated floor. The conduit pool was analyzed to
determine the provisional ratings, reflecting the long-term
probability of loan default within the term and its liquidity at
maturity. When the cut-off loan balances were measured against the
DBRS Stabilized net cash flow (NCF) and their respective actual
constants, four loans, representing 5.8% of the total pool, had a
DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x),
a threshold indicative of a higher likelihood of mid-term default.
Additionally, to assess refinance risk given the current low
interest rate environment, DBRS applied its refinance constants to
the balloon amounts. This resulted in 36 loans, representing 57.3%
of the pool, having a DBRS Refinance (Refi) DSCR below 1.00x;
however, the DBRS Refi DSCRs for the loans are based on a
weighted-average (WA) stressed refinance constant of 10.23%, which
implies an interest rate of 9.66%, amortizing on a 30-year
schedule. This represents a significant stress of 4.46% over the
WA contractual interest rate of the loans in the pool. The loans’
probability of default (POD) is based on the more constraining of
the DBRS Term or Refi DSCR.
One loan exhibits credit characteristics consistent with an
investment-grade shadow rating: 9 West 57th Street. 9 West 57th
Street is the largest loan in the pool, representing 5.2% of the
pool and has credit characteristics consistent with a AAA shadow
rating. Additionally, 13 loans, representing 6.7% of the pool, are
secured by cooperative properties and are very low-leverage, with
minimal term and refinance default risk. Overall, the pool exhibits
a relatively strong DBRS WA Term DSCR of 1.61x based on the whole
loan balance, which indicates moderate term default risk. Even with
the exclusion of 9 West 57th Street and the 13 loans secured by
cooperative properties, the deal exhibits a favorable DBRS Term
DSCR of 1.40x. Furthermore, only 12 loans, representing 8.5% of the
pool, are secured by properties that either fully or primarily
leased to a single tenant. Loans secured by properties occupied by
single tenants have been found to suffer from higher loss
severities in the event of default. As such, DBRS modeled
single-tenant properties with a higher POD and cash flow volatility
compared with multi-tenant properties. The pool is relatively
diverse based on loan size, with a concentration profile equivalent
to that of a pool of 43 equal-sized loans. Diversity is further
enhanced by four loans, representing 11.1% of the pool, that are
secured by multiple properties (59 in total). Increased pool
diversity insulates the higher-rated classes from event risk.
The transaction’s WA DBRS Refi DSCR, excluding the 13 NCB loans,
is 1.00x, indicating a higher refinance risk on an overall pool
level. Furthermore, 12 loans, representing 11.3% of the pool,
including one of the largest ten loans, are structured with
full-term IO payments. An additional 31 loans, comprising 52.8% of
the pool, have partial IO periods ranging from 12 months to 60
months. The DBRS Term DSCR is calculated by using the amortizing
debt service obligation and the DBRS Refi DSCR is calculated
considering the balloon balance and lack of amortization when
determining refinance risk. DBRS determines the POD based on the
lower of Term or Refi DSCR, so loans that lack amortization will be
treated more punitively. Twenty-eight properties, comprising 33.7%
of the pool, are secured by properties located in tertiary or rural
markets. Properties located in tertiary and rural markets are
modeled with significantly higher loss severities than those
located in urban and suburban markets.
The DBRS sample included 29 of the 80 loans in the pool. Site
inspections were performed on 41 of 135 properties in the portfolio
(62.4% of the pool by allocated loan balance). DBRS conducted
meetings with the on-site property manager, listing agent or a
representative of the borrowing entity for 44.3% of the pool. The
DBRS sample had an average NCF variance of –8.9%, ranging from
-21.7% to -1.0%. DBRS identified eight loans, representing 7.3% of
the pool, with unfavorable sponsor strength, including one of the
top ten loans. DBRS increased the POD for the loans with identified
sponsorship concerns.
The rating assigned to Class G differs from the higher rating
implied by the quantitative model. DBRS considers this difference
to be a material deviation, and in this case, the ratings reflect
the dispersion of loan-level cash flows expected to occur
post-issuance.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure and
underlying trust assets. All classes will be subject to ongoing
surveillance that could result in upgrades or downgrades by DBRS
after the date of issuance.
WEST CLO 2012-1: S&P Affirms Prelim. BB- Rating on Class D Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R and A-2R replacement notes from West CLO 2012-1 Ltd., a U.S.
collateralized loan obligation (CLO) transaction that closed in
November 2012 and is managed by Allianz Global Investors Capital.
The replacement notes will be issued via a proposed supplemental
indenture. S&P do not expect the refinancing to have any impact on
the outstanding ratings on the class B, C, and D notes.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels. The replacement notes are expected to be issued at a lower
spread over LIBOR than the original notes they replace.
On the Nov. 30, 2016, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, S&P anticipates withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw its
preliminary ratings on the replacement notes.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the 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 or ultimate
principal, or both, to each of the rated tranches.
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 S&P deems
necessary.
PRELIMINARY RATINGS ASSIGNED
West CLO 2012-1 Ltd.
Replacement class Rating Amount (mil. $)
A-1R AAA (sf) 292.50
A-2R AA (sf) 42.75
OTHER OUTSTANDING RATINGS
West CLO 2012-1 Ltd.
Class Rating
B A (sf)
C BBB (sf)
D BB- (sf)
Subordinated notes NR
NR--Not rated.
[*] Moody's Hikes Ratings on $226MM Subprime RMBS Issued 2003-2004
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 24 tranches
from 8 transactions backed by Subprime RMBS loans.
Complete rating actions are:
Issuer: ABSC Home Equity Loan Trust, Series 2003-HE3
Cl. M2, Upgraded to Caa1 (sf); previously on Jan. 13, 2016,
Upgraded to Caa3 (sf)
Issuer: Ameriquest Mortgage Securities Inc., Series 2004-R7
Cl. A-1, Upgraded to Aaa (sf); previously on Jan. 13, 2016,
Upgraded to Aa2 (sf)
Underlying Rating: Upgraded to Aaa (sf); previously on Jan. 13,
2016, Upgraded to Aa2 (sf)
Financial Guarantor: Assured Guaranty Municipal Corp (Affirmed
at A2, Outlook Stable on Aug. 8, 2016,)
Cl. M-4, Upgraded to Ba3 (sf); previously on Jan. 13, 2016,
Upgraded to B3 (sf)
Cl. M-5, Upgraded to Ba3 (sf); previously on Jan. 13, 2016,
Upgraded to Caa1 (sf)
Cl. M-6, Upgraded to B3 (sf); previously on March 29, 2011,
Downgraded to Ca (sf)
Cl. M-7, Upgraded to Caa2 (sf); previously on March 29, 2011,
Downgraded to Ca (sf)
Issuer: Citigroup Mortgage Loan Trust, Series 2004-CB3, C-Bass
Mortgage Loan Asset-Backed Certificates
Cl. B-1, Upgraded to Ba3 (sf); previously on March 7, 2011,
Downgraded to Ca (sf)
Cl. B-2, Upgraded to B2 (sf); previously on March 7, 2011,
Downgraded to Ca (sf)
Cl. B-3, Upgraded to Caa1 (sf); previously on March 7, 2011,
Downgraded to C (sf)
Cl. B-4, Upgraded to Caa2 (sf); previously on March 7, 2011,
Downgraded to C (sf)
Cl. M-2, Upgraded to Ba2 (sf); previously on Jan. 21, 2016,
Upgraded to Ba3 (sf)
Cl. M-3, Upgraded to Ba2 (sf); previously on Jan. 21, 2016,
Upgraded to Caa1 (sf)
Issuer: CWABS, Inc., Asset-Backed Certificates, Series 2003-BC2
Cl. M-1, Upgraded to Ba1 (sf); previously on Feb. 1, 2016,
Upgraded to B3 (sf)
Issuer: First Franklin Mortgage Loan Trust 2004-FF7
Cl. M1, Upgraded to Baa1 (sf); previously on Jan. 26, 2016,
Upgraded to Baa3 (sf)
Issuer: GSAMP Trust 2004-HE2
Cl. M-2, Upgraded to Ba1 (sf); previously on March 17, 2011,
Downgraded to B3 (sf)
Cl. M-3, Upgraded to B1 (sf); previously on March 17, 2011,
Downgraded to Ca (sf)
Cl. M-4, Upgraded to Caa1 (sf); previously on March 17, 2011,
Downgraded to Ca (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2004-OP2
Cl. B-1, Upgraded to Ca (sf); previously on March 3, 2014,
Downgraded to C (sf)
Cl. M-1, Upgraded to Ba1 (sf); previously on Jan. 20, 2016,
Upgraded to B1 (sf)
Cl. M-2, Upgraded to Ba2 (sf); previously on Jan. 20, 2016,
Upgraded to Ca (sf)
Cl. M-3, Upgraded to B3 (sf); previously on March 3, 2014,
Downgraded to C (sf)
Issuer: Structured Asset Investment Loan Trust 2004-8
Cl. M1, Upgraded to Baa1 (sf); previously on April 25, 2014,
Upgraded to Ba1 (sf)
Cl. M2, Upgraded to Ba2 (sf); previously on April 25, 2014,
Upgraded to B2 (sf)
Cl. M3, Upgraded to B2 (sf); previously on April 25, 2014,
Upgraded to Caa2 (sf)
RATINGS RATIONALE
The ratings upgraded are primarily due to the total credit
enhancement available to the bonds. The rating 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 4.9% in October 2016 from 5.0% in
October 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 on 149 Classes From 25 US RMBS Transaction
-------------------------------------------------------------------
S&P Global Ratings completed its review of 149 classes from 25 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2003 and 2005. The review yielded 28 upgrades, 19
downgrades, 96 affirmations, and six discontinuances. One of the
lowered ratings was also removed from CreditWatch negative. The
transactions in this review are backed by a mix of fixed- and
adjustable-rate Alternative-A and subprime mortgage loans, which
are secured primarily by first liens on one- to four-family
residential properties.
The rating actions also resolve S&P's Oct. 6, 2016, CreditWatch
placements. The CreditWatch negative placements reflected S&P's
view that the trustee reports cited interest shortfalls on the
affected classes in recent remittance periods, which could
negatively affect our ratings on those classes. After verifying
these interest shortfalls to be true, the application of S&P's
criteria has resulted in the lowering of its rating on class I-M-1
from Bear Stearns ALT-A Trust 2005-2 to 'CCC (sf)' from
'BB+ (sf)/Watch Neg'.
For insured obligations where S&P maintains a rating on the bond
insurer that is lower than what it would rate the class without
bond insurance, or where the bond insurer is not rated, S&P relied
solely on the underlying collateral's credit quality and the
transaction structure to derive the rating on the class. Of the
classes reviewed, Deutsche Alt-A Securities Inc. Mortgage Loan
Trust Series 2003-4XS's class A-6A ('BB+ (sf)') is insured by MBIA
Insurance Corp., currently rated ('CCC') by S&P Global Ratings, and
eight additional classes are insured by insurance providers that
S&P Global Ratings no longer rates.
The rating actions also reflect the application of S&P's
interest-only (IO) IO criteria, which provide that we 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 we will withdraw these IO
ratings. The ratings on each of these classes have been affected
by recent rating actions on the reference classes upon which their
notional balances are based. 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.
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
The 28 upgrades include four ratings that were raised by three or
more notches. S&P's projected credit support for these classes is
sufficient to cover its projected losses for the rating levels. The
upgrades from nine transactions reflect one or more of these:
-- Improved collateral performance/delinquency trends;
-- Increased credit support relative to our projected losses;
and/or
-- The class' expected short duration; and/or
-- Principal-only criteria.
Of the four classes that were raised by three or more notches,
classes A-1B and A-2A from DSLA Mortgage Loan Trust 2004-AR1's
credit support increased to 16.16% and 34.99%, respectively, due to
the recent failing of triggers that have prevented subordinate
classes from receiving an increased percentage of unscheduled
principal. Additionally, classes 5-A-1 and 5-A-6 from MASTR
Alternative Loan Trust 2004-10's Group 5 delinquencies decreased to
10.97% from 12.83% in the last review.
S&P raised its ratings on 15 classes from four transactions to a
higher rating from 'CCC (sf)' because S&P believes these classes
are no longer vulnerable to default. S&P also raised five ratings
to 'CCC (sf)' from 'CC (sf)' because it believes these classes are
no longer virtually certain to default, primarily owing to the
improved performance of the collateral backing that transaction.
However, the 'CCC (sf)' ratings indicate that S&P still believes
that its projected credit support will remain insufficient to cover
its projected losses (at the 'B-' and above rating scenarios) for
these classes and that the classes are still vulnerable to
defaulting.
DOWNGRADES
The 19 downgrades include eight ratings that were lowered three or
more notches. S&P lowered its ratings on 11 classes that remain at
investment grade. The remaining eight downgraded classes were
lowered from speculative-grade ratings. The downgrades reflect
S&P's belief that our projected credit support for the affected
classes will be insufficient to cover our projected losses for the
related transactions at a higher rating. The downgrades reflect
one or more of these:
-- Deteriorated collateral performance;
-- Erosion of credit support; and/or
-- Observed interest shortfalls.
The downgrades on 10 classes from five transactions reflect the
erosion of projected credit support. Payment allocation triggers
are passing, allowing principal payments to be made to more
subordinate classes, thereby eroding projected credit support for
the affected senior classes. For class M-1 from Morgan Stanley ABS
Capital I Inc. Trust 2004-NC7, credit support decreased to 55.00%
from 63.58% in the last review. Additionally, credit support
decreased for class B-3 from HarborView Mortgage Loan Trust 2005-9
to 20.72% from 20.83% in the last review, and similarly for class
A-1 from Option One Mortgage Loan Trust 2003-1, enhancement
declined to 23.92% from 28.13% in S&P's last review.
The downgrades on eight classes from six transactions reflect the
increase in S&P's projected losses and our belief that the
projected credit support for the affected classes will be
insufficient to cover the projected losses S&P applied at the
previous rating levels. The increase in S&P's projected losses is
due to higher reported delinquencies during the most recent
performance periods when compared to those reported during the
previous review dates. Of these lowered classes, three were
lowered by three or more notches. Total delinquencies for classes
M-1 and M-2 from Morgan Stanley ABS Capital I Inc. Trust 2004-NC1
increased to 15.57% from 11.28% over the past year. S&P also
lowered its rating on class M-5 from NovaStar Mortgage Funding
Trust's series 2004-3 to 'B (sf)' from 'BB+ (sf)' because while
total delinquencies have remained constant over the past year
(19.18% currently versus 19.62% in the 12 months prior), credit
support has declined to 29.55% from 37.74% over the same period.
The downgrade on class I-M-1 from Bear Stearns ALT-A Trust 2005-2
to 'CCC (sf)' from 'BB+ (sf)/Watch Neg' was based on S&P's
assessment of interest shortfalls to this class during recent
remittance periods. The lowered rating was derived by applying
S&P's interest shortfall criteria, which designate a maximum
potential rating to this class.
Tail Risk
Some of the transactions in this review are backed by a small
remaining pool of mortgage loans. S&P believes that pools with
fewer than 100 loans remaining create an increased risk of credit
instability because a liquidation and subsequent loss on one loan,
or a small number of loans, at the tail end of a transaction's life
may have a disproportionate impact on a given RMBS tranche's
remaining credit support. S&P refers to this as "tail risk."
S&P addressed the tail risk on the classes in this review by
conducting a loan-level analysis that assesses this risk, and
affirmed the ratings on two classes to reflect the application of
S&P's tail risk criteria. As a result, S&P's maximum potential
ratings on class V-A-1 from Credit Suisse First Boston Mortgage
Securities Corp.'s series 2003-AR2 and class II-A-1 from First
Horizon Alternative Mortgage Securities Trust 2005-FA4 were
limited.
AFFIRMATIONS
S&P affirmed its ratings on 58 classes in the 'AAA' through 'B'
rating categories. These affirmations reflect S&P's opinion that
its projected credit support on these classes remained relatively
consistent with its prior projections and is sufficient to cover
our projected losses for those rating scenarios.
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:
-- Insufficient subordination, overcollateralization, or both;
-- Bond performance projection remains stable;
-- Tail risk; and/or
-- Principal-only criteria.
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," 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 our view that
these classes remain virtually certain to default.
DISCONTINUANCES
S&P discontinued its ratings on five classes from Alternative Loan
Trust 2003-15T2 since this transaction has been paid in full. S&P
also discontinued its rating on New Century Home Equity Loan
Trust's series 2003-A's class M-4, which was paid in full during
the September 2016 remittance period.
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 1.5% for 2016;
-- The inflation rate will be 2.2% in 2016; and
-- The 30-year fixed mortgage rate will average about 3.7% 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 4.9% for 2016;
-- Downward pressure causes GDP growth to fall to 1.4% 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 3.6% 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/2fCdPDV
[*] S&P Completes Review on 39 Classes From 8 U.S. RMBS Deals
-------------------------------------------------------------
S&P Global Ratings completed its review of 39 classes from eight
U.S. residential mortgage-backed securities (RMBS) transactions
issued between 1998 and 2005. The review yielded one upgrade, 37
affirmations, and one discontinuance. S&P removed one of the
affirmed ratings from CreditWatch, where it was placed with
negative implications on Aug. 15, 2016.
S&P previously placed class M-1 from GSAMP Trust 2003-AHL on
CreditWatch with negative implications due to interest shortfalls.
The CreditWatch resolution follows the application of S&P's
interest shortfall criteria after receiving information necessary
to complete its review on this class. S&P believes the current
rating is consistent with the credit support available to this
class.
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, S&P relied solely on the underlying collateral's credit
quality and the transaction structure to derive the rating on the
class.
Of the classes reviewed, these are insured by an insurance provider
that is currently rated by S&P Global Ratings:
-- BankBoston Home Equity Loan Trust 1998-1 class A-5
('CCC (sf)'), insured by MBIA Insurance Corp. ('CCC');
-- BankBoston Home Equity Loan Trust 1998-1 class A-6
('CCC (sf)'), insured by MBIA Insurance Corp. ('CCC'); and
-- CDC Mortgage Capital Trust 2003-HE4 class A-1 ('AAA (sf)'),
insured by Assured Guaranty Municipal Corp. ('AA').
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 rating on class M-1 from Citigroup Mortgage Loan
Trust Inc. series 2005-HE3, which received over $13 million in
principal during the past 12 months, to 'AAA (sf)' from
'BBB+ (sf)'. S&P's projected credit support for the class is
sufficient to cover its projected loss for this rating level.
AFFIRMATIONS
The affirmations of 21 ratings in the 'AAA' through 'B' rating
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 our projected losses for
those rating scenarios.
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 S&P's 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:
-- Insufficient subordination, overcollateralization, or both;
-- Delinquency trends;
-- Historical interest shortfalls;
-- Tail risk;
-- Low priority in principal payments; and/or
-- Significant growth in observed loss severities.
In addition, some of the transactions have failed their delinquency
triggers, resulting in reduced--or a complete stop of--unscheduled
principal payments to their subordinate classes. However, these
transactions allow for unscheduled principal payments to resume to
the subordinate classes if the delinquency triggers begin passing
again. This would result in eroding the credit support available
for the more senior classes. Therefore, S&P affirmed its ratings
on certain classes in these transactions even though these classes
may have passed at higher 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 our view that these classes remain
virtually certain to default.
DISCONTINUANCES
S&P discontinued its rating on one class that was paid in full
during recent remittance periods.
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 1.5% for 2016;
-- The inflation rate will be 2.2% in 2016; and
-- The 30-year fixed mortgage rate will average about 3.7% 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 4.9% for 2016;
-- Downward pressure causes GDP growth to fall to 1.4% 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 3.6% 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/2fRCCSs
[*] S&P Completes Review on 49 Classes From 6 RMBS Re-REMIC Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 49 classes from six U.S.
residential mortgage-backed securities (RMBS) resecuritized real
estate mortgage investment conduit (re-REMIC) transactions issued
between 2003 and 2010. The review yielded eight upgrades, seven
downgrades, and 29 affirmations. S&P also placed five ratings on
CreditWatch with negative implications.
The transactions in this review are supported by underlying classes
backed by a mix of fixed- and adjustable-rate prime, subprime,
alternative-A, second lien, option ARM, and HELOC mortgage loans,
which are secured primarily by first liens on one- to four-family
residential properties.
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, S&P relied solely on the underlying collateral's credit
quality and the transaction structure to derive the rating on the
class. One of the transactions reviewed, Fannie Mae Grantor Trust
2004-T5, is insured by U.S. government-affiliated entity Fannie Mae
and Financial Security Assurance Inc.
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
The upgrades include eight 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 one or more of these:
-- Improved collateral performance/delinquency trends; and
-- Increased credit support relative to our projected losses.
S&P raised its rating on class II-A2 from Jefferies
Resecuritization Trust 2008-R2 to 'BB (sf)' from 'CCC (sf)' because
S&P believes that these classes are no longer vulnerable to
default. The upgrade reflects an increase in credit support, as
well as a decrease in S&P's projected losses and its belief that
its projected credit support for the affected classes will be
sufficient to cover its revised projected losses at these rating
levels. S&P has decreased its projected losses because there have
been fewer reported delinquencies during the most recent
performance periods compared to those reported during the previous
review dates. Severe delinquencies decreased to 10.15% as of
October 2016, compared to 15.99% of the collateral from a year
prior.
DOWNGRADES
The downgrades include two ratings that were lowered three or more
notches. Five of the lowered ratings remained at an
investment-grade level, while the remaining two downgraded classes
already had speculative-grade ratings. The downgrades reflect
S&P's belief that its projected credit support for the affected
classes will be insufficient to cover our projected losses for the
related transactions at a higher rating. The downgrades reflect
one or more of these:
-- Deteriorated credit performance trends; and
-- Reduced interest payments over time due to loan
modifications or other credit-related events.
Loan Modifications And Imputed Promises
S&P lowered its ratings on three classes from J.P. Morgan
Resecuritization Trust, 2010-5. Classes 3-A-3 and 3-A-6 were
downgraded to 'A- (sf)' from 'A (sf)' and class 3-A-2 to 'A- (sf)'
from 'AA (sf)'. These downgrades reflect the application of S&P's
imputed promises criteria, which resulted in a maximum potential
rating (MPR) lower than the previous rating on the class.
When a class of securities supported by a particular collateral
pool is paid interest through a weighted average coupon (WAC) and
the interest owed to that class is reduced because of loan
modifications, S&P imputes an amount of interest owed to that class
of securities by applying "Methodology For Incorporating Loan
Modification And Extraordinary Expenses Into U.S. RMBS Ratings,"
published April 17, 2015, and "Principles For Rating Debt Issues
Based On Imputed Promises," published Dec. 19, 2014. Based on S&P's
criteria, it applies an MPR to those classes of securities that are
affected by reduced interest payments over time due to loan
modifications. If S&P applies an MPR cap to a particular class,
the resulting rating may be lower than if S&P had solely considered
that class' paid interest based on the applicable WAC.
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 remained relatively consistent with its prior
projections and is sufficient to cover its projected losses for
those rating scenarios.
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions, and in turn also add volatility 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:
-- Insufficient subordination, overcollateralization, or both;
-- Delinquency trends; and
-- Projected interest shortfalls.
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.
CREDITWATCH PLACEMENTS
S&P placed five of its ratings on classes 2-A-1, 2-A-2, 2-A-3,
2-A-5, and 2-A-6 from J.P. Morgan Resecuritization Trust, Series
2010-5 on CreditWatch with negative implications. The CreditWatch
placement reflects S&P's ongoing review of potential interest
shortfalls in recent remittance periods, as well as the extent to
which they have been properly applied to these classes. After
verifying these possible interest shortfalls with the Trustee, S&P
will adjust the ratings as it considers appropriate according to
our criteria, which could have a significant impact to the ratings,
with potential movements to low speculative-grade.
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 1.5% for 2016;
-- An inflation rate of 2.2% in 2016; and
-- A 30-year fixed mortgage rate average of about 3.7% 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 4.9% for 2016;
-- Downward pressure will cause GDP growth to fall to 1.4% 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 a low 3.6%
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://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/1759014
[*] S&P Completes Review on 96 Classes From 15 U.S. RMBS Deals
--------------------------------------------------------------
S&P Global Ratings completed its review of 96 classes from 15 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2001 and 2005. The review yielded 22 downgrades, 71
affirmations, one withdrawal, and two discontinuances. The
transactions in this review are backed by a mix of fixed- and
adjustable-rate prime jumbo and subprime mortgage loans, which are
secured primarily by first liens on one- to four-family residential
properties.
With respect to insured obligations, where S&P maintains a rating
on the bond insurer that is lower than what it would rate the class
without bond insurance, or where the bond insurer is not rated, S&P
relied solely on the underlying collateral's credit quality and the
transaction structure to derive the rating on the class. Of the
classes reviewed, Prime Mortgage Trust 2003-1's class A-11, Prime
Mortgage Trust 2003-2's class I-A-6, and RFMSI Series 2003-S13
Trust's class A-1 are all insured by MBIA Insurance Corp.,
currently rated ('CCC') by S&P Global Ratings.
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.
DOWNGRADES
The downgrades include 11 ratings that were lowered three or more
notches. S&P lowered its ratings on two classes to speculative
grade from investment grade. The remaining nine downgraded classes
already had speculative-grade ratings. 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. The downgrades reflect
one or more of:
-- Deteriorated collateral performance;
-- Erosion of credit support;
-- A substantial change in constant prepayment rates;
-- Observed interest shortfalls; and/or
-- Tail risk.
The downgrades on eight classes from five transactions reflect the
erosion of projected credit support. Payment allocation triggers
are passing, allowing principal payments to be made to more
subordinate classes, thereby eroding projected credit support for
the affected senior classes.
The downgrades on class A-4 from Morgan Stanley ABS Capital I Inc.
Trust 2004-HE1, on classes M-1 and M-2 from Morgan Stanley ABS
Capital I Inc. Trust 2004-NC4, and on class M-3 from Morgan Stanley
ABS Capital I Inc. Trust 2004-NC8 reflect a decrease in the
constant prepayment rate (CPR) observed for the underlying pool.
Because the payment allocation triggers have failed, resulting in
permanent sequential principal payments to all classes, the lower
CPR has limited principal payments to these more senior classes,
extending their lives and making them more susceptible to back-end
losses.
The downgrade on class M-1 from New Century Home Equity Loan Trust
2005-1 to 'BB+ (sf)' from 'BBB- (sf)'was based on S&P's assessment
of interest shortfalls to the affected class during recent
remittance periods. The lowered rating was derived by applying
S&P's interest shortfall criteria, which designates a maximum
potential rating to this class.
Tail Risk
Some of the transactions in this review are backed by a small
remaining pool of mortgage loans. S&P believes that pools with
fewer than 100 loans remaining create an increased risk of credit
instability because a liquidation and subsequent loss on one loan,
or a small number of loans, at the tail end of a transaction's life
may have a disproportionate impact on a given RMBS tranche's
remaining credit support. S&P refers to this as "tail risk."
S&P addressed the tail risk on the classes in this review by
conducting a loan-level analysis that assesses this risk, and
lowered the ratings on three classes to reflect the application of
our tail risk criteria. S&P lowered the ratings on classes A-2,
A-3, and A-5 from RFMSI Series 2003-S11 Trust to 'B- (sf)' from
'BB+ (sf)'.
AFFIRMATIONS
S&P affirmed its ratings on 35 classes in the 'AAA' through 'B'
rating categories. These affirmations 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.
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:
-- Insufficient subordination, overcollateralization, or both;
-- Bond performance projection remains stable; and/or
-- Principal-only criteria.
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," 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.
WITHDRAWALS
S&P withdrew its rating on class X from MRFC Mortgage Pass-Through
Trust's series 2001-TBC1 according to S&P's interest-only (IO)
criteria, which state that it will maintain the current rating on
an IO class until the ratings on all of the classes that the IO
security references, in the determination of its notional balance,
are either lowered below 'AA-' or have been retired. The rating on
the referenced class A-1 is being lowered to 'A+ (sf)' from 'AA+
(sf)' due to erosion of credit support.
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
before the release of this criteria.
DISCONTINUANCES
S&P discontinued its ratings on class A-1 from RAAC Series 2004-SP2
Trust and class B-3 from Morgan Stanley ABS Capital I Inc. Trust
2004-NC8, which were paid in full during recent remittance
periods.
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 we believe could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.8% in 2016;
-- Real GDP growth of 1.5% for 2016;
-- The inflation rate will be 2.2% in 2016; and
-- The 30-year fixed mortgage rate will average about 3.7% 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 4.9% for 2016;
-- Downward pressure causes GDP growth to fall to 1.4% 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 3.6% 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/2grWfjk
*********
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
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman,
Editors.
Copyright 2016. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000 or Nina Novak at 202-362-8552.
*** End of Transmission ***