/raid1/www/Hosts/bankrupt/TCR_Public/171105.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 5, 2017, Vol. 21, No. 308
Headlines
ACCESS GROUP 2003-A: Fitch Corrects Oct. 26 Release
AMMC CLO XII: S&P Assigns Prelim B-(sf) Rating on Class F-R Notes
ATRIUM XIII: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
BANC OF AMERICA 2007-D: Moody's Ups Cl. 5-A-1 Debt Rating to Caa2
BAYVIEW OPPORTUNITY 2017-RT6: Fitch Rates Cl. B5 Notes 'Bsf'
BEAR STEARNS 2004-PWR4: Moody's Hikes Rating on Cl. L Debt to Ba3
BEAR STEARNS 2004-PWR5: Moody's Hikes Class M Debt Rating to Ba2
BEAR STEARNS 2004-PWR6: Moody's Lowers Cl. N Notes Rating to Ca
BEAR STEARNS 2007-TOP26: Fitch Cuts Class A-J Certs Rating to CCsf
BUSINESS LOAN 2006-A: Moody's Hikes Class C Notes Rating to B1
BX TRUST 2017-IMC: S&P Assigns B-(sf) Rating on Class F Certs
CATAMARAN CLO 2014-1: Moody's Assigns B3 Rating to Cl. E-R Notes
CFIP CLO 2017-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
CITI HELD 2016-PM1: Fitch Affirms 'Bsf' Rating on Class C Debt
CITIGROUP 2015-SSHP: S&P Affirms B-(sf) Rating on Class F Certs
CITIGROUP 2017-C4: Fitch Assigns 'B-sf' Rating to Class H-RR Certs
COMM 2017-PANW: Fitch Assigns 'BBsf' Rating to Class E Certs
CSMC TRUST 2017-CALI: S&P Assigns Prelim B-(sf) Rating on F Certs
CSMC TRUST 2017-HL2: Fitch Assigns 'Bsf' Rating to Class B-5 Notes
DEEPHAVEN RESIDENTIAL 2017-3: S&P Gives (P)B Rating on B-2 Notes
DEER CREEK: Moody's Assigns Ba3 Rating to Class E Notes
DLJ COMMERCIAL 1998-CF1: Moody's Affirms C Rating on Class S Certs
DT AUTO 2017-4: S&P Assigns Prelim BB(sf) Rating on Class E Notes
FLAGSTAR MORTGAGE 2017-2: Moody's Assigns B3 Rating to Cl. B-5 Debt
FORTRESS CREDIT IX: S&P Gives Prelim BB-(sf) Rating on Cl. E Notes
GS MORTGAGE 2006-GG8: Moody's Cuts Class B Certs Rating to C
GS MORTGAGE 2017-SLP: S&P Assigns B-(sf) Rating on Class F Certs
HILLMARK FUNDING: S&P Affirms B+(sf) Rating on Class D Notes
ICON BRAND 2012-1: S&P Lowers Rating on Three Classes to BB(sf)
INSITE WIRELESS 2016-1: Fitch Affirms BB- Rating on Cl. C Notes
JP MORGAN 1999-C8: Moody's Affirms C Rating on Class X Certs
JP MORGAN 2017-4: Moody's Assigns B2 Rating to Class B-5 Debt
JPMCC COMMERCIAL 2015-JP1: Fitch Affirms B- Rating on Cl. G Certs
JPMDB 2017-C7: Fitch Assigns 'B-sf' Rating to Cl. F-RR Certs
LB-UBS COMMERCIAL 2006-C1: Fitch Hikes Cl. B Certs Rating to 'Bsf'
METLIFE SECURITIZATION 2017-1: Fitch to Rate Class B2 Certs 'Bsf'
ML-CFC COMMERCIAL 2006-4: Moody's Affirms C Ratings on 2 Tranches
MONROE CAPITAL 2017-1: Moody's Assigns Ba3 Rating to Class E Notes
MORGAN STANLEY 2016-C32: Fitch Affirms BB-sf Rating on Cl. E Debt
NORTHSTAR 2016-1: Moody's Affirms Ba3(sf) Rating on Class C Notes
NYLIM STRATFORD 2001-1: Moody's Lowers Class B Notes Rating to B1
OCTAGON INVESTMENT 33: S&P Gives Prelim BB-(sf) Rating on D Notes
OCTAGON INVESTMENT 34: Moody's Assigns (P)Ba3 Ratings to 2 Tranches
PRIMA CAPITAL 2016-MRND: Moody's Affirms Ba1 on 2 Tranches
REALT 2017: Fitch Assigns 'Bsf' Rating to Class G Certificates
SATURN VENTURES I: Moody's Affirms C Rating on Class B Notes
SLM TRUST 2007-2: Fitch Affirms 'Bsf' Rating on Class B Debt
SOUND POINT XVII: Moody's Assigns Ba3 Rating to Class D Notes
STACR 2017-SPI1: Moody's Assigns B2 Rating to Class M-2 Debt
THL CREDIT 2017-4: Moody's Assigns (P)Ba3 Rating to Cl. E Notes
TICP CLO VIII: Moody's Assigns Ba3 Rating to Class D Notes
TOWD POINT 2017-5: Moody's Assigns B1(sf) Rating to Class B2 Notes
TRUPS FINANCIALS 2017-2: Moody's Rates Class B Notes Ba1
US CAPITAL V: Moody's Hikes Class A-3 Senior Notes Rating to Ba2
VENTURE CLO XXX: Moody's Assigns (P)Ba3 Rating to Class E Notes
WACHOVIA BANK 20015-C16: S&P Lowers Class J Certs Rating to B-(sf)
WAVE LLC 2017-1: S&P Assigns Prelim BB(sf) Rating on Class C Notes
WELLS FARGO 2015-P2: Fitch Affirms 'Bsf' Rating on Class F Certs
[*] Fitch: US Bank TruPS CDOs Default & Deferral Rate Drops in 3Q17
[*] Fitch: US Bank TruPS CDOs Default & Deferral Rate Drops in 3Q17
[*] Moody's Takes Action on $226.3MM of RMBS Issued 2004-2007
[*] Moody's Takes Action on $295MM of RMBS Issued 2000-2005
[*] S&P Cuts Ratings to D(sf) on 35 Classes From 32 US RMBS Deals
[*] S&P Discontinues Ratings on 28 Classes From Seven CDO Deals
*********
ACCESS GROUP 2003-A: Fitch Corrects Oct. 26 Release
---------------------------------------------------
Fitch Ratings issued a correction to a release on Access Group Inc.
published Oct. 26, 2017. It corrects the outlook for 2003-A class
B.
The revised release is as follows:
Fitch Ratings has taken the following rating actions on notes of
Access Group Inc., 2002-A, 2003-A, 2004-A, 2005-A, 2005-B, 2007-A
and Access Funding 2010-A LLC:
Access 2002-A
Class A-2 affirmed at 'Asf'; Outlook Stable
Class B downgraded to 'CCCsf' from 'Bsf'; RE 85%.
Access 2003-A
Class A-2 affirmed at 'AAAsf'; Outlook Stable
Class A-3 affirmed at 'AAAsf'; Outlook Stable.
Class B affirmed at 'Bsf'; Outlook Stable.
Access 2004-A
Class A-2 affirmed at 'AAAsf'; Outlook Stable;
Class A-3 upgraded to 'BBBsf' from 'BBsf'; Outlook revised to
Stable from Positive;
Class A-4 upgraded to 'BBBsf' from 'BBsf'; Outlook revised to
Stable from Positive;
Class B-1 affirmed at 'Bsf'; Outlook revised to Stable from
Negative;
Class B-2 affirmed at 'Bsf'; Outlook revised to Stable from
Negative.
Access 2005-A
Class A-3 upgraded to 'AAAsf' from 'AAsf'; Outlook Stable;
Class B upgraded to 'BBB-sf' from 'BBsf'; Outlook Stable.
Access 2005-B
Class A-3 affirmed at 'AAAsf'; Outlook Stable.
Access 2007-A
Class A-3 affirmed at'AAAsf'; Outlook Stable;
Class B upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable.
Access Funding 2010-A LLC
Class A affirmed at 'AAAsf'; Outlook Stable.
The rating actions reflect the transactions' performance and credit
enhancement. The downgrade of the 2002-A class B is driven by the
trust's inability to trap excess spread due to the auction rate
securities and insufficient credit enhancement to cover future
losses. The upgrades are based on stable performance and sufficient
credit enhancement.
Fitch's cash flow model implied rating for class A 2002-A is
'BBBsf' and the transaction structure allows for optional
redemption of the subordinate notes prior to the senior notes when
the senior parity reaches 110% and total parity reaches 101.5%.
Fitch's breakeven analysis is based on the conservative scenario
that the senior parity could drop to 110% even though its current
senior parity is 136.1% and continue to rise over time. Fitch
considers this scenario less likely given the trajectory of the
total parity trend. For this reason, the rating has been affirmed
at 'Asf' rather than downgraded to model indicated 'BBBsf'.
Additionally, the trust does not have a reserve account that can be
used to pay interest and fees should there be a payment disruption.
However, the risk is mitigated by the ability of the transaction to
sustain two month's payment disruption without causing interest
shortfalls based on a principal repayment rate of 20% annually, and
quarterly payment frequency.
KEY RATING DRIVERS
Collateral Performance: The trust is collateralized by private
student loans originated by Access Group. Fitch assumes a base case
default rate of 5.2% for 2002-A, 5.6% for 2003-A, 5.8% for 2004-A,
6.0% for 2005-A, 5.6% for 2005-B, and 7.0% for 2007-A and 2010-A.
The base case default rate implies a sustainable CDR of 1.75% for
all transactions and default multiples of 4.0x, 3.35x and 2.5x at
'AAAsf', 'AAsf' and 'Asf' respectively. Fitch assumes a base case
recovery rate of 30% based on transaction data provided by the
issuer.
Payment Structure: Credit enhancement consists of
overcollateralization and excess spread and for some trusts, senior
notes benefit from subordination of more junior notes. Total parity
as of the most recent distribution was approximately 100.3% for
2002-A, at the cash release levels of 102% for 2003-A and 2004-A,
and 103% for 2005-A, 2005-B, and 2007-A and 191% for 2010-A.
Liquidity support is provided by reserve accounts of $400,000 for
2003-A and 2004-A, $1.0 million for 2005-A and 2005-B, $2.0 million
for 2007-A and $1.2 million for 2010-A. The 2002-A trust does not
have a reserve account that can be used to pay interest and trust
expenses.
Operational Capabilities: Day-to-day servicing is provided by
Conduent Education Services LLC which Fitch believes to be an
acceptable servicer of student loans due to their long servicing
history. Conduent will be exiting the student loan servicing
business in 2018 and the issuer is in the process of selecting a
replacement servicer.
Criteria Variation: According to Fitch's PSL Criteria, a committee
can decide to assign ratings with a break-even default multiple
within +/- 0.25 of Fitch's applied default stress multiple at the
model-implied rating level. For this surveillance review, the
affirmation of class A-2 for 2002-A are in excess of the +/- 0.25
default multiple threshold, constituting a variation to the PSL
Criteria. Fitch is making the variation as the analysis is based on
a conservative scenario assuming a senior parity of 110% rather
than actual parity of 136.1%. Additionally, the lack of a reserve
account for interest and fees creates a liquidity risk but the
trust can sustain two month's payment disruption without interest
shortfalls based on the principal repayment rate and note payment
frequency.
RATING SENSITIVITIES
'AAAsf' rated notes 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.
Rating sensitivities only apply for existing ratings above 'Bsf'.
Access 2002-A
Expected impact on the note rating of increased defaults (class A)
Current Ratings: 'Asf'
Increase base case defaults by 10%: 'BBBsf'
Increase base case defaults by 25%: 'BB+sf'
Increase base case defaults by 50%: 'BBsf'
Expected impact on the note rating of reduced recoveries (class A)
Reduce base case recoveries by 20%: 'BBBsf'
Reduce base case recoveries by 30%: 'BBBsf'
Reduce base case recoveries by 50%: 'BBB-sf'
Access 2003-A
Expected impact on the note rating of increased defaults (class A)
Current Ratings:'AAAsf'
Increase base case defaults by 10%: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'
Increase base case defaults by 50%: AAAsf'
Expected impact on the note rating of reduced recoveries (class A)
Reduce base case recoveries by 20%: 'AAAsf'
Reduce base case recoveries by 30%: 'AAAsf'
Reduce base case recoveries by 50%: 'AAAsf'
Access 2004-A
Expected impact on the note rating of increased defaults (class
A-2, A-3 & A-4)
Current Ratings:'AAAsf'/'BBBsf'
Increase base case defaults by 10%: 'AAAsf'/'BBBsf'
Increase base case defaults by 25%: 'AAAsf' /BBBsf'
Increase base case defaults by 50%: AAAsf' / 'BB+sf'
Expected impact on the note rating of reduced recoveries (class
A-2, A-3 & A-4)
Reduce base case recoveries by 20%: 'AAAsf'/ 'A-sf'
Reduce base case recoveries by 30%: 'AAAsf'/ 'BBB+sf'
Reduce base case recoveries by 50%: 'AAAsf'/ 'BBB+sf
Access 2005-A
Expected impact on the note rating of increased defaults (class A,
B)
Current Ratings:'AAAsf'/'BBBsf'
Increase base case defaults by 10%: 'AAAsf'/'BB+sf'
Increase base case defaults by 25%: 'AA+sf' /BBsf'
Increase base case defaults by 50%: AA-sf' / 'B+sf'
Expected impact on the note rating of reduced recoveries (class A,
B)
Reduce base case recoveries by 20%: 'AAAsf'/ 'BBB-sf'
Reduce base case recoveries by 30%: 'AAAsf'/ 'BB+sf'
Reduce base case recoveries by 50%: 'AAAsf'/ 'BB+sf
Access 2005-B
Expected impact on the note rating of increased defaults (class A)
Current Ratings:'AAAsf'
Increase base case defaults by 10%: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'
Increase base case defaults by 50%: 'AA+sf'
Expected impact on the note rating of reduced recoveries (class A)
Reduce base case recoveries by 20%: 'AAAsf'
Reduce base case recoveries by 30%: 'AAAsf'
Reduce base case recoveries by 50%: 'AAAsf'
Access 2007-A
Expected impact on the note rating of increased defaults (class
A/B)
Current Ratings:'AAAsf'/'BBB+sf'
Increase base case defaults by 10%: 'AAAsf'/'BBBsf'
Increase base case defaults by 25%: 'AA+sf' /BBB-sf'
Increase base case defaults by 50%: AA-sf' / 'BBsf'
Expected impact on the note rating of reduced recoveries (class A,
B)
Reduce base case recoveries by 20%: 'AAAsf'/ 'BBBsf'
Reduce base case recoveries by 30%: 'AAAsf'/ 'BBBsf'
Reduce base case recoveries by 50%: 'AAAsf'/ 'BBBsf
Access Funding 2010-A LLC
Expected impact on the note rating of increased defaults (class A)
Current Ratings:'AAAsf'
Increase base case defaults by 10%: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'
Increase base case defaults by 50%: 'AAAsf'
Expected impact on the note rating of reduced recoveries (class A)
Reduce base case recoveries by 20%: 'AAAsf'
Reduce base case recoveries by 30%: 'AAAsf'
Reduce base case recoveries by 50%: 'AAAsf'
AMMC CLO XII: S&P Assigns Prelim B-(sf) Rating on Class F-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-R, C-R, D-R, E-R, and F-R replacement notes and new class X
notes from AMMC CLO XII Ltd./AMMC CLO XII Corp., a collateralized
loan obligation (CLO) originally issued in 2013 that is managed by
American Money Management Corp. The replacement notes will be
issued via a proposed supplemental indenture.
The preliminary ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels.
The preliminary ratings are based on information as of Nov. 2,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 10, 2017, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, we anticipate withdrawing the ratings
on the original notes and assigning ratings to the replacement
notes. However, if the refinancing doesn't occur, we may affirm the
ratings on the original notes and withdraw our 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 make the following changes:
-- Class X notes will be issued.
-- The replacement class A-R, E-R, and F-R notes are expected to
be issued at higher spreads than the original notes.
-- The replacement class B-R, C-R, and D-R notes are expected to
be issued at lower spreads than the original notes.
-- The replacement class D-R notes are expected to be issued at a
floating spread, replacing the current fixed coupon.
-- The non-call period will be extended 3.5 years.
-- The reinvestment period will be extended five years.
-- The stated maturity will be extended 5.5 years.
-- The maximum weighted average life test date will be extended
six years.
S&P said, "Our 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
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
AMMC CLO XII Ltd./AMMC CLO XII Corp.
Replacement class Rating Amount (mil. $)
X AAA (sf) 6.00
A-R AAA (sf) 252.00
B-R AA (sf) 46.50
C-R A (sf) 31.50
D-R BBB (sf) 20.00
E-R BB- (sf) 20.00
F-R B- (sf) 8.00
ATRIUM XIII: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Atrium
XIII's $762.67 million floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by broadly syndicated speculative-grade senior
secured term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of Oct. 30,
2017. 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
Atrium XIII/Atrium XIII LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 517.28
A-2 NR 19.08
B AA (sf) 108.12
C A (sf) 53.53
D BBB- (sf) 51.94
E BB- (sf) 31.80
Subordinated notes NR 79.50
NR--Not rated.
N/A--Not applicable.
BANC OF AMERICA 2007-D: Moody's Ups Cl. 5-A-1 Debt Rating to Caa2
-----------------------------------------------------------------
Moody's Investors Service has upgraded ratings of 11 tranches from
four transactions backed by Alt-A mortgage loans, issued by
multiple issuers.
Complete rating actions are:
Issuer: Banc of America Funding 2007-D Trust
Cl. 1-A-4, Upgraded to Caa1 (sf); previously on Aug 27, 2013
Confirmed at Caa2 (sf)
Issuer: CSFB Adjustable Rate Mortgage Trust 2005-5
Cl. 6-A-2-2, Upgraded to Aa1 (sf); previously on Nov 22, 2016
Upgraded to A1 (sf)
Cl. 6-A-2-1, Upgraded to Aaa (sf); previously on Nov 22, 2016
Upgraded to Aa3 (sf)
Cl. 6-A-1-2, Upgraded to Aaa (sf); previously on Nov 22, 2016
Upgraded to Aa3 (sf)
Cl. 5-A-1, Upgraded to Caa2 (sf); previously on May 4, 2010
Downgraded to Caa3 (sf)
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2007-5
Cl. 1-A1, Upgraded to Caa1 (sf); previously on Nov 19, 2010
Downgraded to Caa3 (sf)
Issuer: Structured Asset Securities Corp Trust 2005-7XS
Cl. 2-A1B, Upgraded to Ba2 (sf); previously on Nov 22, 2016
Upgraded to B1 (sf)
Cl. 2-A1A, Upgraded to Baa3 (sf); previously on Nov 22, 2016
Upgraded to Ba2 (sf)
Cl. 1-A4B, Upgraded to A2 (sf); previously on Nov 22, 2016 Upgraded
to Baa1 (sf)
Cl. 1-A3, Upgraded to A3 (sf); previously on Nov 22, 2016 Upgraded
to Baa2 (sf)
Underlying Rating: Upgraded to A3 (sf); previously on Nov 22, 2016
Upgraded to Baa2 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. 1-A4A, Upgraded to A2 (sf); previously on Nov 22, 2016 Upgraded
to Baa1 (sf)
Underlying Rating: Upgraded to A2 (sf); previously on Nov 22, 2016
Upgraded to Baa1 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
RATINGS RATIONALE
The rating actions reflect the recent performance of the underlying
pools and Moody's updated loss expectations on those pools. The
rating upgrades are primarily due to improvement of credit
enhancement available to the bonds and expected loss on the
collateral.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
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 4.2% in September 2017 from 4.9% in
September 2016. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 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 2017. 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.
BAYVIEW OPPORTUNITY 2017-RT6: Fitch Rates Cl. B5 Notes 'Bsf'
------------------------------------------------------------
Fitch Ratings has assigned the following ratings to Bayview
Opportunity Master Fund IVb Trust 2017-RT6 (BOMFT 2017-RT6):
-- $112,077,000 class A notes 'AAAsf'; Outlook Stable;
-- $112,077,000 class A-IOA notional notes 'AAAsf'; Outlook
Stable;
-- $112,077,000 class A-IOB notional notes 'AAAsf'; Outlook
Stable;
-- $14,382,000 class B1 notes 'AAsf'; Outlook Stable;
-- $14,382,000 class B1-IOA notional notes 'AAsf'; Outlook
Stable;
-- $14,382,000 class B1-IOB notional notes 'AAsf'; Outlook
Stable;
-- $3,234,000 class B2 notes 'Asf'; Outlook Stable;
-- $3,234,000 class B2-IO notional notes 'Asf'; Outlook Stable;
-- $9,191,000 class B3 notes 'BBBsf'; Outlook Stable;
-- $9,191,000 class B3-IOA notional notes 'BBBsf'; Outlook
Stable;
-- $9,191,000 class B3-IOB notional notes 'BBBsf'; Outlook
Stable;
-- $10,382,000 class B4 notes 'BBsf'; Outlook Stable;
-- $6,212,000 class B5 notes 'Bsf'; Outlook Stable.
The following class will not be rated by Fitch:
-- $14,723,144 class B6 notes.
The notes are supported by a pool of 2,745 loans totaling $170.2
million (comprising 2,725 seasoned performing and re-performing
loans [RPLs] and 20 newly originated loans), including $6.0 million
in non-interest-bearing deferred principal amounts, as of the
cutoff date. Distributions of principal and interest (P&I) and loss
allocations are based on a sequential-pay, senior-subordinate
structure.
The 'AAAsf' rating on the class A notes reflects the 34.15%
subordination provided by the 8.45% class B1, 1.90% class B2, 5.40%
class B3, 6.10% class B4, 3.65% class B5, and 8.65% class B6
notes.
Fitch's ratings on the notes reflect the credit attributes of the
underlying collateral, the quality of the servicer (Bayview Loan
Servicing, LLC, rated 'RSS2+'), the representation (rep) and
warranty framework, minimal due diligence findings, and the
sequential pay structure.
KEY RATING DRIVERS
Recent Delinquencies (Negative): Approximately 38.4% of the
borrowers in the pool have had a delinquency in the prior 24
months, with 29.7% occurring in the past 12 months. The majority of
the pool (55.2%) has received a modification due to performance
issues. Although the borrowers had prior delinquencies as recent as
four months ago and tend to be chronic late payers, the seasoning
of roughly 11 years indicates a willingness to stay in their home.
Low Property Values (Negative): Based on Fitch's analysis, the
average current property value of the pool is approximately
$122,000, which is lower than the average of other Fitch-rated RPL
transactions of over $150,000. Historical data from CoreLogic Loan
Performance indicate that recently observed loss severities (LS)
have been higher for very low property values than implied by
Fitch's loan loss model. For this reason, LS floors were applied to
loans with property values below $100,000, which increased the
'AAAsf' loss expectation by roughly 205 basis points (bps).
Tier I Representation Framework (Positive): Fitch considers the
transaction's representation, warranty and enforcement (RW&E)
mechanism framework to be strong and consistent with a Tier I
framework. An automatic review of any loan that incurs a realized
loss or is 180 or more days delinquent will occur after cumulative
realized losses plus the 180+ delinquency bucket exceeds 50% of the
'Bsf' credit enhancement percentage as of the closing date. In
addition, any unaffiliated investor has the ability to cause a
third-party review (TPR) on any loans within 180 days of the loan
incurring a realized loss. Fitch believes the performance trigger
for causing an automatic review is sufficient for identifying
breaches before significant deterioration in pool performance
occurs.
The transaction benefits from life-of-loan representations and
warranties (R&Ws) as well as a backstop by Bayview Asset Management
(BAM) in the event the sponsor, Bayview Opportunity Master Fund
IVb, L.P., is liquidated or terminated.
Due Diligence Findings (Negative): A third-party review (TPR),
which was conducted on 100% of the pool, resulted in 15.4% (or 425
loans) graded 'C' or 'D'. For 363 loans, the due diligence results
showed issues regarding high cost testing -- the loans were either
missing the final HUD1, used alternate documentation to test, or
had incomplete loan files -- and therefore a slight upward revision
to the model output LS was applied, as further described in the
Third-Party Due Diligence section beginning on page 6. In addition,
timelines were extended on 409 loans that were missing final
modification documents (excluding 91 loans that were already
adjusted for HUD1 issues).
Recent Natural Disasters (Mixed): The full extent of damage from
Hurricane Harvey, Hurricane Irma and the California wildfires to
properties in the mortgage pool is not yet known. The servicer,
Bayview Loan Servicing, LLC (BLS), will be conducting inspections
on properties located in counties designated as major disaster
areas by the Federal Emergency Management Agency (FEMA) as a result
of Harvey and Irma.
The sponsor, Bayview Opportunity Master Fund IVb, L.P., is
obligated to repurchase loans that have incurred property damage
due to water, flood or hurricane prior to the transaction's closing
that materially and adversely affects the value of the property.
Fitch currently does not expect the effect of the storm damage to
have rating implications due to the repurchase obligation of the
sponsor and due to the limited exposure to affected areas relative
to the credit enhancement (CE) of the rated bonds.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
In addition, 40bps from the interest remittance amount will be used
to pay down principal as well as any excess interest allocation
from the loan-level daily interest accrual calculation. The
provision to re-allocate principal to pay interest on the 'AAAsf'
and 'AAsf' rated notes prior to other principal distributions, as
well as the application of excess interest to the notes, is highly
supportive of timely interest payments to those classes, in the
absence of servicer advancing.
Potential Interest Deferrals (Mixed): Given that there is no
external P&I advancing mechanism, Fitch analyzed the collateral's
cash flows using its standard prepayment and default timing
assumptions to assess the cash flow stability of the high
investment-grade rated bonds. Fitch considered the borrower's pay
histories in comparison to its timing assumptions and found that
the subordination is expected to be sufficient to cover timely
payment of interest on the 'AAAsf' and 'AAsf' notes. In addition,
principal otherwise distributable to the notes may be used to pay
monthly interest, which also helps provide stability in the cash
flows. However, the lower-rated bonds may experience long periods
of interest deferral, and will generally not be repaid until the
note becomes the most senior outstanding.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level LS are less for
this transaction than for those where the servicer is obligated to
advance P&I. Structural provisions and cash flow priorities,
together with increased subordination, provide for timely payments
of interest to the 'AAAsf' and 'AAsf' rated classes.
Solid Alignment of Interest (Positive): The sponsor, Bayview
Opportunity Master Fund IVb, L.P., will acquire and retain a 5%
vertical interest in each class of the securities to be issued. In
addition, the sponsor will also be the rep provider until at least
July 2021. If the fund is liquidated or terminated, BAM will be
obligated to provide a remedy for material breaches of R&Ws.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $6.1 million (3.6%) of the unpaid
principal balance are outstanding on 1,298 loans. Fitch included
the deferred amounts when calculating the borrower's LTV and sLTV
despite the lower payment and amounts not being owed during the
term of the loan. The inclusion resulted in higher PDs and LS than
if there were no deferrals. Fitch believes that borrower default
behavior for these loans will resemble that of the higher LTVs, as
exit strategies (that is, sale or refinancing) will be limited
relative to those borrowers with more equity in the property.
Servicing Fee Stress (Negative): Fitch determined that the
servicing fee may be insufficient to attract subsequent servicers
under a period of poor performance and high delinquencies. To
account for the potentially higher fee above what is allowed for
under the current transaction documents, Fitch's cash flow analysis
assumed a 100-bp servicing fee.
CRITERIA APPLICATION
Fitch analyzed the transaction in general accordance with its
criteria, as described in the report, "U.S. RMBS Rating Criteria."
This incorporates a review of the originators' lending platforms,
as well as an assessment of the transaction's R&Ws provided by the
originators and arranger, which were found to be consistent with
the ratings assigned to the certificates. Fitch's analysis
incorporated one criteria variation from "U.S. RMBS Loan Loss Model
Criteria," and one criteria variation from "U.S. RMBS Seasoned,
Re-Performing and Non-Performing Loan Rating Criteria," which are
described below.
The first variation relates to overriding the default assumption
for original DTI in Fitch's Loan Loss model. Based on a historical
data analysis of over 750,000 loans from Fannie Mae and Fitch's
rated RPL transactions, Fitch assumed an original debt-to-income
ratio (DTI) of 45% for all loans in the pool that did not have
original DTI data available (95% of the pool). The historical loan
data supports the DTI assumption of 45%. Prior to conducting the
historical analysis, Fitch had previously assumed 55% for loans
that were missing original DTI values.
The second variation is that 0.08% of the tax, title and lien
review was conducted more than six months prior to the cut-off
date. Fitch considers the robust servicing and ongoing monitoring
from Bayview Loan Servicing, which is a high-touch servicing
platform that specializes in seasoned loans, to be a positive.
Given the strength of the servicer, Fitch considered the impact of
a small percentage of outdated tax, title and lien reviews as of
the closing date to be nonmaterial.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. 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 be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 37.6% at 'AAAsf'. The analysis indicates 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'.
BEAR STEARNS 2004-PWR4: Moody's Hikes Rating on Cl. L Debt to Ba3
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and upgraded the ratings on two classes in Bear Stearns Commercial
Mortgage Trust, Series 2004-PWR4.:
Cl. E, Affirmed Aaa (sf); previously on Dec 2, 2016 Affirmed Aaa
(sf)
Cl. F, Affirmed Aaa (sf); previously on Dec 2, 2016 Affirmed Aaa
(sf)
Cl. G, Affirmed Aaa (sf); previously on Dec 2, 2016 Affirmed Aaa
(sf)
Cl. H, Affirmed Aaa (sf); previously on Dec 2, 2016 Affirmed Aaa
(sf)
Cl. J, Affirmed Aaa (sf); previously on Dec 2, 2016 Upgraded to Aaa
(sf)
Cl. K, Upgraded to Aa3 (sf); previously on Dec 2, 2016 Upgraded to
A2 (sf)
Cl. L, Upgraded to Ba3 (sf); previously on Dec 2, 2016 Upgraded to
B1 (sf)
Cl. M, Affirmed C (sf); previously on Dec 2, 2016 Affirmed C (sf)
Cl. X, Affirmed Caa2 (sf); previously on Jun 9, 2017 Downgraded to
Caa2 (sf)
RATINGS RATIONALE
The ratings of Class K and L were upgraded due primarily to an
increase in credit support since Moody's last review, resulting
from amortization, as well as Moody's expectation of further
increases in credit support resulting from continued amortization.
The rating of five P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR), and the
transaction's Herfindahl Index (Herf) are within acceptable
ranges.
The rating of the Class M was affirmed because the rating is
consistent with realized losses.
The rating of the IO class X was affirmed because of the credit
performance of the referenced classes.
Moody's rating action reflects a base expected loss of 0.0% of the
current pooled balance, compared to 0.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 1.7% of the
original pooled balance, the same as Moody's 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.
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. Moody's ratings
reflect the potential for future losses under varying levels of
stress.
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 July 2017.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the 11 October, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $49.4 million
from $954.9 million at securitization. The certificates are
collateralized by three mortgage loans ranging in size from less
than 1% to 94% of the pool. One loan, constituting 94% of the pool,
has defeased and is secured by US government securities.
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 one, the same as at Moody's last review.
One loan, constituting 5.4% 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.
Seven loans have been liquidated from the pool at a loss,
contributing to an aggregate realized loss of $16.3 million (for an
average loss severity of 47%).
The top performing loans represent 5.8% of the pool balance. The
largest loan is the Baring Village Loan ($2.7 million -- 5.4% of
the pool), which is secured by a 92,000 SF retail property located
in Sparks, Nevada approximately eight miles east of downtown Reno.
The center is anchored by a Smith's Food & Drug Store and Ace
Hardware which are not part of the collateral. The property was 91%
leased as of June 2017. The loan is fully amortizing and has paid
down 58% since securitization. Moody's LTV and stressed DSCR are
72% and 1.42X, respectively, compared to 88% and 1.17X at the last
review.
The second largest loan is the Don Wilson Office Building Loan
($0.2 million -- 0.4% of the pool), which is secured by a 25,000
SF, Class B, office building located in Torrence, California,
approximately 22 miles south of Los Angeles. The loan is fully
amortizing and has paid down 86% since securitization. Moody's LTV
and stressed DSCR are 7% and more than 4.00X, respectively,
compared to 14% and more than 4.00X at the last review.
BEAR STEARNS 2004-PWR5: Moody's Hikes Class M Debt Rating to Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on three classes
and affirmed the ratings on six classes in Bear Stearns Commercial
Mortgage Securities Trust 2004-PWR5, Commercial Mortgage
Pass-Through Certificates, Series 2004-PWR5:
Cl. F, Affirmed Aaa (sf); previously on Nov 22, 2016 Affirmed Aaa
(sf)
Cl. G, Affirmed Aaa (sf); previously on Nov 22, 2016 Affirmed Aaa
(sf)
Cl. H, Affirmed Aaa (sf); previously on Nov 22, 2016 Affirmed Aaa
(sf)
Cl. J, Affirmed Aaa (sf); previously on Nov 22, 2016 Upgraded to
Aaa (sf)
Cl. K, Upgraded to Aaa (sf); previously on Nov 22, 2016 Upgraded to
Aa3 (sf)
Cl. L, Upgraded to Baa1 (sf); previously on Nov 22, 2016 Upgraded
to Ba1 (sf)
Cl. M, Upgraded to Ba2 (sf); previously on Nov 22, 2016 Upgraded to
B1 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Nov 22, 2016 Affirmed Caa3
(sf)
Cl. X-1, Affirmed Caa1 (sf); previously on Jun 9, 2017 Downgraded
to Caa1 (sf)
RATINGS RATIONALE
The ratings on three P&I classes, Classes K, L and M, were upgraded
primarily due to an increase in credit support since Moody's last
review, resulting from paydowns and amortization, as well as the
large exposure to two defeased loans approaching maturity. The pool
has paid down by 11.3% since Moody's last review and the pool's two
defeased loans representing 78.8% of the pool are scheduled to
mature within 24 months.
The ratings on four P&I classes, classes F through J, were affirmed
because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges. The rating on Class N was affirmed due to
realized losses as Class N has already experienced an 18% realized
loss as result of previously liquidated loans.
The rating on the IO class, Class X-1, was affirmed based on the
credit quality of its 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. Moody's ratings
reflect the potential for future losses under varying levels of
stress. 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 principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. X-1 was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" methodology published in June 2017.
DEAL PERFORMANCE
As of the October 11, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 95.1% to $59.5
million from $1.2 billion at securitization. The certificates are
collateralized by nine remaining mortgage loans. Two loans,
constituting 78.8% of the pool, have defeased and are secured by US
government securities. One loan, constituting 5% of the pool, has
an investment-grade structured credit assessment.
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 6 at Moody's last review.
Two loans, constituting 1.1% 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.
Eight loans have been liquidated from the pool, resulting in an
aggregate realized loss of $17.8 million (for an average loss
severity of 46.6%). There are currently no loans in special
servicing.
Moody's received full year 2016 operating results for 100% of the
pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 33.9%, compared to 36.3% 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 15.9% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 8.9%.
Moody's actual and stressed conduit DSCRs are 1.63X and 4.72X,
respectively, compared to 1.66X and 4.07X 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 ($2.9 million -- 5% of the pool), which is secured
by a retail property located in New Castle, Delaware. As of June
2017, the property was 100% leased. The loan is fully amortizing
and has amortized by 81.2% 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 remaining non-defeased loans represent 14.2% of the
pool balance. The largest loan is the Arcade Garage Loan ($4
million -- 6.7% of the pool), which is secured by a 617-space, nine
level parking garage located in Providence, Rhode Island. The loan
is fully amortizing and has already amortized by 48.5% since
securitization. Moody's LTV and stressed DSCR are 36.9% and 3.15X,
respectively, compared to 41.3% and 2.82X at the last review.
The second largest loan is the 877 Post Road East Loan ($2.7
million -- 4.5% of the pool), which is secured by a 29,000 square
foot (SF) mixed use property in Westport, Connecticut. The property
was 100% leased as of June 2017, the same as of December 2015. The
loan is fully amortizing and has amortized by 50.2% since
securitization. Moody's LTV and stressed DSCR are 41.3% and 2.36X,
respectively, compared to 44.9% and 2.17X at the last review.
The third largest loan is the Herriman Crossroads Loan ($1.7
million -- 3% of the pool), which is secured by a 31,000 square
foot (SF) retail property located in Herriman, Utah. As per the
June 2017 rent roll the property was 96% leased, compared to 92%
leased as of March 2016. The loan is fully amortizing and has
amortized by 50.4% since securitization. Moody's LTV and stressed
DSCR are 34.4% and 2.67X, respectively, compared to 36% and 2.55X
at the last review.
BEAR STEARNS 2004-PWR6: Moody's Lowers Cl. N Notes Rating to Ca
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on twelve
classes and downgraded the rating on one class in Bear Stearns
Commercial Mortgage Trust, Series 2004-PWR6.:
Cl. B, Affirmed Aaa (sf); previously on Nov 9, 2016 Affirmed Aaa
(sf)
Cl. C, Affirmed Aaa (sf); previously on Nov 9, 2016 Affirmed Aaa
(sf)
Cl. D, Affirmed Aaa (sf); previously on Nov 9, 2016 Affirmed Aaa
(sf)
Cl. E, Affirmed Aaa (sf); previously on Nov 9, 2016 Affirmed Aaa
(sf)
Cl. F, Affirmed Aaa (sf); previously on Nov 9, 2016 Affirmed Aaa
(sf)
Cl. G, Affirmed Aa1 (sf); previously on Nov 9, 2016 Upgraded to Aa1
(sf)
Cl. H, Affirmed Baa1 (sf); previously on Nov 9, 2016 Upgraded to
Baa1 (sf)
Cl. J, Affirmed Ba1 (sf); previously on Nov 9, 2016 Upgraded to Ba1
(sf)
Cl. K, Affirmed B1 (sf); previously on Nov 9, 2016 Upgraded to B1
(sf)
Cl. L, Affirmed B2 (sf); previously on Nov 9, 2016 Upgraded to B2
(sf)
Cl. M, Affirmed Caa1 (sf); previously on Nov 9, 2016 Affirmed Caa1
(sf)
Cl. N, Downgraded to Ca (sf); previously on Nov 9, 2016 Affirmed
Caa3 (sf)
Cl. X-1, Affirmed B3 (sf); previously on Jun 9, 2017 Downgraded to
B3 (sf)
RATINGS RATIONALE
The rating of ten 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 of the Class M was affirmed because the rating is
consistent with Moody's expected loss.
The rating of the Class N was downgraded due to higher anticipated
losses on specially serviced loans.
The rating of the IO class X-1 was affirmed because of the credit
performance of the referenced classes.
Moody's rating action reflects a base expected loss of 2.1% of the
current pooled balance, compared to 0.6% at Moody's last review.
Moody's base expected loss plus realized losses is now 1.5% of the
original pooled balance, compared to 1.4% 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://v3.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 July 2017, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. X-1 was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the 11 October, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $99.0 million
from $1.1 billion at securitization. The certificates are
collateralized by 12 mortgage loans ranging in size from less than
1% to 23% of the pool, with the top ten loans (excluding
defeasance) constituting 61% of the pool. One loan, constituting
11% of the pool, has an investment-grade structured credit
assessment. One loan, constituting 39% of the pool, has defeased
and is secured by US government securities.
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 five, the same as at Moody's last review.
One loan, constituting 23% 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.
Eight loans have been liquidated from the pool at a loss,
contributing to an aggregate realized loss of $13.6 million (for an
average loss severity of 47%). One loan, constituting 3% of the
pool, is currently in special servicing. The largest specially
serviced loan is the Northway Plaza Shopping Center Loan ($2.6
million -- 2.6% of the pool), which is secured by a 79,000 SF
grocery-anchored retail center located in Columbia, South Carolina.
The loan had an anticipated repayment date (ARD) in July 2014 and
transferred to the special servicer in October 2016 due to cash
flow being insufficient to cover the required waterfall. Property
performance has deteriorated since securitization and was 61%
leased as of the September 2017 rent roll. Additionally, the three
largest tenants, Food Lion (37% of NRA), Citi Trends (10% of NRA),
and Rent-A-Center (7% of NRA), have leases that expire in the next
12 months.
Moody's estimates an aggregate $2.0 million loss for the specially
serviced loans (80% expected loss on average).
Moody's received full year 2016 operating results for 96% of the
pool, and full or partial year 2017 operating results for 92% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 50%, compared to 47% 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 19% 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 1.51X and 2.94X,
respectively, compared to 1.62X and 2.82X 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 Berry Plastics
Manufacturing Plant Loan ($10.5 million -- 10.6% of the pool),
which is secured by a portfolio of four industrial properties
located across three states, Arizona (1), Illinois (2), and New
York (1). The portfolio is 100% leased to Berry Global, Inc.
through November 2023. The loan is fully amortizing and has paid
down 50% since securiziation. Moody's analysis incorporated a
Lit/Dark approach to account for the single-tenant exposure.
Moody's structured credit assessment and stressed DSCR are aaa
(sca.pd) and 2.78X, respectively.
The top three conduit loans represent 37% of the pool balance. The
largest loan is the Plymouth Square Shopping Center Loan ($22.5
million -- 22.8% of the pool), which is secured by a 276,000 SF
grocery-anchored retail center located in Plymouth Meeting, PA,
approximately 15 miles northwest of Philadelphia. The property is
anchored by a Weis Market, Marshall's, REI, Rite Aid, and Sweat
Conshohocken. The property was 70% leased as of June 2017. The
borrower is currently moving forward with a mult-million dollar
renovation of the property. The loan benefits from amortization and
has paid down 20% since securitization Moody's LTV and stressed
DSCR are 71% and 1.34X, respectively, compared to 67% and 1.40X at
the last review.
The second largest loan is the Shaklee Corporation Loan ($9.2
million -- 9.3% of the pool), which is secured by 124,000 SF office
building located in Pleasanton, California. The property is 100%
leased to Shaklee Corporation through May 2024. The loan is fully
amortizing and has paid down 51% since securitization. Moody's
analysis incorporated a Lit/Dark approach to account for the
single-tenant exposure. Moody's LTV and stressed DSCR are 34% and
2.88X, respectively, compared to 37% and 2.63X at the last review.
The third largest loan is the Castle Rock Portfolio Loan ($4.6
million -- 4.7% of the pool), which is secured by a portfolio of
six industrial properties and two parcels of land located in
Arizona (1) and Colorado (7). The portfolio is 100% leased to
Karcher North America, Inc. through June 2024. The loan is fully
amortizing and has paid down 50% since securitization. Moody's
analysis incorporated a Lit/Dark approach to account for the
single-tenant exposure. Moody's LTV and stressed DSCR are 35% and
2.87X, respectively, compared to 33% and 3.09X at the last review.
BEAR STEARNS 2007-TOP26: Fitch Cuts Class A-J Certs Rating to CCsf
------------------------------------------------------------------
Fitch Ratings has downgraded three classes and affirmed 12 classes
of Bear Stearns Commercial Mortgage Securities Trust (BSCMS)
commercial mortgage pass-through certificates, series 2007-TOP26.
KEY RATING DRIVERS
The downgrade of classes A-J, B and C reflect higher modeled losses
on the specially serviced assets, including One AT&T Center
(32.6%). Fitch has affirmed class A-M based on the high credit
enhancement, the classes' senior position and the likelihood of
ultimate recovery given the collateral quality of the remaining
pool. Additionally Fitch has affirmed distressed classes D through
O, as loss expectations for these classes have not improved. Fitch
modeled losses of 42.9% of the remaining pool; expected losses on
the original pool balance total 11%, including $91.7 million (4.4%
of the original pool balance) in realized losses to date.
As of the October 2017 distribution date, the pool's aggregate
principal balance has been reduced by 84.4% to $328.7 million from
$2.11 billion at issuance. Interest shortfalls are currently
affecting classes D through P.
Concentrated Pool: The pool is concentrated with 12 performing
loans and seven specially serviced assets remaining. The performing
loans primarily consist of office properties (50%) with maturities
in 2020 or later.
Specially Serviced Assets; One AT&T Center: Seven assets (43.6%)
are currently with the special servicer, all of which are either
REO or in the foreclosure process. The largest specially serviced
asset is AT&T Center (32.6%), which is secured by a 1.46 million
square foot (sf) office building located in St. Louis, MO. The
property was previously fully-occupied by AT&T, but the company
vacated prior to its lease expiration in September 2017. The loan
transferred to the special servicer in March 2017 and the trust
took title to the property through foreclosure in August 2017. The
servicer is planning to market the property for sale with a
disposition expected in 2018. Fitch expects significant losses on
this asset and will continue to monitor the sale process.
RATING SENSITIVITIES
The Rating Outlook for class A-M has been revised to Stable based
on continued transaction paydown and the senior position within the
capital structure. Additionally, the ultimate payoff of loans that
matured in 2017 was better than expected. An upgrade to this class
is unlikely given the concentrated nature of the pool and the
quality of the remaining collateral. A downgrade is possible if
losses from the specially serviced assets are significantly greater
than expected. The distressed classes are subject to further
downgrades as losses are realized.
Fitch downgrades the following classes as indicated:
-- $160.6 million class A-J to 'CCsf' from 'CCCsf'; RE 65%;
-- $42.1 million class B to 'Csf' from 'CCsf'; RE 0%;
-- $18.4 million class C to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following class and revises the Rating Outlook as
indicated:
-- $62.3 million class A-M at 'Asf'; Outlook to Stable from
Negative.
Fitch affirms the following classes:
-- $29 million class D at 'Csf'; RE 0%;
-- $15.8 million class E at 'Csf'; RE 0%;
-- $456,448 class F at 'Dsf'; RE 0%;
-- $0 class G at 'Dsf'; RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class O at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-AB, A-4 and A-1A certificates have paid
in full. Fitch does not rate the class P certificates. Fitch
previously withdrew the ratings on the interest-only class X-1 and
X-2 certificates.
BUSINESS LOAN 2006-A: Moody's Hikes Class C Notes Rating to B1
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the Class A,
B and C notes from the Business Loan Express Business Loan Trust
2006-A securitization of small business loans originated by BLX
Capital LLC. The securitized loans are secured primarily by small
commercial real estate properties.
The complete rating actions are:
Issuer: Business Loan Express Business Loan Trust 2006-A
Cl. A, Upgraded to Baa3 (sf); previously on Feb 10, 2015 Upgraded
to Ba1 (sf)
Cl. B, Upgraded to Ba3 (sf); previously on Feb 10, 2015 Upgraded to
B1 (sf)
Cl. C, Upgraded to B1 (sf); previously on Feb 10, 2015 Upgraded to
B2 (sf)
RATINGS RATIONALE
The upgrade actions for the 2006-A securitization were due to the
improving credit enhancement of the notes and the stable pool
performance over the past twelve months. The spread account balance
for the 2006-A transaction, as a percent of outstanding pool
balance, increased by seven percentage points to 19% as of the
October 2017 remittance date report compared to twelve months ago.
The current spread account balance includes cash trapped due to the
delinquency pipeline, with the reserve fund having a target floor
of 2% of original pool balance which translates to 14% of current
pool balance. Additionally, delinquencies have been relatively
stable for the transaction over the past twelve months, with 60+
day delinquencies remaining at roughly 6% of the pool balance.
The securitization has exposure to 119 loans, however the exposure
is fairly concentrated. Of the 119 loans, the top 10 largest loans
account for approximately 34% of exposure within the collateral
pool.
METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating SME Balance Sheet Securitizations" published in
August, 2017.
The methodology used in the rating actions included an analysis of
the loan collateral to arrive at a projected remaining net loss.
Moody's determined the expected remaining loss using representative
delinquency roll rates and an estimate of market recoveries.
Because of the hard charge-off policy by which a loan must be
charged off after being a certain number of days past due, Moody's
also considered potential future recoveries on charged-off loans
whose collateral has not yet been sold.
The projected net loss was evaluated against the available credit
enhancement provided by subordination, the reserve account, the
excess spread and overcollateralization. Sufficiency of coverage
was considered in light of the credit quality of the collateral
pool, the largest loans concentration in the pool, historical
variability of losses experienced by the issuer, and servicer
quality.
Other methodologies and factors that Moody's may have considered in
the process of rating these transactions appear on Moody's website.
More information on Moody's analysis of this transaction is
available at www.moodys.com.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline below Moody's expectations as
a result of a decrease in seriously delinquent loans and lower
severities than expected on liquidated loans.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of an increase in seriously delinquent loans and higher
severities than expected on liquidated loans.
BX TRUST 2017-IMC: S&P Assigns B-(sf) Rating on Class F Certs
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to BX Trust 2017-IMC's
$955.0 million commercial mortgage pass-through certificates.
The note issuance is a commercial mortgage-backed securities
transaction backed by one two-year, floating-rate commercial
mortgage loan totaling $955 million, with three one-year extension
options, secured by the fee and leasehold interests in 18 showroom
properties, 15 of which are located in High Point, N.C. and three
in Las Vegas.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsor's and manager's experience, the
trustee-provided liquidity, the loan's terms, and the transaction's
structure.
RATINGS ASSIGNED
BX Trust 2017-IMC
Class Rating(i) Amount ($)
A AAA (sf) 275,592,000
X-CP BBB- (sf) 261,176,000(ii)
X-NCP BBB- (sf) 261,176,000(ii)
B AA- (sf) 95,821,000
C A- (sf) 71,230,000
D BBB- (sf) 94,125,000
E BB- (sf) 148,396,000
F B- (sf) 126,836,000
G NR 95,000,000
HRR NR 48,000,000
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional balance. The class X certificates' notional amount
will be reduced by the aggregate amount of principal distributions
and realized losses allocated to the class B, C, and D
certificates.
NR--Not rated.
CATAMARAN CLO 2014-1: Moody's Assigns B3 Rating to Cl. E-R Notes
----------------------------------------------------------------
Moody's Investors Service has assigned the following ratings to the
following notes (the "Refinancing Notes") issued by Catamaran CLO
2014-1 Ltd.:
US$2,000,000 Class X Amortizing Floating Rate Notes due 2030 (the
"Class X Notes"), Assigned Aaa (sf)
US$429,500,000 Class A-1A Floating Rate Notes due 2030 (the "Class
A-1A Notes"), Assigned Aaa (sf)
US$17,000,000 Class A-1B Floating Rate Notes due 2030 (the "Class
A-1B Notes"), Assigned Aaa (sf)
US$60,000,000 Class A-2R Floating Rate Notes due 2030 (the "Class
A-2R Notes"), Assigned Aa2 (sf)
US$37,000,000 Class B-R Deferrable Floating Rate Notes due 2030
(the "Class B-R Notes"), Assigned A2 (sf)
US$37,000,000 Class C-R Deferrable Floating Rate Notes due 2030
(the "Class C-R Notes"), Assigned Baa3 (sf)
US$38,500,000 Class D-R Deferrable Floating Rate Notes due 2030
(the "Class D-R Notes"), Assigned Ba3 (sf)
US$6,500,000 Class E-R Deferrable Floating Rate Notes due 2030 (the
"Class E-R Notes"), Assigned B3 (sf)
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of senior secured, broadly syndicated corporate loans.
Trimaran Advisors, L.L.C. (the "Manager") manages the CLO. It
directs the selection, acquisition, and disposition of collateral
on behalf of the Issuer.
RATINGS RATIONALE
Moody's ratings on the Refinancing 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.
The Issuer has issued the Refinancing Notes on October 31, 2017
(the "Refinancing Date") in connection with the refinancing of all
classes of the secured notes (the "Refinanced Original Notes")
previously issued on May 6, 2014 (the "Original Closing Date"). On
the Refinancing Date, the Issuer used proceeds from the issuance of
the Refinancing Notes to redeem in full the Refinanced Original
Notes.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: Extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; changes to the
overcollateralization test levels; and changes to comply with the
Volcker Rule.
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 August 2017.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $665,500,000
Defaulted Par: $0
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.45%
Weighted Average Coupon (WAC): 5.0%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 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
August 2017.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
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 Refinancing 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 Refinancing
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 X: 0
Class A-1A: 0
Class A-1B: -1
Class A-2R: -2
Class B-R: -2
Class C-R: -1
Class D-R: -1
Class E-R: -1
Percentage Change in WARF -- increase of 30% (from 2850 to 3705)
Rating Impact in Rating Notches
Class X: 0
Class A-1A: -1
Class A-1B: -3
Class A-2R: -3
Class B-R: -4
Class C-R: -2
Class D-R: -1
Class E-R: -4
CFIP CLO 2017-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CFIP CLO
2017-1 Ltd.'s $439.850 million floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by broadly syndicated speculative-grade
senior-secured term loans that are governed by collateral quality
tests.
The preliminary ratings are based on information as of Nov. 2,
2017. 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
CFIP CLO 2017-1 Ltd./CFIP CLO 2017-1 LLC
Class Rating Amount
(mil. $)
X AAA (sf) 1.000
A AAA (sf) 310.000
B AA (sf) 47.750
C (deferrable) A (sf) 36.975
D (deferrable) BBB- (sf) 25.045
E (deferrable) BB- (sf) 19.080
Income notes NR 44.073
NR--Not rated.
CITI HELD 2016-PM1: Fitch Affirms 'Bsf' Rating on Class C Debt
--------------------------------------------------------------
Fitch Ratings has taken the following rating actions on two Citi
Held for Asset Issuance trusts, which are backed by marketplace
loans originated via the Prosper platform:
Citi Held for Asset Issuance 2015-PM3 (CHAI 2015-PM3):
-- Class B upgraded to 'A+sf' from 'BBB+sf'; Outlook Stable;
-- Class C affirmed at 'BB-sf'; Outlook revised to Stable from
Negative.
Citi Held for Asset Issuance 2016-PM1 (CHAI 2016-PM1):
-- Class A upgraded to 'A+sf' from 'Asf'; Outlook Stable;
-- Class B upgraded to 'Asf' from 'BBBsf'; Outlook Stable;
-- Class C affirmed at 'Bsf'; Outlook Stable.
The rating actions above reflect the growth to date in hard credit
enhancement (CE) available to the class A and B notes and
stabilization of asset performance. Fitch increased its lifetime
gross default expectations slightly to 13.7% from 13.6% for CHAI
2015-PM3 and to 15% from 14.9% for CHAI 2016-PM1.
KEY RATING DRIVERS
Collateral Quality: The trusts consist of unsecured consumer loans
that are with original terms of 36 or 60 months originated and
serviced on Prosper's marketplace online lending platform. Fitch's
gross default assumption for the life of the CHAI 2015-PM3
collateral is 13.7%, which translates to 13.7% of the current pool.
Fitch's gross default assumption for life of the CHAI 2016-PM1
collateral is 15%, which translates to 15.1% of the current pool.
Fitch assumes a base case recovery rate of 7%. At the 'A+sf' level,
a default multiple of 3.7x and a recovery haircut of 33% are
applied.
Increasing Credit Enhancement: Hard CE for CHAI 2015-PM3 has grown
since close from 26.5% to 62.9% for the class B notes and from 12%
to 18.1% for the class C notes. Likewise, hard CE for CHAI 2016-PM1
has grown since close from 33% to 74.7% for the class A notes, from
25.1% to 53.3% for the class B notes, and from 12% to 17.9% for the
class C notes. While subordination available to the class A and B
notes will grow as the transactions pay down, overcollateralization
(OC) is at its target release level of 16.5% for both transactions,
and will not grow until it hits its floor of 2% of the initial
balance, which occurs at 12.1% pool factor.
Rating Cap at 'Asf': Fitch placed a rating cap on the notes at the
'Asf' category, considering primarily the sector's untested
performance throughout a full economic cycle. History for unsecured
installment loans originated via online platforms such as Prosper's
thus far has only been during a benign macro environment.
Furthermore, the underlying consumer loans are likely at or near
the bottom of repayment priority for consumers, since repayment
does not provide the consumer ongoing utility as auto loans, credit
cards and cellphone plans do. The cap only constrains the CHAI
2015-PM3 class B and CHAI 2016-PM1 class A notes.
Adequate Servicing Capabilities: Prosper will service the pool of
loans, and Citibank, N.A. will act as the backup servicing. Fitch
considers both parties to be adequate servicers for this pool based
on prior experience and capabilities.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults could produce
loss levels higher than the base case and would likely result in
declines of CE and remaining loss coverage levels available to the
investments. Decreased CE may make certain ratings on the
investments susceptible to potential negative rating actions,
depending on the extent of the decline in coverage.
Rating sensitivities provide greater insight into the model-implied
sensitivities the transaction faces when one or two risk factors
are stressed while holding others equal. The modeling process first
uses the estimation and stress of a base case loss assumption to
reflect asset performance in a stressed environment. Second,
structural protection was analyzed with Fitch's proprietary cash
flow model. The results below should only be considered as one
potential outcome as the transaction is exposed to multiple risk
factors that are all dynamic variables.
CHAI 2015-PM3:
-- Default increase 10%: class B 'A+sf'; class C 'B+sf';
-- Default increase 25%: class B 'A+sf'; class C 'B-sf';
-- Default increase 50%: class B 'Asf'; class C 'B-sf';
-- Recoveries decrease to 0%: class B 'A+sf'; class C 'B+sf'.
CHAI 2016-PM1:
-- Default increase 10%: class A 'A+sf'; class B 'A-sf'; class C
'B-sf';
-- Default increase 25%: class A 'A+sf'; class B 'BBB+sf'; class
C 'CCCsf';
-- Default increase 50%: class A 'Asf'; class B 'BBBsf'; class C
'CCCsf';
-- Recoveries decrease to 0%: class A 'A+sf'; class B 'Asf';
class C 'B-sf'.
Given the cumulative net loss trigger structure, the class C notes
of both trusts demonstrate exposure to further deterioration, and
in particular to back-loaded losses.
Given the short remaining life of the assets, Fitch modelled timing
curves different from those described in the Global Consumer ABS
Criteria. The front, even, and back curves, which are in
three-month intervals, were 37.5%/37.5%/12.5%/12.5%,
25%/25%/25%/8.33%/8.33%/8.33%, and
18.75%/18.75%/18.75%/18.75%/6.25%/6.25%/6.25%/6.25%, respectively.
CITIGROUP 2015-SSHP: S&P Affirms B-(sf) Rating on Class F Certs
---------------------------------------------------------------
S&P Global Ratings affirmed its ratings on six classes of
commercial mortgage pass-through certificates from Citigroup
Commercial Mortgage Trust 2015-SSHP, a U.S. commercial
mortgage-backed securities (CMBS) transaction.
For the affirmations, S&P's expectation of credit enhancement was
more or less in line with the affirmed rating levels.
S&P said, "In addition, we reviewed the transaction's insurance
provision and providers and determined that they are, for the most
part, consistent with our property insurance criteria and normal
market standards. However, upon review of the recent insurance
certificates the master servicer provided, we noted that one of the
insurers is not rated by S&P Global Ratings. We generally expect
insurance providers to be rated by S&P Global Ratings no lower than
two rating categories below the highest-rated securities backed by
the loan, with a floor of the 'BBB' rating category. As such, we
increased our minimum credit enhancement levels at each rating
category."
This is a single-borrower transaction backed by a floating-rate
interest-only (IO) mortgage loan that is secured by 18 hotels (four
full-service, five select-service, five limited-service, and four
extended-stay) totaling 2,486 rooms in nine U.S. states. S&P said,
"Our property-level analysis included a re-evaluation of the
portfolio of hotel properties that secure the mortgage loan in the
trust and considered the flat (2014-2016) to downward trending
(trailing 12 months ended June 30, 2017) servicer-reported
occupancy, average daily rate (ADR), and net operating income.
According to the master servicer, the downward trending trailing 12
months ended June 2017 performance is primarily due to lower
overall occupancy and significant renovation work at the
Renaissance Savery Des Moines property. After the renovation, we
expect the portfolio's performance to bounce back to 2013-2014
reported levels. If the portfolio fails to maintain our expected
performance levels, we may revise our sustainable new cash flow
(NCF) and value. We derived our sustainable in-place NCF, which we
divided by a 9.58% weighted average capitalization rate, to
determine our expected-case value. This yielded an overall S&P
Global Ratings loan-to-value ratio and debt service coverage (DSC)
of 92.1% and 2.42x (based on the LIBOR cap rate plus a spread),
respectively, on the trust balance."
According to the Oct. 16, 2017, trustee remittance report, the IO
mortgage loan has a trust and whole loan balance of $210.0 million
and pays an annual floating interest rate of LIBOR plus a 2.235%
spread. The borrower exercised one of its two successive one-year
extension options and the loan currently matures on Sept. 9, 2018.
The borrowers' equity interest in the whole loan also secures a
$25.0 million mezzanine loan. S&P confirmed with the master
servicer, Wells Fargo Bank N.A. (Wells Fargo), that the hotel in
Florida incurred minor damage from Hurricane Irma. Wells Fargo
reported for the portfolio an overall occupancy, ADR, revenue per
available room, and DSC of 69.93%, $113.28, $78.88, and 3.37x for
the trust balance, respectively, for the 12 months ended June 30,
2017. To date the trust has not incurred any principal losses.
RATINGS LIST
Citigroup Commercial Mortgage Trust 2015-SSHP
Commercial mortgage pass through certificates series 2015-SSHP
Rating
Class Identifier To From
A 17323KAA7 AAA (sf) AAA (sf)
B 17323KAC3 AA- (sf) AA- (sf)
C 17323KAE9 A- (sf) A- (sf)
D 17323KAG4 BBB- (sf) BBB- (sf)
E 17323KAJ8 BB- (sf) BB- (sf)
F 17323KAL3 B- (sf) B- (sf)
CITIGROUP 2017-C4: Fitch Assigns 'B-sf' Rating to Class H-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Ratings
Outlooks to Citigroup Commercial Mortgage Trust 2017-C4 commercial
mortgage pass-through certificates
-- $27,750,000 class A-1 'AAAsf'; Outlook Stable;
-- $103,900,000 class A-2 'AAAsf'; Outlook Stable;
-- $240,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $271,691,000 class A-4 'AAAsf'; Outlook Stable;
-- $40,600,000 class A-AB 'AAAsf'; Outlook Stable;
-- $757,221,000a class X-A 'AAAsf'; Outlook Stable;
-- $85,493,000a class X-B 'A-sf'; Outlook Stable;
-- $73,280,000 class A-S 'AAAsf'; Outlook Stable;
-- $45,189,000 class B 'AA-sf'; Outlook Stable;
-- $40,304,000 class C 'A-sf'; Outlook Stable;
-- $29,311,000ab class X-D 'BBBsf'; Outlook Stable;
-- $29,311,000b class D 'BBBsf'; Outlook Stable;
-- $21,984,000bc class E-RR 'BBB-sf'; Outlook Stable;
-- $12,214,000bc class F-RR 'BB+sf'; Outlook Stable;
-- $12,213,000bc class G-RR 'BB-sf'; Outlook Stable;
-- $9,770,000bc class H-RR 'B-sf'; Outlook Stable.
The following class is not rated by Fitch:
-- $48,853,893bc class J-RR.
(a) Notional amount and interest only.
(b) Privately placed and pursuant to Rule 144A.
(c) Horizontal credit risk retention interest representing at least
5% of the estimated fair value of all classes of regular
certificates issued by the issuing entity (as of the closing
date).
Since Fitch published its expected ratings on Oct. 16 2017, the
expected 'BBB-sf' ratings on the class X-D and class D certificates
have been revised to 'BBBsf' based on the final deal structure.
The final ratings are based on information provided by the issuer
as of Oct. 31, 2017.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 57 loans secured by 95
commercial properties having an aggregate principal balance of
$977,059,894 as of the cut-off date. The loans were contributed to
the trust by Citi Real Estate Funding Inc., Cantor Commercial Real
Estate Lending, L.P., Ladder Capital Finance LLC, German American
Capital Corporation, and Rialto Mortgage Finance, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 70.2% of the properties
by balance, cash flow analysis of 82.2%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
Higher Fitch Leverage than Recent Transactions: The pool's leverage
is slightly higher than recent comparable Fitch-rated multiborrower
transactions. The pool's Fitch DSCR and LTV are 1.19x and 108.3%,
as compared to the YTD 2017 averages of 1.27x and 100.8%,
respectively.
Diverse Pool: The top-10 loans comprise 44% of the pool by balance,
which is below the YTD 2017 average of 53.3% for comparable
Fitch-rated multiborrower transactions. The transaction's loan
concentration index of 309 and average loan size of $17.1 million
are both below the YTD 2017 averages of 399 and $20.4 million,
respectively.
Above-Average Hotel and Retail Concentration: Loans secured by
hotel properties make up 18.8% of the pool, which is above the YTD
2017 average of 15.9%. Hotels have the highest probability of
default in Fitch's multiborrower model, all else equal. Loans
secured by retail properties, mixed-use properties that are
predominantly retail, and leased-fee assets improved with retail
collateral make up 36.1% of the pool. This is above the YTD 2017
average of 24%. Office properties and mixed-use properties that are
predominantly office make up 30.9% of the pool. Retail and office
properties have an average probability of default in Fitch's
multiborrower model, all else equal.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 14.5% 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 CGCMT
2017-C4 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 'BBB-sf'
could result.
COMM 2017-PANW: Fitch Assigns 'BBsf' Rating to Class E Certs
------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to COMM 2017-PANW Mortgage Trust Commercial Mortgage
Pass-Through Certificates:
-- $163,875,000 class A 'AAAsf'; Outlook Stable;
-- $36,290,000 class B 'AA-sf'; Outlook Stable;
-- $24,890,000 class C 'A-sf'; Outlook Stable;
-- $35,245,000 class D 'BBB-sf'; Outlook Stable;
-- $34,200,000 class E 'BBsf'; Outlook Stable.
Fitch does not rate the following class:
-- $15,500,000a class VRR.
(a)Vertical credit risk retention interest representing 5% of the
loan balance (as of the closing date).
The certificates represent the beneficial interests in the $310
million, seven-year, fixed-rate, interest-only mortgage loan
securing the fee interest in The Campus @ 3333 Phase III, a
940,564-sf, four-building office campus located in Santa Clara, CA.
Proceeds of the loan, along with $304.2 million of cash equity and
$28.8 million of seller credit, were used to acquire the property
for $610 million, fund $31 million of upfront reserves and pay
closing costs. The certificates will follow a sequential-pay
structure.
KEY RATING DRIVERS
Fitch Leverage: The $310.0 million mortgage loan has a Fitch DSCR
and LTV of 1.13x and 79.1%, respectively, and debt of $330 psf.
Creditworthy Tenancy: The property is 100% leased to Palo Alto
Networks, Inc. (PANW), which executed three, separate, absolute NNN
leases, which expire in July 2028, 3.9 years beyond the loan
maturity in October 2024. PANW provides security platform solutions
to enterprises, service providers and government entities
worldwide, and the company reported 2016 revenue of $1.38 billion.
Asset Quality and Strong Location: The property was built in 2017
and is certified LEED Silver. The property is centrally located in
Santa Clara, CA with easy access to Interstate 101 and Montague
Expressway, two major thoroughfares in Silicon Valley. The property
also has easy access to the Lawrence Street Caltrain station.
RATING SENSITIVITIES
Fitch evaluated the sensitivity of the ratings for class A and
found that a 10% decline in Fitch's implied NCF would result in a
one-category downgrade, while a 42% decline would result in a
downgrade to below investment grade.
CSMC TRUST 2017-CALI: S&P Assigns Prelim B-(sf) Rating on F Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CSMC Trust
2017-CALI's $250.0 million commercial mortgage pass-through
certificates series 2017-CALI.
The certificate issuance is a commercial mortgage-backed securities
transaction backed by a $250.0 million trust mortgage loan, which
is part of a whole mortgage loan totaling $300.0 million, secured
by a first lien on the borrower's fee interest in One California
Plaza, a 42-story office building with a total of 1.05 million sq.
ft., located in Los Angeles' Greater Downtown submarket.
The preliminary ratings are based on information as of Oct. 31,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of the collateral's
historical and projected performance, the sponsor's and managers'
experience, the trustee-provided liquidity, the loan's terms, and
the transaction's structure.
PRELIMINARY RATINGS ASSIGNED
CSMC Trust 2017-CALI
Class Rating Amount ($)
A AAA (sf) 72,700,000
X-A AAA (sf) 72,700,000(i)
X-B A- (sf) 37,100,000(i)
B AA- (sf) 17,900,000
C A- (sf) 19,200,000
D BBB- (sf) 23,500,000
E BB- (sf) 32,000,000
F B- (sf) 30,900,000
G NR 39,700,000
HRR NR 14,100,000
(i)Notional balance. The notional amount of the class X-A
certificates will be equal to the total class A certificate
balance. The notional amount of the class X-B certificates will be
equal to the total class B and class C certificate balance. NR--Not
rated.
CSMC TRUST 2017-HL2: Fitch Assigns 'Bsf' Rating to Class B-5 Notes
------------------------------------------------------------------
Fitch rates CSMC 2017-HL2 Trust (CSMC 2017-HL2) as follows:
-- $542,384,000 class A-1 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $542,384,000 class A-2 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $406,788,000 class A-3 certificates 'AAAsf'; Outlook Stable;
-- $406,788,000 class A-4 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $27,119,000 class A-5 certificates 'AAAsf'; Outlook Stable;
-- $27,119,000 class A-6 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $108,477,000 class A-7 certificates 'AAAsf'; Outlook Stable;
-- $108,477,000 class A-8 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $57,429,000 class A-9 certificates 'AAAsf'; Outlook Stable;
-- $28,715,000 class A-9A exchangeable certificates 'AAAsf';
Outlook Stable;
-- $28,714,000 class A-9B exchangeable certificates 'AAAsf';
Outlook Stable;
-- $57,429,000 class A-10 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $28,715,000 class A-10A exchangeable certificates 'AAAsf';
Outlook Stable;
-- $28,714,000 class A-10B exchangeable certificates 'AAAsf';
Outlook Stable;
-- $433,907,000 class A-11 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $135,596,000 class A-12 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $433,907,000 class A-13 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $135,596,000 class A-14 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $599,813,000 class A-15 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $599,813,000 class A-16 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $599,813,000 class A-IO1 notional certificates 'AAAsf';
Outlook Stable;
-- $542,384,000 class A-IO2 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $406,788,000 class A-IO3 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $27,119,000 class A-IO4 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $108,477,000 class A-IO5 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $57,429,000 class A-IO6 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $599,813,000 class A-IO7 notional exchangeable certificates
'AAAsf'; Outlook Stable;
-- $13,081,000 class B-1 certificates 'AAsf'; Outlook Stable;
-- $10,529,000 class B-2 certificates 'Asf'; Outlook Stable;
-- $7,657,000 class B-3 certificates 'BBBsf'; Outlook Stable;
-- $3,190,000 class B-4 certificates 'BBsf'; Outlook Stable;
-- $1,915,000 class B-5 certificates 'Bsf'; Outlook Stable.
The following class will not be rated by Fitch:
-- $1,914,517 class B-6 certificates.
The notes are supported by one collateral group that consists of
1,029 prime fixed-rate mortgages (FRMs) acquired by subsidiaries of
American International Group, Inc. (AIG) from various mortgage
originators with a total balance of approximately $638.10 million
of the cut-off date.
The 'AAAsf' rating on the class A notes reflects the 6.00%
subordination provided by the 2.05% class B-1, 1.65% class B-2,
1.20% class B-3, 0.50% class B-4, 0.30% class B-5 and 0.30% class
B-6 notes.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The pool consists of
high-quality 30-year fixed-rate fully amortizing Safe Harbor
Qualified Mortgage (SHQM) loans to borrowers with strong credit
profiles, relatively low leverage and large liquid reserves. The
loans are seasoned an average of six months.
The pool has a weighted average (WA) original FICO score of 775,
which is indicative of very high credit-quality borrowers.
Approximately 50% of the borrowers have original FICO scores at or
above 780. In addition, the original WA combined loan-to-value
(CLTV) ratio of 74% represents substantial borrower equity in the
property and reduced default probability.
AIG as Aggregator (Neutral): AIG is a global insurance corporation
that has issued one previous RMBS transaction to date. In 2013, AIG
established the Residential Mortgage Lending (RML) group to
establish relationships with mortgage originators and acquire prime
jumbo loans on behalf of funds owned by AIG. Fitch conducted a full
review of AIG's aggregation processes and believes that AIG meets
industry standards needed to aggregate mortgages for residential
mortgage-backed securitization. In addition to the satisfactory
operational assessment, a due diligence review was completed on
100% of the pool.
Third-Party Due Diligence Results (Positive): A third-party
loan-level due diligence review was conducted on 100% of the pool
in accordance with Fitch's criteria, and focused on credit,
compliance and property valuation. Based on the review, 26.5% of
the loans received an 'A' grade and the remainders were graded 'B'
(73.0%) and 'C' (0.5%). The loans graded 'B' and 'C' were due to
nonmaterial findings and contained compensating factors such as
large reserves, low LTV, low DTIs and high FICOs. In Fitch's view,
the results of the diligence indicate acceptable controls and
adherence to underwriting guidelines, and no adjustment was made to
the expected losses.
Top Tier Representation and Warranty Framework (Positive): Fitch
considers the transaction's representation, warranty and
enforcement (RW&E) mechanism framework to be consistent with Tier I
quality. As a result of the Tier I RW&E framework and the 'A'
Fitch-rated counterparty supporting the repurchase obligations of
the RW&E providers, the pool received a PD credit of 47 basis
points at the 'AAAsf' level (addressed in further detail on page
5).
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.
CE Floor (Positive): To mitigate tail risk, which arises as the
pool seasons and fewer loans are outstanding, a subordination floor
of 0.75% 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.
Geographic Concentration (Neutral): Approximately 34.8% of the pool
is located in California, which is in line or slightly lower than
recent Fitch-rated transactions. In addition, the metropolitan
statistical area (MSA) concentration is minimal, as the top three
MSAs account for only 27.7% of the pool. The largest MSA
concentration is in the Los Angeles MSA (11.7%) followed by the
Seattle MSA (8.2%) and the Atlanta MSA (7.8%). As a result, no
geographic concentration penalty was applied.
Extraordinary Expense Treatment (Neutral): The trust provides for
expenses, including indemnification amounts and costs of
arbitration, to be paid by the net WA coupon of the loans, which
does not affect the contractual interest due on the certificates.
Furthermore, the expenses to be paid from the trust are capped at
$300,000 per annum, which can be carried over each year, subject to
the cap until paid in full.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. 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 be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 7.1%. The analysis indicates 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'.
DEEPHAVEN RESIDENTIAL 2017-3: S&P Gives (P)B Rating on B-2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Deephaven
Residential Mortgage Trust 2017-3's $305.016 million mortgage
pass-through notes.
The note issuance is a residential mortgage-backed securities
(RMBS) transaction backed by first-lien, fixed- and
adjustable-rate, and interest-only residential mortgage loans
secured by single-family residences, planned-unit developments,
two- to four-family residences and condominiums to nonconforming
borrowers.
The preliminary ratings are based on information as of Oct. 30,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework; and
-- The mortgage aggregator.
PRELIMINARY RATINGS ASSIGNED
Deephaven Residential Mortgage Trust 2017-3
Class Rating(i) Amount ($)
A-1 AAA (sf) 187,702,000
A-2 AA (sf) 30,824,000
A-3 A (sf) 41,865,000
M-1 BBB (sf) 18,556,000
B-1 BB (sf) 15,335,000
B-2 B (sf) 10,734,000
B-3 NR 1,687,204
XS NR Notional(ii)
R NR N/A
(i)The collateral and structural information in this report
reflects the preliminary term sheet dated Oct. 26, 2017. The
preliminary ratings address ultimate principal and interest
payments, but interest can be deferred on the classes.
(ii)Notional equals to the aggregate balance of the class A-1, A-2,
A-3, M-1, B-1, B-2, and B-3 notes.
NR--Not rated.
N/A--Not applicable.
DEER CREEK: Moody's Assigns Ba3 Rating to Class E Notes
-------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Deer Creek CLO, Ltd.
Moody's rating action is:
US$2,800,000 Class X Senior Secured Floating Rate Notes Due 2030
(the "Class X Notes"), Assigned Aaa (sf)
US$195,000,000 Class A Senior Secured Floating Rate Notes Due 2030
(the "Class A Notes"), Assigned Aaa (sf)
US$31,800,000 Class B Senior Secured Floating Rate Notes Due 2030
(the "Class B Notes"), Assigned Aa2 (sf)
US$16,200,000 Class C Secured Deferrable Floating Rate Notes Due
2030 (the "Class C Notes"), Assigned A2 (sf)
US$19,200,000 Class D Secured Deferrable Floating Rate Notes Due
2030 (the "Class D Notes"), Assigned Baa3 (sf)
US$13,800,000 Class E Secured Deferrable Floating Rate Notes Due
2030 (the "Class E Notes"), Assigned Ba3 (sf)
The Class X Notes, the Class A Notes, the Class B Notes, the Class
C Notes, the Class D Notes and the Class E Notes are referred to
herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Deer Creek CLO is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 95% of the portfolio must consist
of senior secured loans and eligible investments representing
prinicipal proceeds, and up to 5% of the portfolio may consist of
second lien loans and senior unsecured loans. The portfolio is
approximately 70% ramped as of the closing date.
CreekSource LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five-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 issued one class of
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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $300,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 9.0 years.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
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 X Notes: 0
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2800 to 3640)
Rating Impact in Rating Notches
Class X Notes: 0
Class A Notes: -1
Class B Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
DLJ COMMERCIAL 1998-CF1: Moody's Affirms C Rating on Class S Certs
------------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one interest
only (IO) class of DLJ Commercial Mortgage Corp 1998-CF1,
Commercial Mortgage Pass-Through Certificates, Series 1998-CF1:
Cl. S, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on the IO class was affirmed based on the credit quality
of the referenced classes. The IO class is the only outstanding
Moody's-rated class in this transaction.
Moody's rating action reflects a base expected loss of 0% of the
current balance, the same as at Moody's last review. Moody's base
expected loss plus realized losses is now 1.7% of the original
pooled balance. 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.
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. Moody's ratings
reflect the potential for future losses under varying levels of
stress.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017.
Additionally, the methodology used in rating Cl. S was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 16, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 99.8% to $1.5
million from $839 million at securitization. The Certificates are
collateralized by two mortgage loans.
The larger loan represents 98% of the pool and is on the master
servicer's watchlist. The watchlist includes loans which 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, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance. The smaller loan represents 2% of the pool and
has defeased and is secured by US Government securities.
Eleven loans have been liquidated from the pool, contributing to an
aggregate realized loss of $14 million (23% loss severity on
average).
The top loan is the Walgreens Retail Building - Portland Loan
($1.49 million -- 98% of the pool), which is secured by a 14,000
square foot retail property in Portland, Oregon. The property is
100% leased to Walgreens through May 2067. The property has
amortized 35% since securitization. Moody's LTV and stressed DSCR
are 78% and 1.49X, respectively, compared to 77% and 1.54X at the
prior review.
DT AUTO 2017-4: S&P Assigns Prelim BB(sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to DT Auto
Owner Trust 2017-4's $456.23 million asset-backed notes series
2017-4.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The preliminary ratings are based on information as of Nov. 2,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 67.5%, 64.2%, 54.6%, 44.2%,
and 37.8% credit support for the class A, B, C, D, and E notes,
respectively, based on stressed break-even cash flow scenarios
(including excess spread).
-- These credit support levels provide approximately 2.20x, 2.10x,
1.77x, 1.35x, and 1.20x coverage of S&P's expected net loss range
of 29.50%-30.50% for the class A, B, C, D, and E notes,
respectively. Credit enhancement also covers cumulative gross
losses of approximately 96.4%, 91.7%, 78.0%, 63.1%, and 54.0%
respectively, assuming a 30% recovery rate.
-- The timely interest and principal payments by the legal final
maturity dates made under stressed cash flow modeling scenarios
that S&P deems appropriate for the assigned preliminary ratings.
-- S&P's expectation that under a moderate ('BBB') stress
scenario, the ratings on the class A, B, and C notes would likely
not be lowered, and the class D notes would likely remain within
one category of our preliminary 'BBB (sf)' rating, all else being
equal. The rating on class E would remain within two rating
categories of our preliminary 'BB (sf)' rating during the first
year, though it would ultimately default in the moderate ('BBB')
stress scenario with approximately 72% principal repayment. These
potential rating movements are consistent with our credit stability
criteria (see "Methodology: Credit Stability Criteria," published
May 3, 2010).
-- The collateral characteristics of the subprime pool being
securitized, including a high percentage (approximately 85%) of
obligors with higher payment frequencies (more than once a month),
which we expect will result in a somewhat faster paydown on the
pool.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage-of-receivables basis) as the pool
amortizes.
PRELIMINARY RATINGS ASSIGNED
DT Auto Owner Trust 2017-4
Class Rating Type Interest Amount
rate (mil. $)(i)
A AAA (sf) Senior Fixed 193.90
B AA+ (sf) Subordinate Fixed 35.64
C A+ (sf) Subordinate Fixed 81.27
D BBB (sf) Subordinate Fixed 82.69
E BB (sf) Subordinate Fixed 62.73
(i)The actual size of these tranches will be determined on the
pricing date.
FLAGSTAR MORTGAGE 2017-2: Moody's Assigns B3 Rating to Cl. B-5 Debt
-------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 19
classes of residential mortgage-backed securities (RMBS) issued by
Flagstar Mortgage Trust 2017-2 (FSMT 2017-2). The ratings range
from Aaa (sf) to B3 (sf).
The certificates are backed by a single pool of fixed rate non
agency jumbo mortgages (73.1% of the aggregate pool) and agency
eligible high balance conforming residential fixed rate mortgages
(26.9% of the aggregate pool), originated by Flagstar Bank, FSB,
with an aggregate stated principal balance of $576,441,992.
Flagstar Bank, FSB ("Flagstar") is the servicer of the pool, Wells
Fargo Bank, N.A. ("Well Fargo") is the master servicer and
Wilmington Trust N.A. will serve as the trustee.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure similar to the Flagstar
Mortgage Trust 2017-1 transaction. The fee-for-service incentive
structure includes an initial monthly base servicing fee of $20.5
for all performing loans (compared to the greater of (1) 4 basis
points of current principal balance and (2) $10.0 in FSMT 2017-1)
and increases according to certain delinquent and incentive fee
schedules. The Class B-6-C (NR) is first in line to absorb any
increase in servicing costs above the base servicing costs.
Moreover, the transaction does not have a servicing fee cap.
The complete rating actions are:
Issuer: FLAGSTAR MORTGAGE TRUST 2017-2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aa1 (sf)
Cl. A-14, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned A1 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
Summary credit analysis
Moody's says, "We calculated losses on the pool using Moody's US
Moody's Individual Loan Analysis (MILAN) model based on the
loan-level collateral information as of the cut-off date.
Loan-level adjustments to the model results included adjustments to
probability of default for higher and lower borrower debt-to-income
ratios (DTIs), for borrowers with multiple mortgaged properties,
self-employed borrowers, and for the default risk of Homeownership
association (HOA) properties in super lien states. Moody's final
loss estimates also incorporate adjustments for originator
assessments and the financial strength of Representation & Warranty
(R&W) provider. Moody's expected loss for this pool in a base case
scenario is 0.40% and reach 4.90% at a stress level consistent with
Moody's Aaa (sf) scenario"
Collateral description
The FSMT 2017-2 transaction is a securitization of 847 first lien
residential mortgage loans with an unpaid principal balance of
$576,441,992. This transaction has approximately 4 months seasoned
loans, and strong borrower characteristics. The non-zero weighted
average current FICO score is 762 and the weighted-average original
combined loan-to-value ratio (CLTV) is 67.2%. A large percentage of
the borrowers have more than 24 months' liquid reserves. There are
however a relatively high percentage of self-employed borrowers
(31.9%, by loan balance) in the aggregate pool.
Flagstar Bank, FSB originated and will service the loans in the
transaction. Moody's consider Flagstar an adequate originator and
servicer of prime jumbo and conforming mortgages and Moody's loss
estimates did not include an adjustment for originator or servicer
quality.
Third-party review and representation & warranties
A third party review (TPR) firm verified the accuracy of the
loan-level information that the sponsor gave us. The firm conducted
detailed credit, collateral, and regulatory reviews on all loans in
the mortgage pool. The TPR results indicated compliance with the
originators' underwriting guidelines for the vast majority of loans
with no material compliance issues. Three (3) loans received a
valuation grade C because the value estimated by the TPR firm did
not support the appraisal and the remaining one loan did not have
two appraisals as required per the underwriting guidelines. The
loans with grade C represent approximately 0. 7% of the overall
pool. Moody's stressed the property values for these 4 loans and it
did not have a material impact on Moody's credit enhancement.
Flagstar Bank, FSB as the originator, makes the loan-level
representation and warranties (R&Ws) for the mortgage loans. The
loan-level R&Ws are strong and, in general, either meet or exceed
the baseline set of credit-neutral R&Ws Moody's have identified for
US RMBS. Further, R&W breaches are evaluated by an independent
third party using a set of objective criteria. Similar to JPMMT
transactions, the transaction contains a "prescriptive" R&W
framework. The originator makes comprehensive loan-level R&Ws and
an independent reviewer will perform detailed reviews to determine
whether any R&Ws were breached when (1) loans become 120 days
delinquent (2) the servicer stops advancing, (3) the loan is
liquidated at a loss or (4) the loan becomes between 30 days and
120 days delinquent and is modified by the servicer. These reviews
are prescriptive in that the transaction documents set forth
detailed tests for each R&W that the independent reviewer will
perform. Unlike FSMT 2017-1, should the reviewer observe evidence
of a breach of R&W during the regular course of performing a
test(s), such evidence may be considered, provided the sponsor has
the right to refute the claim or provide supporting documentation
or evidence. Moody's did however make an adjustment to Moody's loss
levels to incorporate the weaker financial strength of the R&W
provider.
Servicing arrangement
Moody's considers the overall servicing arrangement for this pool
to be adequate.
Servicing compensation for loans in this transaction is based on a
fee-for-service incentive structure. The fee-for-service incentive
structure includes an initial monthly base fee of $20.5 for all
performing loans and increases according to certain delinquent and
incentive fee schedules. In FSMT 2017-1, the monthly base servicing
fee was the greater of (1) 4 bps of outstanding principal balance
and (2) $10. While the initial base servicing fee for this
transaction is slightly lower compared to FSMT 2017-1, Moody's
believe the overall servicing fee arrangement is adequate. By
establishing a base servicing fee for performing loans that
increases with the delinquency of loans, the fee-for-service
structure aligns monetary incentives to the servicer with the costs
of the servicer. The fee-for-service compensation is reasonable and
adequate for this transaction. It also better aligns the servicer's
costs with the deal's performance and structure. The Class B-6-C
(NR) is first in line to absorb any increase in servicing costs
above the base servicing costs. Delinquency and incentive fees will
be deducted from the Class B-6-C interest payment amount first and
could result in interest shortfall to the certificates depending on
the magnitude of the delinquency and incentive fees.
Trustee and master servicer
The transaction trustee is Wilmington Trust, N.A. 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 obligated to make servicing
advances if the servicer is unable to do so.
Tail risk & subordination floor
This deal has a shifting-interest structure, with a subordination
floor to protect against losses that occur late in the life of the
pool when relatively few loans remain (tail risk). When the total
senior subordination is less than 1.0% of the original pool
balance, the subordinate bonds do not receive any principal and all
principal is then paid to the senior bonds. In addition, if the
subordinate percentage drops below 6.0% of current pool balance,
the senior distribution amount will include all principal
collections and the subordinate principal distribution amount will
be zero. The subordinate bonds themselves benefit from a floor.
When the total current balance of a given subordinate tranche plus
the aggregate balance of the subordinate tranches that are junior
to it amount to less than 0.7% of the original pool balance, those
tranches do not receive principal distributions. Principal those
tranches would have received are directed to pay more senior
subordinate bonds pro-rata.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments to the senior bonds, and then
interest and principal payments to each subordinate bond. As in all
transactions with shifting interest structures, the senior bonds
benefit from a cash flow waterfall that allocates all prepayments
to the senior bond for a specified period of time, and increasing
amounts of prepayments to the subordinate bonds thereafter, but
only if loan performance satisfies delinquency and loss tests.
Of note, if certificate balance of subordinate certificates (up to
Class B-2) are written down to zero, then any amount that would
have been distributed to Class A-14 will instead be distributed to
Class A-6, Class A-10 , Class A-12 and Class A-14 sequentially,
until it is paid down to zero.
Similarly, on or prior to the accretion termination date (the
earlier of (1) the distribution date on which Class A-10 has been
reduced to zero and (2) the distribution date where the aggregate
balance of subordinate certificates has been reduced to zero), the
accretion-directed certificate (Class A-10) will be entitled to
receive as monthly principal distribution the accrued interest that
would otherwise be distributable to the accrual certificate (Class
A-12).
All certificates (except Class B-6-C) in this transaction are
subject to a net WAC cap. Class B-6-C, will accrue interest at the
net WAC minus the aggregate delinquent servicing and aggregate
incentive servicing fee. For any distribution date, net WAC will be
the greater of (1) zero and (2) the weighted average net mortgage
rates minus the capped extraordinary trust expense rate.
Realized losses are allocated reverse sequentially among the
subordinate and senior support certificates and on a pro-rata basis
among the super senior certificates.
Exposure to Extraordinary Expenses
Certain extraordinary trust expenses (such as fees paid to the
reviewer, servicing transfer costs) in the FSMT 2017-2 transaction
are deducted directly from the available distribution amount. The
remaining trust expenses (which have an annual cap of $300,000 per
year) are deducted from the net WAC. Moody's believe there is a
very low likelihood that the rated certificates in FSMT 2017-2 will
incur any losses from extraordinary expenses or indemnification
payments from potential future lawsuits against key deal parties.
First, the loans are prime quality, 100 percent qualified mortgages
and were originated under a regulatory environment that requires
tighter controls for originations than pre-crisis, which reduces
the likelihood that the loans have defects that could form the
basis of a lawsuit. Second, the transaction has reasonably well
defined processes in place to identify loans with defects on an
ongoing basis. In this transaction, an independent breach reviewer
(Inglet Blair LLC), named at closing must review loans for breaches
of representations and warranties when certain clear defined
triggers have been breached, which reduces the likelihood that
parties will be sued for inaction. Furthermore, the issuer has
disclosed the results of a credit, compliance and valuation review
of all of the mortgage loans by an independent third party (Clayton
Services LLC). Unlike FSMT 2017-1, Moody's did not make an
adjustment for extraordinary expenses because most of the trust
expenses will reduce the Net WAC as opposed to the available
funds.
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.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS" published in February 2015.
FORTRESS CREDIT IX: S&P Gives Prelim BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fortress
Credit Opportunities IX CLO Ltd.'s $1.198 billion floating rate
notes.
The note issuance is a CLO transaction backed primarily by middle
market speculative-grade senior secured term loans.
The preliminary ratings are based on information as of Nov. 2,
2017. 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
middle market 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.
-- The rating requirements of Natixis as the class A-1R
noteholder, as well as rating requirements of any future class A-1R
noteholders.
PRELIMINARY RATINGS ASSIGNED
Fortress Credit Opportunities IX CLO Ltd.
Class Rating Interest Amount
rate (%) (mil. $)
A-1R AAA (sf) CP+1.55(i) 137.50
A-1T AAA (sf) 3ML+1.55 451.90
A-1L AAA (sf) 3ML+1.55 30.00
A-1F AAA (sf) 3.65 100.00
B AA (sf) 3ML+1.95 198.50
C (deferrable) A- (sf) 3ML+2.65 145.40
D (deferrable) BBB- (sf) 3ML+3.75 104.60
E (deferrable) BB- (sf) 3ML+7.25 30.10
Sub. notes (deferrable) NR N/A 302.00
(i)CP is capped at Three-month LIBOR plus 0.25%.
3ML--Three-month LIBOR.
NR--Not rated.
N/A--Not applicable.
GS MORTGAGE 2006-GG8: Moody's Cuts Class B Certs Rating to C
------------------------------------------------------------
Moody's Investors Service has downgraded the rating on two and
affirmed the ratings on four classes GS Mortgage Securities
Corporation II, Commercial Mortgage Pass-Through Certificates,
Series 2006-GG8:
Cl. A-J, Downgraded to Caa1 (sf); previously on Oct 28, 2016
Affirmed B3 (sf)
Cl. B, Downgraded to C (sf); previously on Oct 28, 2016 Downgraded
to Caa3 (sf)
Cl. C, Affirmed C (sf); previously on Oct 28, 2016 Downgraded to C
(sf)
Cl. D, Affirmed C (sf); previously on Oct 28, 2016 Downgraded to C
(sf)
Cl. E, Affirmed C (sf); previously on Oct 28, 2016 Affirmed C (sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The ratings on two P&I Classes (A-J & B) were downgraded due to an
increase in expected losses from specially serviced loans.
The ratings on the P&I classes C, D & E were affirmed because the
ratings are consistent with Moody's expected loss.
The rating on IO Class X was affirmed based on the credit
performance of the referenced classes.
Moody's rating action reflects a base expected loss of 53.5% of the
current balance, compared to 32.8% at Moody's last review. Moody's
base expected loss plus realized losses is 13.7% of the original
pooled balance and remains the same as Moody's 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 July 2017.
Additionally, the methodology used in rating Class X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 94% of the pool is in
special servicing. 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 loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the October 13, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 92% to $331.5
million from $4.24 billion at securitization. The certificates are
collateralized by 4 mortgage loans ranging in size from 6% to 50%
of the pool.
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 3, compared to 5 at Moody's last review.
Forty-five loans have been liquidated from the pool, resulting in
an aggregate realized loss of $404 million (for an average loss
severity of 51.1%). Three loans, constituting 50% of the pool, are
currently in special servicing.
The specially serviced loans are secured by a mix of office and
retail properties. Moody's estimates an aggregate $177 million loss
for the specially serviced and troubled loans (53.5% expected loss
on average).
The largest specially serviced loan is the Fair Lakes Office Park
Loan ($116.5 million -- 35.2% of the pool), which is secured by a
1.25MM SF office park, comprised of 9 Class A buildings ranging in
size from 75,000 to 275,000 SF located in Fairfax, Virginia
approximately 16 miles west of Washington DC and 11 miles south of
Dulles International Airport. The Loan transferred to special
servicing in June 2015 due to imminent default and title
transferred to the Trust via a deed in lieu in September 2016. The
Property was 56% occupied as of December 2016, compared to 82% in
December 2015, 89% in December 2014 and 99% at securitization.
The second largest specially loan is the Algonquin Center Loan
($28.6 million -- 8.6% of the pool), which is secured by a 206,000
SF community center shadow anchored by Target, and anchored by
Kohl's, HomeGoods and Michael's located in Algonquin, Illinois. The
Property was 96% leased as of March 2017 (with only 2 vacant units)
compared to 93% in June 2016. The Loan transferred to special
servicing in October 2016 due balloon payment/maturity default. The
Borrower was granted a one year extension to secure refinancing but
later transferred to special servicing again in August 2017. The
servicers August 2017 inspection reported the Property in average
condition with minimal deferred maintenance.
The third largest specially serviced loan is the Gateway Mall Loan
($20.7 million -- 6.3% of the pool), which is secured by a 132,000
SF community center located in Machesney Park, Illinois located
approximately 87 miles northwest of Chicago and 7 miles north of
Rockford. As of July 2017, the Property was 45% leased to national
tenants including Office Depot, PetSmart, Panera Bread, GNC and
GameStop. The Loan transferred to special servicing in October
2016. The Trust was the highest bidder in a foreclosure sale held
in June 2017.
The sole performing loan, representing 50% of the pool is the CA
Headquarters Loan ($165.6 million -- 50.0% of the pool), which is
secured by a single-tenant office building located in Islandia, New
York. This property is 100% occupied by Computer Associates until
August 2021. The Loan transferred to special servicing due to
impending maturity in August 2016 when the Borrower was unable to
refinance but was later returned to the master servicer in May
2017. The maturity date has been extended to October 2020 with an
option to further extend to August 2021. A new LOC Reserve was
established with a cap of $1.15MM and a hard lockbox is in place
with excess cash going into the new general reserve account.
GS MORTGAGE 2017-SLP: S&P Assigns B-(sf) Rating on Class F Certs
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to GS Mortgage Securities
Corp. Trust 2017-SLP's $688.750 million commercial mortgage
pass-through certificates.
The certificate issuance is a commercial mortgage-backed securities
transaction backed primarily by one senior promissory note and one
junior promissory note (collectively, the trust loan) issued by 136
special purpose entities (collectively, the borrowers), evidencing
a five-year, fixed-rate, interest-only mortgage loan and, together
with two pari passu senior promissory notes (collectively, the
companion loans, and together with the trust loan, the whole loan
totaling $800.0 million), secured by, among other things, a
first-mortgage lien on the borrowers' fee simple, ground leasehold
and other interests in 138 full-service, limited-service,
select-service, and extended stay and full-service hotel properties
(collectively, the properties) located in 27 states.
The ratings reflect S&P's view of collateral's historical and
projected performance, the sponsors' and managers' experience, the
trustee-provided liquidity, the loan's terms, and the transaction's
structure.
RATINGS ASSIGNED
GS Mortgage Securities Corp. Trust 2017-SLP
Class Rating Amount ($)
A AAA (sf) 182,358,000
X-A AAA (sf) 182,358,000(i)
X-B BBB- (sf) 201,563,000(i)
B AA- (sf) 62,443,000
C A- (sf) 59,929,000
D BBB- (sf) 79,191,000
E BB- (sf) 124,852,000
F B- (sf) 107,977,000
G NR 72,000,000
(i)Notional balance. The notional amount of the class X-A
certificates will be reduced by the aggregate amount of principal
distributions and realized losses allocated to the class A
certificates. The notional amount of the X-B certificates will be
reduced by the aggregate amount of principal distributions and
realized losses allocated to the B, C, and D certificates.
NR--Not rated.
HILLMARK FUNDING: S&P Affirms B+(sf) Rating on Class D Notes
------------------------------------------------------------
S&P Global Ratings raised its ratings on the class A-2, B, and C
notes from Hillmark Funding Ltd., a collateralized loan obligation
(CLO) managed by Hillmark Capital Management. S&P said, "We also
removed these ratings from CreditWatch, where we placed them with
positive implications on Aug. 14, 2017. At the same time, we
affirmed our rating on the class D notes from the same
transaction.
"The rating actions follow our review of the transaction's
performance using data from the September 2017 trustee report.
"Since our last rating actions in December 2014, $288.39 million
has been paid down to the senior notes' principal balances,
resulting in the full payment of the class A-1 notes. The class A-2
notes have also been paid down to 83.38% of their original
outstanding balance. The transaction has benefited from a drop in
the weighted average life due to the underlying collateral's
seasoning, with 2.44 years reported as of the September 2017
trustee report, compared with 4.22 years reported in the November
2014 trustee report. This decrease in the portfolio's weighted
average life has contributed to some reduction of the collateral
portfolio's overall credit risk profile."
The upgrades reflect the significant paydowns to the class A-1 and
A-2 notes since our December 2014 rating actions. These paydowns
resulted in the full payoff of the class A-1 notes and improved
reported overcollateralization (O/C) ratios since the November 2014
trustee report, which S&P used for its previous rating actions:
-- The class A O/C ratio improved to 440.30% from 124.90%.
-- The class B O/C ratio improved to 185.73% from 115.09%.
-- The class C O/C ratio improved to 122.49% from 107.54%.
-- The class D O/C ratio improved to 108.68% from 104.98%.
S&P said, "Although the credit support has increased, the
collateral portfolio's credit quality has deteriorated since our
last rating actions. Collateral obligations with ratings in the
'CCC' category have increased, with $27.30 million reported as of
the September 2017 trustee report, compared with $11.71 million
reported as of the November 2014 trustee report. This has
contributed to the portfolio's weighted average rating declining to
'B' from 'B+' since our last actions."
In addition, as the portfolio's size has declined, the
concentration of these lower-rated and defaulted obligations has
risen significantly. Specifically, the trustee reports that the
concentration of assets rated 'CCC' make up approximately 29% of
the portfolio.
S&P said, "Although our cash flow analysis indicated a higher
rating for the class C notes, our rating action considers the
decline in the portfolio's credit quality and additional
sensitivity runs that considered the exposure to specific
distressed industries and assets that had low market values.
"Despite cash flow runs that suggested a higher rating on the class
D notes, we affirmed the rating because it was constrained at the
current rating level by the application of the largest obligor
default test, a supplemental stress test included as part of our
corporate collateralized debt obligation criteria. The portfolio's
overall diversification has also decreased to only 43 performing
obligors, down from 147 at the time of our last rating actions. The
top five largest obligors in the portfolio currently make up
approximately 26% of the portfolio's performing balance.
"Our 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 our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis demonstrated, in our view, that all of the rated
outstanding classes have adequate credit enhancement available at
the rating levels associated with these rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as we deem
necessary."
RATINGS RAISED AND REMOVED FROM CREDITWATCH
Hillmark Funding Ltd.
Rating
Class To From
A-2 AAA (sf) AA+ (sf)/Watch Pos
B AAA (sf) A+ (sf)/Watch Pos
C BBB+ (sf) BB+ (sf)/Watch Pos
RATING AFFIRMED
Hillmark Funding Ltd.
Class Rating
D B+ (sf)
ICON BRAND 2012-1: S&P Lowers Rating on Three Classes to BB(sf)
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class A-1, A-2, and
2013-1 A-2 notes from Icon Brand Holdings LLC's series 2012-1
transaction and placed them on CreditWatch with negative
implications. Icon Brand Holdings LLC is a corporate securitization
transaction backed by royalty payments from licensing agreements
associated with various brands from Iconix Brand Group Inc.
(Iconix).
On Nov. 1, 2017, S&P Global Ratings lowered the corporate credit
rating on Iconix to 'CCC' from 'B' and lowered Iconix's corporate
business risk profile (BRP) to vulnerable from weak, following
Walmart's decision not to renew its Danskin license in 2019, among
other factors. S&P said, "Our analysis of this transaction
primarily relies on Iconix's BRP. Based on the change to the BRP,
we lowered the ratings on the class A-1, A-2, and 2013-1 A-2 notes
to 'BB (sf)'. At the same time, we placed the ratings on the notes
on CreditWatch with negative implications due to the uncertainty
regarding the royalties from the Danskin brand.
"The debt-service coverage ratio (DSCR) is one of the important
surveillance metrics we monitor, and though it has decreased
compared to when the deal closed, the transaction has not breached
any DSCR triggers so far. However, the DSCR is likely to decline
from current levels if the royalty streams from the Danskin brand
decrease."
Since the transaction closed in November 2012, it has paid down
over $466.83 million in principal along with timely interest. The
transaction has an interest reserve account to cover any liquidity
issues that would impair timely interest payments for up to three
months.
S&P said, "We will continue to monitor the situation related to the
Danskin brand and resolve the CreditWatch when we receive more
information regarding the future royalties from this brand. We
could affirm the ratings if there is minimal disruption to the
Danskin royalties. On the other hand, we could lower the ratings
further if Iconix is unable to find a buyer to step in and take
over the Danskin brand royalties within a reasonable amount of
time."
RATINGS LOWERED AND PLACED ON CREDITWATCH NEGATIVE
Icon Brand Holdings LLC (Series 2012-1)
Rating
Class To From
A-1 BB (sf)/Watch Neg BBB (sf)
A-2 BB (sf)/Watch Neg BBB (sf)
2013-1 A-2 BB (sf)/Watch Neg BBB (sf)
INSITE WIRELESS 2016-1: Fitch Affirms BB- Rating on Cl. C Notes
---------------------------------------------------------------
Fitch Ratings has affirmed InSite Wireless Group, LLC and InSite
Secured Cellular Site Revenue Notes Series 2013-1 and 2016-1 as
follows:
-- $119.8 million 2013-1 class A at 'Asf'; Outlook Stable;
-- $39.6 million 2013-1 class B at 'BBB-sf'; Outlook Stable;
-- $14 million 2013-1 class C at 'BB-sf'; Outlook Stable;
-- $210.5 million 2016-1 class A at 'Asf'; Outlook Stable;
-- $21 million 2016-1 class B at 'BBB-sf'; Outlook Stable;
-- $70 million 2016-1 class C at 'BB-sf'; Outlook Stable.
The series 2016-1 class A is pari passu with the series 2013-1
class A; the series 2016-1 class B is pari passu with the series
2013-1 class B; and the series 2016-1 class C is pari passu with
the series 2013-1 class C.
The transaction is an issuance of notes backed by mortgaged
cellular sites representing not less than 80% of the annualized run
rate (ARR) net cash flow (NCF) and guaranteed by the direct parent
of the co-issuers. The guarantees are secured by a pledge and
first-priority-perfected security interest in 100% of the equity
interest of the co-issuers and their subsidiaries (which own or
lease 1,363 wireless communication sites and own the rights to
operate 22 distributed antennae system [DAS] networks).
KEY RATING DRIVERS
Fitch Cash Flow and Leverage: As part of its analysis, Fitch
received a Sept. 30, 2017 data file with site and tenant
information. The pool data consisted of 1,385 sites with 3,055
tenant leases. Fitch modeled similar assumptions regarding the pool
as at issuance. Fitch's NCF on the pool is $54 million (exclusive
of incremental cash flow from the remaining site acquisition
account). Assuming the remaining balance in the site acquisition
account is not utilized by InSite, the implied Fitch stressed debt
service coverage ratio (DSCR) of 1.27x. The debt multiple relative
to Fitch's NCF would be 8.5x, which equates to a debt yield of
11.8%.
Leases to Strong Tower Tenants: There are 3,055 wireless tenant
leases, an increase from 2,800 a year ago when the series 2016-1
notes were issued. Telephony and data tenants represent 73% of
annualized run rate revenue (ARRR), and 58.3% of the ARRR is from
investment-grade tenants. Tenant leases on the cellular sites have
average annual escalators of approximately 3% and an average final
remaining term (including renewals) of nearly 22 years.
Reasonable Diversification: There are 1,363 sites and 22 DAS sites
spanning 47 states, Canada (149 sites), the U.S. Virgin Islands
(eight sites) and Puerto Rico (61 sites). The largest state (Texas)
represents approximately 11.3% of ARRR. The top 10 states
(including Ontario) represent 59% of ARRR. There were 1,196 sites
and 19 DAS sites at the issuance of the series 2016-1 notes.
DAS Networks: The collateral pool contains 22 DAS networks
representing approximately 10% of the ARRR (8.4% of the issuer
NCF). DAS sites are located within buildings or other structures or
venues for which an asset entity has rights under a lease or
license to install and operate a DAS on the premises or to manage a
DAS network on the premises. Fitch did not give credit for the five
sites where InSite has a management contract to manage a DAS
network owned by the DAS venue; these sites contribute 0.9% of
ARRR. Additionally, Fitch limited proceeds from the DAS networks to
the 'BBsf' category (i.e. applied a 'BBsf' rating cap), based on
the uncertainty surrounding the licensing agreements in a
venue-bankruptcy scenario and the limited history of these
networks. There was a variance from Fitch's 'U.S. Wireless Tower
Transaction Rating Criteria' related to the management fee
calculated for DAS collateral. A higher management fee is utilized
for DAS collateral due to the unique nature of the collateral.
RATING SENSITIVITIES
Fitch does not foresee negative ratings migration unless a material
economic or asset level event changes the transaction's
portfolio-level metrics. The class ratings are expected to remain
stable based on anticipated cash flow growth due to annual rent
escalations, tenant renewals and acquired sites during the site
acquisition period. Upgrades could be limited due to the allowance
for additional notes, the specialized nature of the collateral and
the potential for changes in technology to affect long-term demand
for wireless tower space.
JP MORGAN 1999-C8: Moody's Affirms C Rating on Class X Certs
------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on two classes
in J.P. Morgan Commercial Mortgage Finance Corp 1999-C8, Mortgage
Pass-Through Certificates, Series 1999-C8:
Cl. H, Affirmed Ca (sf); previously on Nov 10, 2016 Upgraded to Ca
(sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on Class H was affirmed because the rating is consistent
with Moody's expected loss plus realized losses. The class has
already realized a 46% expected loss from previously liquidated
loans.
The rating on the IO class, Class X, was affirmed based on the
credit quality of its referenced class.
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. Moody's ratings
reflect the potential for future losses under varying levels of
stress. Moody's rating action reflects a base expected loss plus
realized losses is now 7.5% 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 principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 16, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $1.88 million
from $731.52 million at securitization. The certificates are
collateralized by four mortgage loans ranging in size from 11% to
50% of the pool.
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 3, compared to 4 at Moody's last review.
Three loans, constituting 81% 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.
Seventeen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $54.9 million (for an average loss
severity of 46%). There are currently no loans in special
servicing.
The largest remaining loan is the Ridge Terrace Heath Care Ctr.
Loan ($933,620 -- 49.6% of the pool), which is secured by a 120-bed
heath care center located in Lantana, Florida. The loan is on the
servicer's watchlist due to low DSCR. Performance has been very
weak due to a significant increase in expenses, however, the loan
remains current. The loan is fully amortizing, has amortized 82%
since securitization and is scheduled to mature in March 2019.
Moody's LTV and stressed DSCR are 60% and 2.44X, respectively,
compared to 88% and 1.66X at last review.
The remaining three loans in the pool are all fully amortizing with
loan expirations within the next 20 months and have Moody's LTVs
below 40%.
JP MORGAN 2017-4: Moody's Assigns B2 Rating to Class B-5 Debt
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 19
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust 2017-4 (JPMMT 2017-4). The ratings range
from Aaa (sf) to B2 (sf).
The certificates are backed by 1,461 primarily 30-year,
fully-amortizing fixed rate mortgage loans with a total balance of
$911,012,968 as of October 1, 2017 cut-off date. Similar to prior
JPMMT transactions, JPMMT 2017-4 includes conforming fixed-rate
mortgage loans originated by JPMorgan Chase Bank, N. A. (Chase) and
LoanDepot, and underwritten to the government sponsored enterprises
(GSE) guidelines in addition to prime jumbo non-conforming
mortgages purchased by JPMMAC from various originators and
aggregators. JPMorgan Chase Bank, N.A. and Shellpoint Mortgage
Servicing will be the servicers on the conforming loans originated
by JPMorgan Chase and LoanDepot, respectively, while Shellpoint
Mortgage Servicing, USAA, PHH Mortgage, Guaranteed Rate, Johnson
Bank and Bank of Oklahoma will be the servicers on the prime jumbo
loans. Wells Fargo Bank, N.A. will be the master servicer and
securities administrator. U.S. Bank Trust National Association will
be the trustee. Pentalpha Surveillance LLC will be the
representations and warranties breach reviewer. Distributions of
principal and interest and loss allocations are based on a typical
shifting-interest structure that benefits from and a senior and
subordination floor.
The complete rating actions are:
Issuer: J.P. Morgan Mortgage Trust 2017-4
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aa1 (sf)
Cl. A-14, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the aggregate pool average
0.45% in a base scenario and reaches 5.40% at a stress level
consistent with the Aaa ratings.
We calculated losses on the pool using Moody's US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the cut-off date. Loan-level
adjustments to the model results included adjustments to
probability of default for higher and lower borrower debt-to-income
ratios (DTIs), for borrowers with multiple mortgaged properties,
self-employed borrowers, and for the default risk of Homeownership
association (HOA) properties in super lien states. Moody's final
loss estimates also incorporate adjustments for originator
assessments and the financial strength of Representation & Warranty
(R&W) providers.
We base Moody's provisional ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, Moody's assessments of the aggregators,
originators and servicers, the strength of the third party due
diligence and the representations and warranties (R&W) framework of
the transaction.
Collateral Description
JPMMT 2017-4 is a securitization of a pool of 1,461 primarily
30-year, fully-amortizing mortgage loans with a total balance of
$911,012,968 as of the cut-off date, with a weighted average (WA)
remaining term to maturity of 357 months, and a WA seasoning of 3
months. The borrowers in this transaction have high FICO scores and
sizeable equity in their properties. The WA current FICO score is
769 and the WA original combined loan-to-value ratio (CLTV) is
72.8%. The characteristics of the loans underlying the pool are
generally comparable to other JPMMT transactions backed by 30-year
mortgage loans that Moody's have rated.
In this transaction, 42.8% of the pool by loan balance was
underwritten by Chase to Fannie Mae's and Freddie Mac's guidelines
(conforming loans). Moreover, the conforming loans in this
transaction have a high average current loan balance at $540,078.
The higher conforming loan balance of loans in JPMMT 2017-4 is
attributable to the greater amount of properties located in
high-cost areas, such as the metro areas of New York City and San
Francisco. United Shore Financial Services, LLC contributes
approximately 11.4% of the mortgage loans in the pool. The
remaining originators each account for less than 10% of the
principal balance of the loans in the pool and provide R&W to the
transaction.
Third-party Review and Reps & Warranties
Four third party review (TPR) 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, and no appraisal defects.
The loans that had exceptions to the originators' underwriting
guidelines had strong documented compensating factors such as low
DTIs, low LTVs, high reserves, high FICOs, or clean payment
histories. The TPR firms also identified minor compliance
exceptions for reasons such as inadequate RESPA disclosures (which
do not have assignee liability) and TILA/RESPA Integrated
Disclosure (TRID) violations related to fees that were out of
variance but then cured and disclosed. Moody's did not make any
adjustments to Moody's expected or Aaa loss levels due to the TPR
results.
JPMMT 2017-4's R&W framework is in line with other JPMMT
transactions where an independent reviewer is named at closing, and
costs and manner of review are clearly outlined at issuance.
Moody's review of the R&W framework takes into account the
financial strength of the R&W providers, scope of R&Ws (including
qualifiers and sunsets) and enforcement mechanisms.
The R&W providers vary in financial strength. JPMorgan Chase Bank,
National Association (rated Aa2), who is the R&W provider for
approximately 42.8% (by loan balance) of the loans, is the
strongest R&W provider. Moody's have made no adjustments on the
Chase loans in the pool, as well as loans originated by PHH
Mortgage. In contrast, the rest of the R&W providers are unrated
and/or financially weaker entities. Moreover, JPMMAC will not
backstop any R&W providers who may become financially incapable of
repurchasing mortgage loans. Moody's made an adjustment for these
loans in Moody's analysis to account for this risk.
For loans that JPMMAC acquired via the MAXEX platform, Central
Clearing and Settlement LLC, (CCS) MAXEX's subsidiary and seller
under the assignment, assumption and recognition agreement with
JPMMAC, will make the R&Ws. The R&Ws provided by CCS to JPMMAC and
assigned to the trust are in line with the R&Ws found in the JPMMT
transactions. MAXEX backstops all validated R&W violations through
a combination of enforcement and insolvency guarantees.
Trustee and Master Servicer
The transaction trustee is U.S. Bank National Association. The
custodians 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. Moody's
assess Wells Fargo as an SQ1 (strong) master servicer of
residential loans.
Tail Risk & Subordination Floor
This deal has a standard shifting-interest structure, with a
subordination floor to protect against losses that occur late in
the life of the pool when relatively few loans remain (tail risk).
When the total senior subordination is less than 0.70% of the
original pool balance, the subordinate bonds do not receive any
principal and all principal is then paid to the senior bonds. In
addition, if the subordinate percentage drops below 6.00% of
current pool balance, the senior distribution amount will include
all principal collections and the subordinate principal
distribution amount will be zero. The subordinate bonds themselves
benefit from a floor. When the total current balance of a given
subordinate tranche plus the aggregate balance of the subordinate
tranches that are junior to it amount to less than 0.50% of the
original pool balance, those tranches do not receive principal
distributions. Principal those tranches would have received are
directed to pay more senior subordinate bonds pro-rata.
Transaction Structure
The transaction uses the shifting interest structure in which the
senior bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the senior
bonds. Next, available distribution amounts are used to reimburse
realized losses and certificate writedown amounts for the senior
bonds (after subordinate bond have been reduced to zero I.e. the
credit support depletion date). Finally, interest and then
principal payments are paid to the subordinate bonds in sequential
order.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balance of the
subordinate bonds is written off, losses from the pool begin to
write off the principal balance of the senior support bond, and
finally losses are allocated to the super senior bonds.
In addition, the pass-through rate on the bonds is based on the net
WAC in each pool as reduced by the sum of (i) the reviewer annual
fee rate and (ii) the capped trust expense rate. In the event that
there is a small number of loans remaining, the last outstanding
bonds' rate can be reduced to zero.
Other Considerations
Similar to JPMMT 2017-3 transaction, extraordinary trust expenses
in the JPMMT 2017-4 transaction are deducted from Net Wac as
opposed to available distribution amount. Moody's believe there is
a very low likelihood that the rated certificates in JPMMT 2017-4
will incur any losses from extraordinary expenses or
indemnification payments from potential future lawsuits against key
deal parties. First, the loans are prime quality, 100% Qualified
Mortgages and were originated under a regulatory environment that
requires tighter controls for originations than pre-crisis, which
reduces the likelihood that the loans have defects that could form
the basis of a lawsuit. Second, the transaction has reasonably well
defined processes in place to identify loans with defects on an
ongoing basis. In this transaction, an independent breach reviewer
(Pentalpha Surveillance, LLC), named at closing must review loans
for breaches of representations and warranties when certain clearly
defined triggers have been breached which reduces the likelihood
that parties will be sued for inaction. Third, the issuer has
disclosed the results of a credit, compliance and valuation review
of 100% of the mortgage loans by independent third parties (AMC,
Inglet Blair, Opus and Clayton Services LLC). Finally, the
performance of past JPMMT transactions have been well within
expectation.
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.
JPMCC COMMERCIAL 2015-JP1: Fitch Affirms B- Rating on Cl. G Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 17 classes of JPMCC Commercial Mortgage
Securities Trust, commercial mortgage pass-through certificates,
series 2015-JP1 (JPMCC 2015-JP1).
KEY RATING DRIVERS
Stable Performance: Overall pool performance remains stable and
generally in line with expectations at issuance, with minimal
paydown or changes to credit enhancement. As of the October 2017
distribution date, the pool's aggregate principal balance paid down
by 0.9% to $791.9 million from $799.2 million at issuance.
Fitch Loans of Concern: Fitch has designated two loans (2.9% of
pool) as Fitch Loans of Concern (FLOCs), including one of the top
15 loans, Novant Portfolio (2.1%). Four other loans (5.4%) are on
the servicer's watchlist due to deferred maintenance or occupancy
declines that have since been offset by new leasing activity, none
of which are considered FLOCs.
The largest FLOC, Novant Portfolio (2.1% of pool), is secured by a
portfolio of five properties consisting of traditional office,
medical office and industrial warehouse/distribution, located in
Winston Salem, Huntersville and Mocksville, NC. At issuance, the
portfolio was 100% occupied by Novant Health (AA-) on various
leases scheduled to expire between July 2018 and December 2019.
Novant has occupied these properties since 2008. Physical portfolio
occupancy has declined to 94.4%, as Novant has vacated one of the
underlying properties, 140 Club Oaks Court located in Winston
Salem, NC, prior to its scheduled July 2018 lease expiration.
According to servicer commentary, the vacant building is not being
utilized by the tenant because of organizational transitions. The
loan is structured with a cash-flow sweep 12 months prior to the
first Novant lease expiration in July 2018. Fitch's query to the
servicer for additional clarity on Novant's lease on the vacant
space and the cash flow sweep trigger remains outstanding.
The other FLOC (0.8%), which is secured by the Hyatt Place Houston,
a 126-room limited service hotel located in Houston, TX, was 30
days delinquent as of October 2017. The property, which reported
negative cash flow at year-end 2016, has been affected by newer
competition, as well as weakness in the overall energy sector.
Hurricane and Wildfire Exposure: Two properties (1.1% of pool) are
located in regions impacted by Hurricane Harvey (0.8%) and
Hurricane Irma (0.3%). Per the master servicer's significant
insurance event (SIE) report, the Hyatt Place Houston property
(located in Houston, TX; 0.8%) sustained minor damage from
Hurricane Harvey. According to the latest servicer updates, the
University Terrace property (Orlando, FL; 0.3%) sustained no damage
from Hurricane Irma. Exposure to the recent wildfires in California
consists of a hotel property securing the tenth-largest loan
(DoubleTree Anaheim - Orange County; 2.5%); Fitch awaits an update
from the servicer.
Pool and Loan Concentrations: The largest loan, 32 Avenue of the
Americas, represents 12.6% of the current pool balance and the
largest 10 loans account for 55.9% of the pool. Loans secured by
office properties represent 49.2% of the pool.
Below-Average Amortization: The pool is scheduled to amortize by
8.8% of the initial pool balance prior to maturity, which is less
than the 2015 average of 11.7%. Six loans (31.2% of pool) are
full-term interest-only and 16 loans (32%) are partial
interest-only and have yet to begin amortizing.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall
stable performance of the pool since issuance. Fitch does not
foresee positive or negative ratings migration until a material
economic or asset level event changes the transaction's overall
portfolio-level metrics.
Fitch has affirmed the following ratings:
-- $19.2 million class A-1 at 'AAAsf'; Outlook Stable;
-- $138 million class A-2 at 'AAAsf'; Outlook Stable;
-- $34.9 million class A-3 at 'AAAsf'; Outlook Stable;
-- $120 million class A-4 at 'AAAsf'; Outlook Stable;
-- $197 million class A-5 at 'AAAsf'; Outlook Stable;
-- $43 million class A-SB at 'AAAsf'; Outlook Stable;
-- $31 million class A-S at 'AAAsf'; Outlook Stable;
-- $583.1 million* class X-A at 'AAAsf'; Outlook Stable;
-- $41 million class B at 'AA-sf'; Outlook Stable;
-- $41 million* class X-B at 'AA-sf'; Outlook Stable;
-- $46 million class C at 'A-sf'; Outlook Stable;
-- $28 million class D at 'BBBsf'; Outlook Stable;
-- $28 million* class X-D at 'BBBsf'; Outlook Stable;
-- $22 million class E at 'BBB-sf'; Outlook Stable;
-- $22 million* class X-E at 'BBB-sf'; Outlook Stable;
-- $18 million class F at 'BBsf'; Outlook Stable;
-- $10 million class G at 'B-sf'; Outlook Stable.
*Notional amount and interest-only.
Fitch does not rate the class NR certificates. Fitch's rating on
the interest-only class X-C was previously withdrawn.
JPMDB 2017-C7: Fitch Assigns 'B-sf' Rating to Cl. F-RR Certs
------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to JPMDB Commercial Mortgage Securities Trust 2017-C7
commercial mortgage pass-through certificates:
-- $27,657,000 class A-1 'AAAsf'; Outlook Stable;
-- $54,016,000 class A-2 'AAAsf'; Outlook Stable;
-- $60,700,000 class A-3 'AAAsf'; Outlook Stable;
-- $275,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $287,683,000 class A-5 'AAAsf'; Outlook Stable;
-- $47,404,000 class A-SB 'AAAsf'; Outlook Stable;
-- $857,267,000b class X-A 'AAAsf'; Outlook Stable;
-- $100,776,000b class X-B 'AA-sf'; Outlook Stable;
-- $104,807,000 class A-S 'AAAsf'; Outlook Stable;
-- $55,091,000 class B 'AA-sf'; Outlook Stable;
-- $45,685,000 class C 'A-sf'; Outlook Stable;
-- $47,029,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $47,029,000a class D 'BBB-sf'; Outlook Stable;
-- $21,499,000ac class E-RR 'BB-sf'; Outlook Stable;
-- $12,093,000ac class F-RR 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $36,279,296ac class G-RR;
-- $30,390,000d class VRR.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Horizontal credit risk retention interest.
(d) Vertical credit risk retention interest.
Since Fitch published its expected ratings on Oct. 10, 2017, the
expected 'A-sf' rating on the interest-only X-B class has been
revised to 'AA-sf' based on the final deal structure.
The final ratings are based on information provided by the issuer
as of Oct. 27, 2017.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 41 loans secured by 201
commercial properties having an aggregate principal balance of
$1,105,333,296 as of the cut-off date. The loans were contributed
to the trust by JPMorgan Chase Bank, National Association and
German American Capital Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 67.2% of the properties
by balance, cash flow analysis of 91.5%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
Fitch Leverage in Line with Recent Transactions: The transaction
has comparable leverage to other recent Fitch-rated multiborrower
transactions. The pool's Fitch debt service coverage ratio (DSCR)
and loan-to-value (LTV) is 1.29x and 100.9%, respectively, relative
to the year-to-date (YTD) 2017 averages of 1.27x and 100.8%,
respectively. Excluding the investment-grade credit opinion loans,
the pool has a Fitch DSCR and LTV of 1.28x and 106.4%,
respectively, also comparable to the YTD 2017 normalized averages
of 1.21x and 106.5%.
Investment-Grade Credit Opinion Loans: Three loans representing
13.3% of the pool have investment-grade credit opinions, which is
above the YTD 2017 average of 12.0% and 2016 average of 8.4%.
Moffett Place Building 4 (6.3% of the pool) and 245 Park Avenue
(2.9% of the pool) both have investment-grade credit opinions of
'BBB-sf*'. General Motors Building has an investment-grade credit
opinion of 'AAAsf*'. Combined, the three loans have a weighted
average (WA) Fitch DSCR and LTV of 1.37x and 65.0%, respectively.
Above-Average Hotel Concentration: Loans secured by hotels make up
18.9% of the pool, which is above the YTD 2017 average of 15.9%.
Hotels have the highest probability of default in Fitch's
multiborrower model. The pool's largest property type is office at
33.0%, followed by industrial at 18.2%. Office and industrial
properties have an average probability of default in Fitch's
multiborrower model.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 12.3% 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
JPMDB 2017-C7 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 'Asf' 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.
LB-UBS COMMERCIAL 2006-C1: Fitch Hikes Cl. B Certs Rating to 'Bsf'
------------------------------------------------------------------
Fitch Ratings has upgraded one class and affirmed 19 classes of
LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage
pass-through certificates series 2006-C1.
KEY RATING DRIVERS
Concentration: The pool is extremely concentrated. Four loans
remain outstanding, the largest of which represents 94.1% of the
pool and is backed by a Class B regional mall and was previously in
special servicing. Two other assets, which represent 2.8% of the
pool, are REO. The ratings incorporate the binary risk associated
with this concentration.
Payoff Timing Uncertain: The largest loan was previously modified,
terms of which included an extension of the maturity date to
December 2018 with two possible one-year extension options. In
addition, the loan's payment terms were flipped from amortizing to
interest only. With two other assets REO and the only other
performing loan representing 3.1% of the pool, monthly scheduled
principal is minimal. The paydown of the majority of the pool is
reliant on the successful refinance of the largest loan.
The Triangle Town Center loan represents 94.1% of the pool balance.
The collateral includes the inline space of a 1.4 million square
foot (sf) regional mall in Raleigh, North Carolina. Non-collateral
anchors include Macy's, Sears, Saks Fifth Avenue, Dillard's and
Belk. The inline space is approximately 80.9% occupied with leases
representing approximately 28.9% of the NRA rolling by YE2018. The
loan was previously in special servicing and recently assumed after
CBL, the previously sponsor, sold its majority stake to DRA. DRA
now holds 90% ownership interest in the property, and CBL retains
10% and also continues to manage the property. As part of the
assumption, DRA agreed to a $25 million cash infusion, which went
to reserves and unpaid taxes, insurance and debt service. In
addition, an outparcel that was originally included as collateral
and known as Triangle Commons was sold. The proceeds of this sale
($29 million) were used to pay down the trust debt. Additional
terms of the modification included an extension of the maturity
date, reduction of the interest rate and conversion to
interest-only payments.
Inline sales were $467 per sf for the T12 ending August 2017.
Anchor sales, based on historical reports, seem to be declining
year-over-year. There are several competing retail centers in the
area, including Crabtree Valley Mall and North Hills Mall. Crabtree
Valley Mall is located 8 miles away from the subject and is
anchored by Macy's, Belk and Sears. North Hills Mall is located 6
miles away and is anchored by Target, Regal Cinemas and Harris
Teeter.
RATING SENSITIVITIES
The Rating Outlook for class A-J remains Stable. It is expected to
repay within the next six months and is sufficiently protected from
potential losses. In conjunction with the upgrade of class B, the
Recovery Estimate was removed and Outlook Stable assigned. The
upgrade of class B follows the return of the largest loan back to
the Master Servicer and reduction in exposure via a $29 million
principal paydown. Both the class A-J and class B ratings have been
capped below investment grade based on a sensitivity analysis of
the largest loan given its history in special servicing, upcoming
tenant roll and location in a saturated, secondary market. Exposure
to the remaining assets in special servicing is minimal and
potential losses from those loans would be constrained to the class
already rated 'Dsf'. Upgrades are possible with a significant
improvement in loan level metrics.
Fitch has upgraded and assigned an Outlook for the following:
-- $15.3 million class B to 'Bsf' from 'CCCsf' RE 100%; Outlook
Stable.
Fitch has affirmed the following ratings:
-- $0.9 million class A-J at 'BBsf'; Outlook Stable;
-- $27.6 million class C at 'CCCsf'; RE 50%;
-- $24.6 million class D at 'CCsf'; RE 0%;
-- $12.2 million class E at 'Dsf'; RE 0%;
-- $0 class F at 'Dsf'; RE 0%;
-- $0 class G at 'Dsf'; RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class IUU-3 at 'Dsf'; RE 0%;
-- $0 class IUU-4 at 'Dsf'; RE 0%;
-- $0 class IUU-5 at 'Dsf'; RE 0%;
-- $0 class IUU-6 at 'Dsf'; RE 0%;
-- $0 class IUU-7 at 'Dsf'; RE 0%;
-- $0 class IUU-8 at 'Dsf'; RE 0%;
-- $0 class IUU-9 at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-4, A-AB, A-M, IUU-1 and IUU-2
certificates have been paid in full. Fitch does not rate the class
P, Q, S, T and IUU-10 certificates. Fitch previously withdrew the
ratings on the interest-only class X-CP and X-CL certificates.
METLIFE SECURITIZATION 2017-1: Fitch to Rate Class B2 Certs 'Bsf'
-----------------------------------------------------------------
Fitch Ratings expects to rate MetLife Securitization Trust 2017-1
(MST 2017-1):
-- $288,892,000 class A notes 'AAAsf'; Outlook Stable;
-- $12,022,000 class M1 notes 'AAsf'; Outlook Stable;
-- $11,164,000 class M2 notes 'Asf'; Outlook Stable;
-- $13,054,000 class M3 notes 'BBBsf'; Outlook Stable;
-- $7,042,000 class B1 certificates 'BBsf'; Outlook Stable;
-- $5,324,000 class B2 certificates 'Bsf'; Outlook Stable.
The following classes will not be rated by Fitch:
-- $1,031,000 class B3 certificates;
-- $1,030,000 class B4 certificates;
-- $1,031,000 class B5 certificates;
-- $1,030,000 class B6 certificates;
-- $1,031,000 class B7 certificates;
-- $859,150 class B8 certificates;
-- $327,675,352 notional class A-IO-S certificates.
MST 2017-1 is MetLife Securitization Trust's inaugural residential
re-performing loan (RPL) transaction. The notes and certificates
are supported by 1,378 seasoned performing and re-performing
mortgages with a total balance of $343.51 million, which includes
$15.8 million or 4.6% of the aggregate pool balance in
non-interest-bearing deferred principal amounts as of the cut-off
date.
The 'AAAsf' rating on the class A notes reflects the 15.90%
subordination provided by the 3.50% class M1, 3.25% class M2, 3.80%
class M3, 2.05% class B1, 1.55% class B2, 0.30% class B3, 0.30%
class B4, 0.30% class B5, 0.30% class B6, 0.30% class B7, and 0.25%
class B8 notes and certificates.
Fitch's ratings on the notes and certificates reflect the credit
attributes of the underlying collateral, the quality of the
servicer, Select Portfolio Servicing, Inc. (SPS, rated RPS1-), and
the representation (rep) and warranty framework, minimal due
diligence findings and the sequential pay structure.
KEY RATING DRIVERS
High Credit Quality (Positive): The notes and certificates are
backed by a pool of high quality RPL mortgage loans. The weighted
average (wavg) primary borrower's most recent FICO score of 733 is
the highest of all other RPL RMBS rated by Fitch to date. In
addition, the pool has a current loan-to value ratio (LTV) of just
71%, a sustainable LTV of 74.5% and is seasoned on average over 10
years. This is most evidenced by Fitch's 'AAAsf' loss expectation
of 15%.
Experienced Aggregator (Positive): This will be the first rated RPL
transaction issued by Metropolitan Life Insurance Company (MLIC).
Fitch reviewed MetLife Investment Management (MIM), a business
division of MetLife, Inc., in August 2017 and currently considers
MIM to be an average aggregator of RPL collateral. MIM, which began
aggregating RPLs in 2012 and managed approximately $16 billion in
investments as of March 31, 2017, benefits from a conservative loan
sourcing strategy and use of robust analytics in its aggregation
process.
Clean Current Loans (Positive): Although 80% of the pool has been
modified, all of the borrowers have been paying on time for the
past 24 months. In addition, 91.7% of the borrowers have been clean
for 36 months. Borrowers that have been current for at least the
past 36 months received a 25% reduction to Fitch's 'AAAsf'
probability of default (PD) while those that have been current
between 24 and 36 months received an 18.75% reduction.
Third-Party Due Diligence (Positive): A third-party due diligence
review was conducted on 100% of the pool and focused on regulatory
compliance and pay histories; a tax and title lien search was also
conducted. Roughly 8% of the pool (114 loans) was assigned a grade
'C' or 'D' for compliance violations, a third of which had material
violations or lacked documentation to confirm regulatory compliance
and were applied an adjustment by Fitch. The remaining loans had
violations with limited assignee liability or other exceptions that
could delay foreclosure, which is addressed by Fitch's extended
timelines applied to RPLs. The findings for MST 2017-1 is below the
average of 10.8% seen in other Fitch rated RPL RMBS.
Tier 2 Representation and Warranty Framework (Mixed): Life of loan
representations and warranties are being provided by MLIC
(A+/Stable/F1+). Based on Fitch's assessment, the construct for
this transaction was categorized as a Tier 2 due to the high
threshold (less than 50%) of investors unaffiliated with the issuer
needed for noteholders to cause a review. While there is no 120 day
delinquent loan threshold to cause a third party review to identify
breaches, there are other performance triggers for an automatic
review that Fitch views as adequate. Given the rating of MLIC,
there was no adjustment made to the expected losses.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $15.8 million (4.6%) of the unpaid
principal balance are outstanding on 210 loans. Fitch included the
deferred amounts when calculating the borrower's LTV and sLTV
despite the lower payment and amounts not being owed during the
term of the loan. The inclusion resulted in higher PDs and LS than
if there were no deferrals. Fitch believes that borrower default
behavior for these loans will resemble that of the higher LTVs, as
exit strategies (that is, sale or refinancing) will be limited
relative to those borrowers with more equity in the property.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I. Structural provisions and
cash flow priorities, together with increased subordination,
provide for timely payments of interest to the 'AAAsf' and 'AAsf'
rated classes.
Recent Natural Disasters (Mixed): The servicer, Select Portfolio
Servicing, Inc. (SPS), is contacting borrowers to inquire about
potential natural disaster related damage. If a borrower reports
material damage to the property, the loan will be removed from the
pool.
The remedy provider is obligated to repurchase loans that have
incurred property damage due to water, flood, or hurricane prior to
the transaction's closing that adversely affects the value of the
property. Fitch currently does not expect the effect of the storm
damage to have rating implications due to the repurchase obligation
of the sponsor and due to the limited exposure to affected areas
relative to the credit enhancement (CE) of the rated bonds.
Solid Alignment of Interest (Positive): The sponsor, MLIC, and/or
one or more of its majority-owned affiliates will acquire and
retain a 5% vertical interest in each class of the securities to be
issued. In addition, the sponsor will also be the rep provider.
CRITERIA APPLICATION
Fitch's analysis incorporated one criteria variation from its "U.S.
RMBS Loan Loss Model Criteria," which is described below.
The variation relates to overriding the default assumption for
original debt-to-income ratio (DTI) in Fitch's Loan Loss model.
Based on a historical data analysis of over 750,000 loans from
Fannie Mae and Fitch's rated RPL transactions, Fitch assumed an
original DTI of 45% for all loans in pool that did not have
original DTI data available (100% of the pool). The historical loan
data supports the DTI assumption of 45%. Prior to conducting the
historical analysis, Fitch had previously assumed 55% for loans
that were missing original DTI values.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. 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 be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 38.2% at 'AAAsf'. The analysis indicates 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'.
ML-CFC COMMERCIAL 2006-4: Moody's Affirms C Ratings on 2 Tranches
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
in ML-CFC Commercial Mortgage Trust 2006-4, Commercial Mortgage
Pass-Through Certificates, Series 2006-4:
Cl. C, Affirmed Caa2 (sf); previously on Nov 10, 2016 Affirmed Caa2
(sf)
Cl. D, Affirmed C (sf); previously on Nov 10, 2016 Downgraded to C
(sf)
Cl. XC, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The ratings on Class C and D were affirmed because the ratings are
consistent with Moody's expected loss.
The rating on the IO class, Class XC, was affirmed based on the
credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 35.3% of the
current pooled balance, compared to 14.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 9.6% of the
original pooled balance, compared to 9.8% 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 July 2017.
Additionally, the methodology used in rating Cl. XC was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 87.5% of the pool is in
special servicing. 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 loans to the most junior class(es) and the
recovery as a pay down of principal to the most senior class(es).
DEAL PERFORMANCE
As of the October 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $87.7 million
from $4.52 billion at securitization. The certificates are
collateralized by twelve mortgage loans ranging in size from 1% to
33% of the pool.
Sixty-two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $402 million (for an average loss
severity of 47%). Eight loans, constituting 87.5% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Elm Ridge Center loan ($28.9 million -- 32.9% of the pool),
which is secured by an anchored retail center located in Greece,
New York. The loan status is delinquent and it had an original
maturity date in May 2016. The property was 67% occupied as of
August 2017 and the Borrower has continued to remit property cash
flow and is covering the property's operating expenses
out-of-pocket.
The second largest specially serviced loan is the Caughlin Ranch
Shopping Center loan ($16.8 million -- 19.1% of the pool), which is
secured by an anchored retail center located in Reno, Nevada,
comprising of four buildings and two pads with 26 units. The loan
was transferred to special servicing in September 2016, after the
Borrower indicated the inability to payoff the loan at its maturity
date in November 2016. The property was 90% occupied as of August
2017.
The third largest specially serviced loan is the Prospect Square
loan ($13.6 million -- 15.5% of the pool), which is secured by a
leasehold interest in a mixed-use property consisting of 12,040
square feet (SF) of office and 21,285 SF of retail space located in
San Diego, California. The asset transferred to special servicing
in November 2016 due to imminent maturity default (the original
maturity date was December 2016). The Borrower indicated they were
unable to refinance due to the underlying ground lease that runs
through August 2037. The property was 81.5% occupied as of July
2017.
The remaining five specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $30.9 million loss
for the specially serviced loans (40% expected loss on average).
The top three performing loans represent 11% of the pool balance.
The largest performing loan is the New York Graphic Society
Building Loan ($5.1 million -- 5.8% of the pool), which is secured
by a 43,000 SF suburban office property located in Norwalk,
Connecticut. The current sponsor purchased this property in August
2016. The property is occupied by the New York Graphic Society and
Veterinary Cancer Center. The loan has amortized 15% since
securitization and matures in June 2018. Moody's LTV and stressed
DSCR are 94% and 1.16X, respectively.
The second largest performing loan is the Superior Super Warehouse
- Chino Loan ($2.8 million -- 3.2% of the pool), which is secured
by a free standing retail property located in Chino, California,
approximately 35 miles east of downtown Los Angeles. The property
was 100% occupied as of June 2017. The loan is fully-amortizing,
has amortized over 60% since securitization and matures in October
2021. Moody's LTV and stressed DSCR are 30% and 3.36X,
respectively, compared to 33% and 3.02X at the last review.
The third largest performing loan is the Stone Ridge Apartments
Loan ($1.6 million -- 1.8% of the pool), which is secured by a
70-unit garden style multifamily located in Chattanooga, Tennessee.
The property was 97% occupied as of September 2015. The loan has
amortized 16% since securitization and matures in September 2024.
Moody's LTV and stressed DSCR are 93% and 1.08X, respectively,
compared to 95% and 1.06X at the last review.
MONROE CAPITAL 2017-1: Moody's Assigns Ba3 Rating to Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Monroe Capital MML CLO 2017-1, Ltd.
Moody's rating action is:
US$224,000,000 Class A Senior Floating Rate Notes Due 2029 (the
"Class A Notes"), Definitive Rating Assigned Aaa (sf)
US$41,000,000 Class B Floating Rate Notes Due 2029 (the "Class B
Notes"), Definitive Rating Assigned Aa2 (sf)
US$24,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2029 (the "Class C Notes"), Definitive Rating Assigned A2 (sf)
US$31,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2029 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf)
US$30,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due
2029 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes are referred to herein, collectively,
as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Monroe Capital 2017-1 is a managed cash flow SME CLO. The issued
notes will be collateralized primarily by small and medium
enterprise loans. At least 95% of the portfolio must consist of
senior secured loans and eligible investments, and up to 5% of the
portfolio may consist of second lien loans and senior unsecured
loans. The portfolio is approximately 78% ramped as of the closing
date.
Monroe Capital Management LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. After the reinvestment period, the Manager may
not reinvest in new assets and all principal proceeds, including
sale proceeds, will be used to amortize the notes in accordance
with the priority of payments.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 45
Weighted Average Rating Factor (WARF): 3300
Weighted Average Spread (WAS): 5.00%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 43.0%
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
August 2017.
The CLO permits the manager to determine RiskCalc-derived rating
factors, based on modifications to certain pre-qualifying
conditions applicable to the use of RiskCalc, for obligors
temporarily ineligible to receive Moody's credit estimates. Such
determination is limited to a small portion of the portfolio and
permits certain modifications for a limited time. Moody's rating
analysis included a stress scenario in which Moody's assumed a
rating factor commensurate with a Caa2 rating for such obligors.
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 3300 to 3795)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -1
Class C Notes: 0
Class D Notes: 0
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 3300 to 4290)
Rating Impact in Rating Notches
Class A Notes: -1
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
MORGAN STANLEY 2016-C32: Fitch Affirms BB-sf Rating on Cl. E Debt
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Morgan Stanley Bank of
America Merrill Lynch Trust Series 2016-C32.
KEY RATING DRIVERS
Stable Performance: The affirmations are based on the stable
performance of the underlying collateral. There have been no
material changes to the pool since issuance, therefore the original
rating analysis was considered in affirming the transaction.
As of the October, 2017 distribution date, the pool's aggregate
balance has been reduced by 0.44% to $902.97 million, from $906.95
million at issuance. Four loans (3.51%) are on the servicer's
watchlist, of which two are considered Fitch Loans of Concern
(1.67%).
Hurricane Exposure Update: Nine loans (10.3% of the pool balance)
secured by 11 properties located in regions potentially impacted by
Hurricane Irma in Florida (nine properties, seven loans; 6.2%) and
Hurricane Harvey in the greater Houston, TX area (two properties,
two loans; 4.1%). According to initial servicer feedback, for
borrowers that have so far provided updates, zero to minor damage
was reported for most properties and significant wind damage was
reported for a manufactured housing property in Labelle, FL
(0.85%). However, not all borrowers have been able to respond to
servicer inquiries. Additionally, damage to infrastructure and
residential properties in these areas is likely to disrupt
commercial activity to some extent in the near term.
Retail Concentration: The pool's largest property type is retail at
40.2% of the pool balance that includes two regional malls (11.8%),
both sponsored by Simon Property Group, L.P. (rated 'A'/Stable by
Fitch). The Wolfchase Galleria (6%; Memphis, TN) has exposure to
(non-collateral) anchors Macy's, JC Penney, Sears, and Dillards;
Potomac Mills (5.8%; Woodbridge, VA) anchors include Costco, JC
Penny, AMC Theatres, BuyBuy Baby and Marshalls, all collateral
tenants. Fitch continues to monitor this asset type in light of
changing consumer trends and continued store closures.
Amortization: Eight loans representing 31.3% of the pool are full
interest-only loans. This is in line with the YE 2016 average of
33.3% for other Fitch-rated transactions. Additionally, there are
23 loans representing 36.6% of the pool that are partial-interest
only. Based on the loans scheduled maturity balance, the pool is
expected to amortize 11% over the life of the transaction.
RATING SENSITIVITIES
The Rating Outlook on all classes remains Stable given the
relatively stable performance of the transaction since issuance.
Fitch does not foresee positive or negative ratings migration until
a material economic or asset-level event changes the transaction's
overall portfolio level metrics.
Fitch has affirmed the following classes:
-- $32.9 million class A-1 at 'AAAsf'; Outlook Stable;
-- $6.8 million class A-2 at 'AAAsf'; Outlook Stable;
-- $58.6 million class A-SB at 'AAAsf'; Outlook Stable;
-- $190 million class A-3 at 'AAAsf'; Outlook Stable;
-- $342.6 million class A-4 at 'AAAsf'; Outlook Stable;
-- $65.8 million class A-S at 'AAAsf'; Outlook Stable;
-- $44.2 million class B at 'AA-sf'; Outlook Stable;
-- $43.1 million class C at 'A-sf'; Outlook Stable;
-- $48.7 million class D at 'BBB-sf'; Outlook Stable;
-- $23.8 million class E at 'BB-sf'; Outlook Stable;
-- $10.2 million F at 'B-sf'; Outlook Stable;
-- $630.9* million class X-A at 'AAAsf'; Outlook Stable;
-- $110* million class X-B at 'AA-sf'; Outlook Stable;
-- $48.7* million class X-D at 'BBB-sf'; Outlook Stable.
*Notional amount and interest-only
Fitch does not rate class G.
NORTHSTAR 2016-1: Moody's Affirms Ba3(sf) Rating on Class C Notes
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
notes issued by NorthStar 2016-1:
Cl. A, Affirmed Aaa (sf); previously on Nov 10, 2016 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Baa3 (sf); previously on Nov 10, 2016 Definitive
Rating Assigned Baa3 (sf)
Cl. C, Affirmed Ba3 (sf); previously on Nov 10, 2016 Definitive
Rating Assigned Ba3 (sf)
The Class A, Class B, and Class C Notes are referred to herein as
the "Rated Notes".
RATINGS RATIONALE
Moody's has affirmed the ratings on the Rated Notes because the key
transaction metrics are commensurate with the existing rating. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation (CRE CDO CLO)
transactions.
This is the first review of the transaction since securitization.
NorthStar 2016-1 is a static cash flow commercial real estate
collateralized loan obligation (CRE CLO). As of the trustee's
September 25, 2017 report, the aggregate note balance of the
transaction, including preferred shares, has decreased to $207.3
million from $284.2 million at issuance, due to repayments of the
underlying collateral per the transaction waterfall.
The pool contains no defaulted loan as of the trustee's September
25, 2017 report.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO CLO transactions: 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 CLO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 4556,
compared to 4554 at securitization. The current ratings on the
Moody's-rated collateral and the assessments of the non-Moody's
rated collateral follow: Ba1-Ba3 and 12.2% compared to 10.4% at
securitization; Caa1-Ca/C and 87.8% compared to 89.6% at
securitization.
Moody's modeled a WAL of 3.0 years, compared to 3.9 years at
securitization. The WAL is based on assumptions about extensions on
the underlying loan collateral.
Moody's modeled a fixed WARR of 55.6%, compared to 56.8% at
securitization.
Moody's modeled a MAC of 36.5%, compared to 34.1% at
securitization.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in June 2017.
Factors That Would Lead to Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes are 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 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 assessments of the underlying collateral pool. Holding
all other key parameters static, stressing the ratings and
assessments of approximately 30% of the collateral pool down by -1
notch would result in no rating movement on the Rated Notes (e.g.,
one notch down implies a ratings movement of Baa3(sf) to Ba1(sf)).
Stressing the ratings and assessments of approximately 30% of the
collateral pool down by -2 notches would result in no rating
movement on the Rated Notes (e.g., two notches down implies a
ratings movement of Baa3(sf) to Ba2(sf)).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment.
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.
NYLIM STRATFORD 2001-1: Moody's Lowers Class B Notes Rating to B1
-----------------------------------------------------------------
Moody's Investors Service has downgraded the rating on notes issued
by NYLIM Stratford CDO 2001-1 Ltd.:
US$40,000,000 Class B Floating Rate Notes Due 2036 (current
outstanding balance of $13,564,837.37), Downgraded to B1 (sf);
previously on July 30, 2014 Downgraded to Ba2 (sf)
NYLIM Stratford CDO 2001-1 Ltd., issued in April 2001, is a
collateralized debt obligation backed primarily by a portfolio of
corporate bonds, Residential Mortgage Backed Securities (RMBS),
REITs and other Asset Backed Securities (ABS) originated between
1996 to 2004.
RATINGS RATIONALE
The rating action is primarily due to the deterioration of the
Class B notes' overcollateralization (OC) ratio since November
2016. Based on the trustee's October 2017 report, the Class B OC is
reported at 138.3% versus 175.3% in November 2016. The
deterioration of the Class B OC is primarily caused by the
diversion of principal proceeds to pay the Class C notes' current
interest payment. On the October 2017 payment date, $0.51 million
of proceeds was used to make interest payments on the Class C
notes. Moody's expects the diversion of principal proceeds to
continue.
Methodology Underlying the Rating Action
The principal methodology used in this rating was "Moody's Approach
to Rating SF CDOs" published in June 2017.
Factors That Would Lead To an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings, as described below:
1) Macroeconomic uncertainty: 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.
2) 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.
3) 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.
4) 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.
Loss and Cash Flow Analysis:
Moody's applies a Monte Carlo simulation framework in Moody's
CDROM(TM) 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(TM) 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):
Ba1 and below ratings notched up by two rating notches (155):
Class B: 0
Class C: 0
Preferred Shares: 0
Ba1 and below ratings notched down by two notches (270):
Class B: 0
Class C: 0
Preferred Shares: 0
OCTAGON INVESTMENT 33: S&P Gives Prelim BB-(sf) Rating on D Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Octagon
Investment Partners 33 Ltd.'s $183.025 million floating rate and
combination notes.
The note issuance is a collateralized loan obligation backed by a
diversified collateral pool, which consists primarily of broadly
syndicated, speculative-grade senior secured term loans.
The preliminary ratings are based on information as of Nov. 2,
2017. 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.
S&P said, "Our principal only rating on the combination notes,
which consist of the $16.15 million class A-1 notes, $2.80 million
class A-2 notes, $20.00 million class B notes, $1.50 million class
C notes, $0.98 million class D notes, and $5.60 million
subordinated notes, takes into account our cash flow analysis,
assuming paydowns to the combination notes from interest payments,
equity distributions, or principal payments on the underlying
notes."
PRELIMINARY RATINGS ASSIGNED
Octagon Investment Partners 33 Ltd.
Class Rating Amount
(mil. $)
A-1 NR 323.00
A-2 AA (sf) 56.00
B A (sf) 30.50
C BBB- (sf) 30.00
D BB- (sf) 19.50
Subordinated notes NR 50.95
Combination notes(i) A-p (sf) 47.025
(i)The combination notes are backed by $16.15 million class A-1
notes, $2.80 million class A-2 notes, $20.00 million class B notes,
$1.50 million class C notes, $0.98 million class D notes and $5.60
million subordinated notes.
3ML--Three-month LIBOR.
p--Principal only.
NR--Not rated.
N/A--Not applicable.
OCTAGON INVESTMENT 34: Moody's Assigns (P)Ba3 Ratings to 2 Tranches
-------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to nine
classes of notes to be issued by Octagon Investment Partners 34,
Ltd. (the "Issuer" or "Octagon 34").
US$274,500,000 Class A-1 Senior Secured Floating Rate Notes due
2030 (the "Class A-1 Notes"), Assigned (P)Aaa (sf)
US$18,000,000 Class A-2 Senior Secured Floating Rate Notes due 2030
(the "Class A-2 Notes"), Assigned (P)Aaa (sf)
US$40,000,000 Class B-1 Senior Secured Floating Rate Notes due 2030
(the "Class B-1 Notes"), Assigned (P)Aa2 (sf)
US$5,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2030
(the "Class B-2 Notes"), Assigned (P)Aa2 (sf)
US$10,000,000 Class C-1 Secured Deferrable Mezzanine Floating Rate
Notes due 2030 (the "Class C-1 Notes"), Assigned (P)A1 (sf)
US$23,750,000 Class C-2 Secured Deferrable Mezzanine Floating Rate
Notes due 2030 (the "Class C-2 Notes"), Assigned (P)A3 (sf)
US$22,500,000 Class D Secured Deferrable Mezzanine Floating Rate
Notes due 2030 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$9,375,000 Class E-1 Secured Deferrable Junior Floating Rate
Notes due 2030 (the "Class E-1 Notes"), Assigned (P)Ba3 (sf)
US$10,880,000 Class E-2 Secured Deferrable Junior Floating Rate
Notes due 2030 (the "Class E-2 Notes"), Assigned (P)Ba3 (sf)
The Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the
Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the
Class D Notes, the Class E-1 Notes and the Class E-2 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.
Octagon 34 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 expect the portfolio to be approximately 85% ramped as of
the closing date.
Octagon Credit Investors, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five 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 and combination 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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $450,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9.1 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
August 2017.
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: -1
Class B-1 Notes: -2
Class B-2 Notes: -2
Class C-1 Notes: -2
Class C-2 Notes: -2
Class D Notes: -1
Class E-1 Notes: 0
Class E-2 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-1 Notes: -3
Class B-2 Notes: -3
Class C-1 Notes: -3
Class C-2 Notes: -3
Class D Notes: -2
Class E-1 Notes: -1
Class E-2 Notes: -1
PRIMA CAPITAL 2016-MRND: Moody's Affirms Ba1 on 2 Tranches
----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
notes and certificates issued by Prima Capital CRE Securitization
2016-MRND Trust:
Cl. 1-A1 Notes, Affirmed Ba1 (sf); previously on Dec 8, 2016
Assigned Ba1 (sf)
Cl. 1-A2 Certificates, Affirmed B1 (sf); previously on Dec 8, 2016
Assigned B1 (sf)
Cl. 2-A1 Notes, Affirmed Ba1 (sf); previously on Dec 8, 2016
Assigned Ba1 (sf)
The Class 1-A1 notes and Class 1-A2 certificates are referred to
herein as the "Group 1"; and the Class 2-A1 notes as the "Group
2."
RATINGS RATIONALE
Moody's has affirmed the ratings on Group 1 and Group 2 because the
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 CLO)
transactions.
Prima 2016-MRND is a static cash transaction. Group 1 is a
resecuritization of one single asset/single borrower CMBS bond
issued in 2016 secured primarily by science office and laboratory
properties (the "Underlying Certificates"). Group 2 is
collateralized by six collateral interests (five names) in the form
of single asset/single borrower commercial real estate bonds (CMBS)
-- 100% secured by CBD office properties. As of the September 19,
2017 trustee report, the aggregate balance of Group 1 has decreased
to $130.2 million from $150.0 million at issuance; and the
aggregate balance of Group 2 has decreased to $148.6 million from
$151.6 million at issuance; primarily due to pre-payments of the
underlying collateral of Group 1 and Group 2.
No assets had defaulted as of the trustee's September 19, 2017
report.
GROUP 1
Moody's has identified the key parameters, including the constant
default rate (CDR), the constant prepayment rate (CPR), the
weighted average life (WAL), and the weighted average recovery rate
(WARR).
The WAL of Group 1 is 3.3 years, assuming a CDR of 0% and CPR of
0%. For delinquent loans (30-plus days, REO, foreclosure,
bankrupt), Moody's assumes a fixed WARR of 40%, and for current
loans, 50%. Moody's also ran a sensitivity analysis using a fixed
WARR of 40% for current loans. There is no impact to the modeled
ratings.
GROUP 2
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 CLO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 1858,
compared to 1848 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is: Ba1-Ba3 and 66.4% compared to 67.1% at last review,
B1-B3 and 33.6% compared to 32.9% at last review.
Moody's modeled a WAL of 5.5 years, compared to 6.4 years at last
review. The WAL is based on assumptions about extensions on the
underlying loan collateral.
Moody's modeled a fixed WARR of 30.9%, compared to 31.0% at last
review.
Moody's modeled a MAC of 50.0%, compared to 36.7% at last review.
Methodology Underlying the Rating Action:
GROUP 1
The principal methodology used in rating Cl. 1-A1 Notes and Cl.
1-A2 Certificates (Group 1) was "Moody's Approach to Rating
Resecuritizations" published in February 2014.
GROUP 2
The principal methodology used in rating Cl. 2-A1 Notes (Group 2)
was "Moody's Approach to Rating SF CDOs" published in June 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of Group 1 and Group 2 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 Group 1 and Group
2.
GROUP 1
Because the credit quality of the resecuritization depends on that
of the underlying CMBS certificate, whose credit quality in turn
depends on the performance of the underlying commercial mortgage
pool, any change to the ratings on the underlying securities could
lead to a review of the ratings of the Group 1.
GROUP 2
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for Group 2, although
a change in one key parameter assumption could be offset by a
change in one or more of the other key parameter assumptions. Group
2 is particularly sensitive to changes in the rating factors of the
underlying collateral. Holding all other key parameters static,
stressing the ratings and credit assessments of 30% of the
collateral by -1 notch would result in n rating movement on the
rated notes of 0 notches downward (e.g., one notch down implies a
ratings movement of Baa3 to Ba1). Additionally, stressing 30% of
the collateral by -2 notches would result in an average modeled
rating movement on the rated notes of 0 notches downward (e.g., two
notches down implies a ratings movement of Baa3 to Ba2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment.
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.
REALT 2017: Fitch Assigns 'Bsf' Rating to Class G Certificates
--------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to the following classes of Real Estate Asset Liquidity
Trust (REAL-T) commercial mortgage pass-through certificates series
2017:
-- $114,961,000 class A-1 'AAAsf'; Outlook Stable;
-- $233,834,000 class A-2 'AAAsf'; Outlook Stable;
-- $12,203,000 class B 'AAsf'; Outlook Stable;
-- $12,203,000 class C 'Asf'; Outlook Stable;
-- $3,641,000 class D-1 'BBBsf'; Outlook Stable;
-- $9,070,000bc class D-2 'BBBsf'; Outlook Stable;
-- $4,068,000bc class E 'BBB-sf'; Outlook Stable;
-- $4,068,000bc class F 'BBsf'; Outlook Stable;
-- $4,576,000bc class G 'Bsf'; Outlook Stable.
All currencies are in Canadian dollars (CAD).
The following classes are not rated by Fitch:
-- $373,201,000a class X;
-- $8,134,444bc class H.
(a) Notional amount and interest only.
(b) Privately placed and pursuant to Rule 144A.
(c) Horizontal credit risk retention interest representing at least
5% of the estimated fair value of all classes of regular
certificates issued by the issuing entity (as of the closing
date).
Since Fitch published its expected ratings on Oct. 17, 2017, the
final balance of the class D-1 certificates decreased to $3,641,000
and the final balance of the class D-2 certificates increased to
$9,070,000.
The final ratings are based on information provided by the issuer
as of Oct. 31, 2017.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 71 loans secured by 111
commercial properties located in Canada having an aggregate
principal balance of $406,758,444 as of the cut-off date. All loans
were contributed to the trust by the Royal Bank of Canada.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 67.2% of the properties
by balance, cash flow analysis of 96.8%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The transaction has higher leverage than other
recent Fitch-rated Canadian multiborrower deals. The pool's Fitch
debt service coverage ratio (DSCR) of 1.11x is below both the 2016
and 2015 Canadian averages of 1.15x and 1.18x, respectively. The
pool's Fitch loan-to-value (LTV) of 109.4% is above both the 2016
and 2015 averages of 106.0% and 102.6%, respectively.
Favorable Property Type Concentrations: While the pool's largest
property type concentration is retail at 29.5% (split between
anchored shopping centers at 20.9% and unanchored shopping centers
at 8.6%), the pool's second largest property type is multifamily at
27.2%, which is significantly greater than the 2016 and 2015
averages for Canadian multiborrower transactions of 13.8% and
10.6%, respectively. In Fitch's multiborrower model, multifamily
properties have a below-average likelihood of default, all else
equal. Additionally, the pool does not contain any loans backed by
hotel properties, which demonstrate more performance volatility
and, therefore, have higher default probabilities.
Canadian Loan Attributes and Historical Performance: The ratings
reflect strong historical 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. For more information on prior Canadian CMBS
securitizations, see "Canadian CMBS Default and Loss Study," dated
Oct. 10, 2013 and available at www.fitchratings.com.
Favorable Geographic Concentration: Properties in Ontario represent
57.1% of the pool, which reflects a higher concentration than
previous Canadian deals. Ontario is the country's most populous
province and accounts for approximately 40% of the country's
population and GDP. The properties are spread throughout the
province as the top 10 loans include collateral located in Thunder
Bay, Barrie, Windsor, London, and Keswick. Other significant
province concentrations include Saskatchewan (20.8% of the pool)
and British Columbia (9.5%). Three loans accounting for 1.7% of the
pool are located in the more energy-dependent province of Alberta.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 17.2% 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 REAL-T
2017 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 'BBB+sf'
could result.
SATURN VENTURES I: Moody's Affirms C Rating on Class B Notes
------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
notes issued by Saturn Ventures I, Ltd.:
Class A-3 Floating Rate Senior Notes, Affirmed Ca (sf); previously
on Nov 9, 2016 Affirmed Ca (sf)
Class B Floating Rate Subordinate Notes, Affirmed C (sf);
previously on Nov 9, 2016 Affirmed C (sf)
The Class A-3 Floating Rate Senior Notes, and Class B Floating Rate
Subordinate Notes are referred to herein as the "Rated Notes."
RATINGS RATIONALE
Moody's has also affirmed the ratings on the Rated Notes because
the key transaction metrics are commensurate with the existing
ratings. While the credit quality has deteriorated, as evidenced by
WARF, Moody's current ratings are positioned to reflect implied
losses and forecast credit risk. 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.
Saturn Ventures I, Ltd. is a static cash transaction wholly backed
by a portfolio of: i) residential mortgage backed securities
primarily in the form of "subprime", "alt-A", and "prime" (RMBS)
(89.9% of the pool balance); and ii) commercial mortgage backed
securities (CMBS) (10.1%). As of the trustee's September 29, 2017
report, the aggregate note balance of the transaction, including
preferred shares, is $58.4 million, down from $400.0 million at
issuance, with the paydown directed to the senior most outstanding
class of notes, as a result of full and partial amortization of the
underlying collateral and the re-direction of interest proceeds as
principal proceeds due to the failure of certain par value tests.
The pool contains six assets totaling $5.8 million (94.4% of the
collateral pool balance) that are listed as defaulted securities as
of the trustee's September 29, 2017 report. Five of these assets
(89.3% of the defaulted balance) are RMBS, and one asset is CMBS
(10.7%). Moody's does expect significant/moderate losses to occur
on the defaulted securities.
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 CLO pool.
Moody's has updated its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 5897,
compared to 5375 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is: A1-A3 and 2.4% compared to 0.0% at last review,
Baa1-Baa3 and 0.0% compared to 3.0% at last review, Ba1-Ba3 and
0.0% compared to 28.5% at last review, B1-B3 and 35.4% compared to
12.3% at last review, Caa1-Ca/C and 62.1% compared to 56.2% at last
review.
Moody's modeled a WAL of 2.4 years, compared to 2.6 years at last
review. The WAL is based on assumptions about extensions on the
underlying CMBS look-through loan collateral.
Moody's modeled a fixed WARR of 1.0%, the same as at last review.
Moody's modeled a MAC of 0.0%, 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 June 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated 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.
Holding all other parameters constant, 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 notches 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.
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.
SLM TRUST 2007-2: Fitch Affirms 'Bsf' Rating on Class B Debt
------------------------------------------------------------
Fitch Ratings has taken the following rating actions:
SLM Student Loan Trust 2007-2(SLM 2007-2)
-- Class A-3 downgraded to 'Bsf' from 'BBBsf'; Outlook Stable;
-- Class A-4 affirmed at 'Bsf'; Outlook Stable;
-- Class B affirmed at 'Bsf'; Outlook Stable.
SLM Student Loan Trust 2007-3(SLM 2007-3)
-- Class A-3 downgraded to 'Bsf' from 'BBsf'; Outlook Stable;
-- Class A-4 affirmed at 'Bsf'; Outlook Stable;
-- Class B affirmed at 'Bsf'; Outlook Stable.
For both transactions, the class A-3 and A-4 notes miss their legal
final maturity date under Fitch's base case scenarios. The
technical default would result in interest payments being diverted
away from the class B, which would cause that note to fail as well.
In addition to model results, Fitch has considered qualitative
factors such as the revolving credit agreement in place for the
benefit of the noteholders and the eventual full payment of
principal.
The trust has entered into a revolving credit agreement with
Navient by which it may borrow funds at maturity in order to pay
off the notes. Since 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.
The speed at which the notes are being paid down has been
decreasing. Based on the latest two quarters average paydown speed
without applying any stress, both the class A-3 notes are expected
to be paid in full right on the legal final maturity dates, which
is commensurate with the 'Bsf' rating.
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'/Stable.
Collateral Performance for SLM 2007-2: Fitch assumes a base case
default rate of 21% and a 63% default rate under the 'AAA' credit
stress scenario. The base case default assumption of 21% implies a
constant default rate of 4.2% (assuming a weighted average life of
4.9 years) and a sustainable constant prepayment rate of 11.3%
based on data provided by the issuer. Fitch applies the standard
default timing curve in its credit stress cash flow analysis. The
claim reject rate is assumed to be 0.5% in the base case and 3% in
the 'AAA' case. The TTM levels of deferment, forbearance and
income-based repayment (prior to adjustment) are 9.3%, 16%, and
18.4%, respectively, and are used as the starting point in cash
flow modelling. Subsequent declines or increases are modelled as
per criteria. The borrower benefit is assumed to be approximately
0%, based on information provided by the sponsor.
Collateral Performance for SLM 2007-3: Fitch assumes a base case
default rate of 21% and a 63% default rate under the 'AAA' credit
stress scenario. The base case default assumption of 21% implies a
constant default rate of 4.2% (assuming a weighted average life of
4.9 years) and a sustainable constant prepayment rate of 11.2%
based on data provided by the issuer. Fitch applies the standard
default timing curve in its credit stress cash flow analysis. The
claim reject rate is assumed to be 0.5% in the base case and 3% in
the 'AAA' case. The TTM levels of deferment, forbearance and
income-based repayment (prior to adjustment) are 9.6%, 16.2%, and
18%, respectively, and are used as the starting point in cash flow
modelling. Subsequent declines or increases are modelled 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: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for SAP and the securities. As of September 2017, for
SLM 2007-2 and SLM 2007-3, 5% of the trust student loans are
indexed to 91-day T-Bill and 95% one-month LIBOR. All notes are
indexed to three-month LIBOR. 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 and, for the class A notes, subordination. As of September
2017, for SLM 2007-2 and SLM 2007-3, respectively, senior effective
parity ratios (including the reserve) were 120.38% (16.93% CE) and
120.28 (16.86% CE). Current total parity for SLM 2007-2 and SLM
2007-3 is at 100.6% (0.54% CE) and 100.54 (0.54% CE). Liquidity
support is provided by a reserve currently sized at $4,000,000 and
$3,003,866 for both transactions, respectively. The transaction
will continue to release cash as long as the target total parity of
100% is maintained.
Maturity Risk: For both SLM 2007-2 and SLM 2007-3, Fitch's student
loan ABS cash flow model (SLABS) indicates that the class A-3, A-4,
and B notes do not pay off before their legal final maturity date
in Fitch's modelling scenario, including the base cases. If the
breach of the class A-3 or A-4 maturity 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: Navient Solutions, Inc. (fka Sallie Mae,
Inc.), ACS, and Great Lakes are master servicer, subservicer and
subservicer, respectively, and are responsible for the day-to-day
servicing of the portfolio. Fitch believes all to be acceptable
servicers of FFELP student loans at this time.
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. Additionally, the
results do not take into account any rating-cap considerations.
SLM 2007-2
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 'CCCsf'
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
SLM 2007-3
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 'CCCsf'
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
-- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
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 XVII: Moody's Assigns Ba3 Rating to Class D Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Sound Point CLO XVII, Ltd. (the "Issuer" or "Sound
Point XVII").
Moody's rating action is:
US$260,000,000 Class A-1A Senior Secured Floating Rate Notes due
2030 (the "Class A-1A Notes"), Assigned Aaa (sf)
US$260,000,000 Class A-1B Senior Secured Floating Rate Notes due
2030 (the "Class A-1B Notes"), Assigned Aaa (sf)
US$91,000,000 Class A-2 Senior Secured Floating Rate Notes due 2030
(the "Class A-2 Notes"), Assigned Aa2 (sf)
US$40,000,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class B Notes"), Assigned A2 (sf)
US$53,000,000 Class Class C Mezzanine Secured Deferrable Floating
Rate Notes due 2030 (the "Class C Notes"), Assigned Baa3 (sf)
US$32,000,000 Class D Junior Secured Deferrable Floating Rate Notes
due 2030 (the "Class D Notes"), Assigned Ba3 (sf)
The Class A-1A Notes, the Class A-1B Notes, the Class A-2 Notes,
the Class B Notes, the Class C Notes and the Class D Notes are
referred to herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Sound Point XVII is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans, senior
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 five 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 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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $800,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2714
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9 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
August 2017.
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 2714 to 3121)
Rating Impact in Rating Notches
Class A-1A Notes: 0
Class A-1B 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 2714 to 3528)
Rating Impact in Rating Notches
Class A-1A Notes: -1
Class A-1B Notes: -1
Class A-2 Notes: -3
Class B Notes: -3
Class C Notes: -2
Class D Notes: -1
STACR 2017-SPI1: Moody's Assigns B2 Rating to Class M-2 Debt
------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to two
certificates of residential mortgage backed securities issued by
Freddie Mac Structured Agency Credit Risk STACR Securitized
Participation Interest (SPI) Trust, Series 2017-SPI1 (STACR
2017-SPI1). This is the inaugural issue of STACR-SPI. The
transaction will be backed by 3,231 first-lien, conforming and
super conforming, fixed-rate mortgages with current principal of
$1,252,221,957. Unlike any post crisis prime jumbo or GSE sponsored
securitizations, there will not be any pool level performance
triggers in this transaction. Instead, the performance triggers are
set at a loan level.
The complete rating actions are:
Issuer: Freddie Mac Structured Agency Credit Risk (STACR)
Securitized Participation Interests Trust, Series 2017-SPI1
Cl. M-1, Definitive Rating Assigned Baa3 (sf)
Cl. M-2, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
Summary credit analysis
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to other STACR securitizations. In addition,
Moody's adjusted Moody's expected losses based on other qualitative
attributes, including a slightly weaker R&W framework and lack of
TRID review by Freddie Mac and the independent third-party
diligence provider. Moody's expected losses are 0.91% in a base
case scenario, and reach 8.80% at a stress level consistent with
Moody's Aaa (sf) scenario.
Collateral description
The transaction will be backed by 3,231 first-lien, conforming and
super conforming, fixed-rate mortgages with current principal of
$1,252,221,957. All of the loans in the pool satisfy Freddie Mac's
underwriting requirements, are current and have never been 30 or
more days delinquent. The weighted average FICO score for the pool
is 757. The weighted average original LTV for the pool is 77.4%,
which is comparable to the loans in the STACR-DNA program. However,
a large portion (32.1%) of the pool have an original LTV greater
than 80% but are covered by mortgage insurance at origination. None
of the loans are located in FEMA designated disaster zone in which
FEMA has authorized individual assistance to homeowners in such
county as a result of Hurricane Harvey, Hurricane Irma or Hurricane
Maria. This pool also has high concentration in California (48.4%)
of which 15.3% are located in counties currently affected by the
wildfires in California. While it is too early for Freddie Mac to
determine the damages to the properties, Freddie Mac's
Seller/Servicing Guide has stringent requirements for homeowner's
insurance policy. Generally, wildfire is treated like any covered
loss in the homeowners insurance policy and the insurance limits
must at least equal the higher of (1) the unpaid principal balance
of the mortgage or (2) 80% of the full replacement cost of the
insurable improvements. As a result, Moody's have not made any
adjustments to Moody's expected loss estimates.
Structural considerations
The mortgage loans will be housed in a participation interest trust
(PI trust), which will issue two types of certificates for every
loan in the trust: (1) pass-through certificate (PC) participation
interests representing 96% beneficial interest in the loan and (2)
credit participation interests representing 4% beneficial interest
in the loan.
Freddie Mac will deposit the credit participation interest into the
SPI trust, which will issue the Class X, Class M-1, Class M-2,
Class B and Class R certificates. Freddie Mac will also deposit the
PC participation interest into one or more PC trust.
Unlike any post crisis prime jumbo or GSE sponsored
securitizations, there will not be any pool level performance
triggers in this transaction. Instead, the performance triggers are
set at a loan level. The PC trust agreement permits or requires
Freddie Mac to repurchase a PC participation interest from the
related PC trust due to, among other reasons, delinquency or
imminent default of the borrower on a loan backing the PC
participation interest.
The SPI trust will be obligated to acquire any PC participation
interest repurchased by Freddie Mac from the PC trusts. Collections
from the each mortgage loan will be allocated proportionate to the
participation interest held by the PC trusts and SPI trust.
On the closing date, Class X balance will be zero and will be
increased by the PC participation interest repurchased from the PC
trust. Class X certificate will accrue interest and will be senior
to other certificates issued by the SPI trust. All certificates
issued by the SPI trust will be paid principal sequentially and
realized losses will be allocated reverse sequentially.
The coupon on the subordinate certificates is equal to the weighted
average of net mortgage rate on the collateral for such
distribution date (without considering interest modification or
extraordinary expenses). If the interest accrued on the Class B
certificate is insufficient to absorb the reduction in interest
amount caused by modification and extraordinary expenses, and to
the extent that the Class B certificate is outstanding, the
transaction allows for certain principal payments to be re-directed
to cover interest shortfall to the rated certificates, 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.
Freddie Mac as the master servicer will make advances on delinquent
principal and interest for every loan until it becomes 60 days
delinquent (Stop advance loan). The master servicer will make
advances necessary to preserve the PI trust's interest in the
mortgages. The SPI trust will receive its proportionate share of
advances made by the master servicer. An advance will be
reimbursable to the master servicer from (1) subsequent mortgagor
payments or liquidation proceeds (2) principal payments on other
mortgage loans or (3) the termination price.
In analyzing the transaction's structure, Moody's coded the
waterfall through Moody's Wall Street Analytics software,
Structured Finance Workstation. Typically, Moody's stress the cash
flow in three different loss timing scenarios, each combined with
four different prepayment curves, for a total of 12 different
stress scenarios as described in the Moody's Approach to Rating US
Prime RMBS methodology. However, in this transaction, Moody's
supplemented the analysis with additional scenarios where Moody's
stressed Moody's liquidation timelines to test the sensitivity of
the rated certificates to the default timing.
Third party review (TPR)
Clayton (an independent third-party diligence provider) randomly
selected a sample of 311 loans from an original pool of 3,560
loans. Of the 311 loan sample, Clayton reviewed 244 loans for data
accuracy, credit, property valuation, and 67 loans for data
accuracy, credit, property valuation, and compliance. Freddie Mac
reviewed the same loans during the same time frame.
Moody's increased Moody's Aaa (sf)-stressed expected loss slightly
because all loans are subject to TRID but Freddie Mac and Clayton
did not conduct a loan review for compliance with TRID for any of
the loans in the pool. Loans with data integrity exceptions were
minor and did not pose a material risk. All other categories of
findings were clear and did not have any issues.
Representation and Warranties (R&W)
Freddie Mac is not providing direct loan-level R&Ws for this
transaction. Instead the transaction benefits indirectly from the
R&Ws made by the individual loan sellers/servicers to Freddie Mac.
Freddie Mac commands strong R&Ws from its seller/servicers
pertaining to all facets of the loan, including but not limited to
compliance with laws, compliance with all underwriting guidelines,
enforceability, good property condition and appraisal procedures.
Unlike the previous STACR DNA and HQA transactions, the rated
certificates do not have a 12.5 year bullet maturity payment and
are not the direct obligation of Freddie Mac. As a result, the
certificate holders are exposed longer to any loans with defects.
The risk is largely mitigated by Freddie Mac's strong quality
control process and their alignment of interest with
certificate-holders. Nevertheless, Moody's increased Moody's
expected losses to account for this weakness.
Trustee Indemnification
Moody's believe there is a very low likelihood that the rated
certificates in STACR 2017-SPI1 will incur any loss from
extraordinary expenses or indemnification payments owing to
potential future lawsuits against key deal parties. First, the
loans are prime quality and were originated under a regulatory
environment that requires tighter controls for originations than
pre-crisis, which reduces the likelihood that the loans have
defects that could form the basis of a lawsuit. Second, Freddie
Mac, who will retain a 5% vertical slice of the subordinate
certificates that are being issued to investors and also guarantee
the senior portion of the loans (i.e. the PC participation
interest), has a strong alignment of interest with investors, and
is incentivized to actively manage the pool to optimize
performance. Freddie Mac has strong oversight over the originators
and servicers in the transaction. Third, historical performance of
loans aggregated by Freddie Mac has been very strong to date, with
minimal losses on previously issued FWLS and STACR transactions.
Finally, the optional termination rights exist when the subordinate
notes are
THL CREDIT 2017-4: Moody's Assigns (P)Ba3 Rating to Cl. E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by THL Credit Wind River 2017-4 CLO
Ltd.
Moody's rating action is:
US$3,000,000 Class X Senior Secured Floating Rate Notes due 2030
(the "Class X Notes"), Assigned (P)Aaa (sf)
US$317,500,000 Class A Senior Secured Floating Rate Notes due 2030
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$57,500,000 Class B Senior Secured Floating Rate Notes due 2030
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$31,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class C Notes"), Assigned (P)A2 (sf)
US$31,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$22,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2030 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class X Notes, 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, together, 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.
THL 2017-4 CLO is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans
and unsecured loans. Moody's expect the portfolio to be
approximately 75% ramped as of the closing date.
THL Credit Advisors LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, the Manager may reinvest unscheduled principal payments
and proceeds from sales of credit risk and credit improved 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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.60%
Weighted Average Spread (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 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
August 2017.
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 X Notes: 0
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2850 to 3705)
Rating Impact in Rating Notches
Class X Notes: 0
Class A Notes: -1
Class B Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
TICP CLO VIII: Moody's Assigns Ba3 Rating to Class D Notes
----------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by TICP CLO VIII, Ltd.
Moody's rating action is:
US$256,000,000 Class A-1 Senior Secured Floating Rate Notes due
2030 (the "Class A-1 Notes"), Assigned Aaa (sf)
US$40,000,000 Class A-2 Senior Secured Floating Rate Notes due 2030
(the "Class A-2 Notes"), Assigned Aa2 (sf)
US$26,000,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class B Notes"), Assigned A2 (sf)
US$24,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class C Notes"), Assigned Baa3 (sf)
US$22,000,000 Class D Junior Secured Deferrable Floating Rate Notes
due 2030 (the "Class D Notes"), Assigned 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."
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.
TICP VIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans, cash and eligible investments, and
up to 10.0% of the portfolio may consist, in the aggregate, of
second lien loans and unsecured loans. The portfolio is
approximately 67% ramped as of the closing date.
TICP CLO VIII Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five-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 issued one class of
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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2819
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
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 2819 to 3242)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-2 Notes: -1
Class B Notes: -2
Class C Notes: -1
Class D Notes: -1
Percentage Change in WARF -- increase of 30% (from 2819 to 3665)
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
TOWD POINT 2017-5: Moody's Assigns B1(sf) Rating to Class B2 Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to eight
classes of notes issued by Towd Point Mortgage Trust 2017-5.
The notes are backed by one pool of seasoned residential mortgage
loans. None of the loans in the collateral pool have been
fpreviously modified for loss mitigation purposes. As of the
statistical calculation date of August 31, 2017, the collateral
pool is comprised of 3,992 first and second lien, adjustable rate
and fixed rate mortgage loans, and has a non-zero updated weighted
average FICO score of 736 and a weighted average current LTV of
65.3%. Select Portfolio Servicing, Inc. (SPS) is the servicer for
the loans in the pool. FirstKey Mortgage, LLC (FirstKey) will be
the asset manager for the transaction.
The complete rating actions are:
Issuer: Towd Point Mortgage Trust 2017-5
Cl. A1, Definitive Rating Assigned Aaa (sf)
Cl. A2, Definitive Rating Assigned Aa2 (sf)
Cl. A3, Definitive Rating Assigned Aa1 (sf)
Cl. A4, Definitive Rating Assigned A1 (sf)
Cl. B1, Definitive Rating Assigned Ba2 (sf)
Cl. B2, Definitive Rating Assigned B1 (sf)
Cl. M1, Definitive Rating Assigned A2 (sf)
Cl. M2, Definitive Rating Assigned Baa2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss on TPMT 2017-5's collateral pool is 2.3% in
Moody's base case scenario. Moody's loss estimates take into
account the historical performance of the loans that have similar
collateral characteristics as the loans in the pool, and also
incorporate an expectation of a continued strong credit environment
for RMBS, supported by improving home prices over the next two to
three years.
Our credit opinion is the result of Moody's analysis of a wide
array of quantitative and qualitative factors, a review of the
third-party review of the pool, servicing framework and the
representations and warranties framework.
The methodologies used in these ratings were "Moody's Approach to
Rating Securitisations Backed by Non-Performing and Re-Performing
Loans" published in August 2016 and "US RMBS Surveillance
Methodology" published in January 2017.
Collateral Description
Towd Point Mortgage Trust 2017-5 (TPMT 2017-5) is a securitization
of seasoned residential mortgage loans. This transaction represents
the fifth TPMT transaction in 2017 and the 16th issue from the Towd
Point Mortgage Trust ("TPMT") shelf since its inception in January
2015. The loans underlying this transaction exhibit collateral
characteristics similar to that of seasoned Alt-A mortgages.
TPMT 2017-5 represents the first TPMT securitization that consists
entirely of mortgage loans that have never been modified for loss
mitigation purposes. As a consequence, none of the mortgage loans
have deferred amounts. As of the statistical calculation date,
August 31, 2017, all of the mortgage loans have been contractually
current under both the Office of Thrift Supervision (OTS) method
and Mortgage Bankers Association (MBA) method. As of the
statistical calculation date, approximately 90.2% of the loans have
been current under both the OTS method and MBA method for at least
24 months. On average, the mortgage loans have been seasoned for 12
years and show some delinquencies in the payment history that have
self-cured. Moody's analysis for CDR is based on the payment
history of loans with similar loan characteristics as the loans in
TPMT 2017-5 and that show delinquencies that have self-cured and
that have never been modified for loss mitigation purposes.
As of the statistical calculation date, the majority of the
mortgage loans (99.1%) have an adjustable rate. Of these mortgage
loans, approximately 79.9% have mortgage rates that adjust in
accordance with an index based on one-year, six-month or one-month
LIBOR. The interest rate on the Class A1, Class A2, Class M1, Class
M2, Class B1, Class B2, Class B3, Class B4 and Class B5 (assuming
no exchanges for exchangeable notes have occurred) adjusts monthly
based on one-month LIBOR. To the extent that the index on the
related adjustable mortgage loans declines more rapidly than
one-month LIBOR, a net WAC shortfall may be created. Excess
cashflow, if any, will be available for the payment of any net WAC
shortfalls to the notes as well as any unpaid reimbursement amount.
In the event that LIBOR is no longer available as an index, the
mortgage notes and the transaction documents provide the servicer
and indenture trustee (with direction from the depositor) for
determining an index for the mortgage loans indexed to LIBOR and
the notes, respectively.
As of the statistical calculation date, approximately 14.2% and
2.0% of the properties backing the mortgage loans are located in
Florida and Texas, respectively. To the extent that a borrower in
the FEMA zone areas affected by Hurricane Irma or Hurricane Harvey
is granted any payment relief (including forbearance) by SPS as a
result of property damage from either hurricane within 90 days of
the closing date, FirstKey will repurchase the related mortgage
loan at the repurchase price on the next succeeding payment date.
In addition, if within 90 days of the closing date, any such
borrower under the related mortgage loan becomes one (1) month
delinquent under the OTS method and SPS is unable to contact such
borrower, SPS will order an external inspection of the related
mortgaged property within approximately 45 days of the related
monthly payment due date that is delinquent on such mortgage loan.
If SPS determines that such inspection shows material property
damage to such mortgaged property resulting from Hurricane Harvey
or Hurricane Irma, SPS will grant the related borrower payment
relief (e.g., forbearance) and FirstKey will repurchase the related
mortgage loan at the repurchase price on the next succeeding
payment date.
Between the statistical calculation date and the cut-off date of
September 30, 2017, 200 loans were removed from the pool, with 69
such mortgage loans removed because of payment in full, 27 of such
mortgage loans removed because of hurricane damage or payment
relief (e.g., forbearance) entered into due to hurricane damage to
the related mortgage property and 104 of such mortgage loans
removed due to a failure to meet the sponsor's eligibility
requirements. As a result, as of the cut-off date, the number of
mortgage loans is 3,792, the WA non-zero FICO is 736, the WA LTV is
64.3%, the percentage of loans current for at least the prior 24
months is 90.2% and the percentage of mortgage loans delinquent
more than 29 days (based on the MBA method) increased from 0.00% to
1.2%. The percentage of adjustable rate mortgage loans is 99.2%.
The total unpaid principal balance is $735,866,012.
Moody's estimated losses on the pool by applying Moody's
assumptions on expected future delinquencies, default rates, loss
severities and prepayments as observed on similar seasoned
collateral. Moody's projected future annual delinquencies for eight
years by applying an initial annual default rate assumption
adjusted for future years through delinquency burnout factors. The
delinquency burnout factors reflect Moody's future expectations of
the economy and the U.S. housing market. Based on the loan
characteristics of the pool and the demonstrated pay histories,
Moody's applied an initial expected annual delinquency rate of 4.0%
for the pool for year one. Moody's then calculated future
delinquencies using default burnout and voluntary conditional
prepayment rate (CPR) assumptions. Moody's aggregated the
delinquencies and converted them to losses by applying pool
specific lifetime default frequency and loss severity assumptions.
In applying Moody's loss severity assumptions, Moody's accounted
for the lack of principal and interest advancing in this
transaction.
Transaction Structure
TPMT 2017-5 has a sequential priority of payments structure, in
which a given class of notes can only receive principal payments
when all the classes of notes above it have been paid off.
Similarly, losses will be applied in the reverse order of priority.
The interest rate for the notes other than Class A3 and Class A4
will equal the least of (a) one-month LIBOR plus the applicable
margin per annum (subject to a floor of zero) (b) the applicable
adjusted net WAC rate and (c) the applicable available funds cap
for each accrual period. The coupon for the exchangeable notes,
Class A3 and Class A4 is equal to the weighted average of the note
rates of the related exchange notes for such accrual period. There
are no performance triggers in this transaction. Additionally, the
servicer will not advance any principal or interest on any of the
loans.
As discussed in the collateral section above, monthly excess
cashflow, if any, will be available for the payment of any net WAC
shortfalls and reimbursement of any unreimbursed writedwon amounts
to the notes.
As sponsor, FirstKey (or through a majority-owned affiliate) will
retain an eligible vertical interest representing at least 5%
economic interest in the credit risk of the mortgage loans.
Moody's believe there is a very low likelihood that the rated notes
in TPMT 2017-5 will incur any loss from extraordinary expenses or
indemnification payments owing to potential future lawsuits against
key deal parties. First, majority of the loans are seasoned with
demonstrated payment history, reducing the likelihood of a lawsuit
on the basis that the loans have underwriting defects. Second,
historical performance of loans aggregated by the sponsor to date
has been within expectation, with minimal losses on previously
issued TPMT transactions. Third, the transaction has reasonably
well defined processes in place to identify loans with defects on
an ongoing basis. In this transaction, an independent breach
reviewer must review loans for breaches of representations and
warranties when a realized loss is incurred on a loan, which
reduces the likelihood that parties will be sued for inaction.
Moody's coded TPMT 2017-5's cashflows using SFW®, a cashflow tool
developed by Moody's Analytics. To assess the final rating on the
notes, Moody's ran 96 different loss and prepayment scenarios
through SFW. The scenarios encompass six loss levels, four loss
timing curves, and four prepayment curves. The structure allows for
timely payment of interest and ultimate payment of principal with
respect to the notes by the legal final maturity.
Third Party Review
In contrast to other TPMT transactions, where mortgage loans were
acquired from multiple sources, approximately 87% of the mortgage
loans were acquired by FirstKey Mortgage, LLC (FirstKey) from a
single seller and serviced by a single servicer. As such, the due
diligence review for this transaction for compliance, data capture
and payment history was based on a sample rather than on a 100%
review as in prior TPMT transactions. However, a 100% third party
due diligence was conducted for tax delinquencies and lien
position.
Four independent third party review (TPR) firms -- JCIII &
Associates, Inc. (subsequently acquired by American Mortgage
Consultants), Clayton Services, LLC, AMC Diligence, LLC, and
Westcor Land Title Insurance Company -- conducted due diligence for
the transaction. Due diligence was performed on 20.7% of the loans
in TPMT 2017-5's collateral pool for compliance and data capture,
23.5% for pay string history, and 100% for title and tax review.
The TPR firms reviewed compliance, data integrity and key documents
to verify that loans were originated in accordance with federal,
state and local anti-predatory laws. The TPR firms conducted audits
of designated data fields to ensure the accuracy of the collateral
tape.
Based on Moody's analysis of the third-party review reports,
Moody's determined that a portion of the loans had legal or
compliance exceptions that could cause future losses to the trust.
Moody's incorporated an additional hit to the loss severities for
these loans to account for this risk. FirstKey Mortgage, LLC,
retained Westcor and AMC to review the title and tax reports for
the loans in the pool, and will oversee Westcor and monitor the
loan sellers in the completion of the assignment of mortgage
chains.
Representations & Warranties
Moodys' ratings reflect TPMT 2017-5's weak representations and
warranties (R&Ws) framework. The representation provider, FirstKey
Mortgage, LLC is unrated by Moody's. Moreover, FirstKey's
obligations will be in effect for only thirteen months (until the
payment date in November 2018). The R&Ws themselves are weak
because they contain many knowledge qualifiers and the regulatory
compliance R&W does not cover monetary damages that arise from TILA
violations whose right of rescission has expired. The transaction
provides a breach reserve account to cover for any breaches of R&Ws
after the sunset. The initial breach reserve account target amount
is $3,316,913.
Transaction Parties
The transaction benefits from a strong servicing arrangement.
Select Portfolio Servicing, Inc. (SPS) will service 100% of TPMT
2017-5's collateral pool. Moody's assess SPS higher compared to its
peers. Furthermore, FirstKey, the asset manager, will oversee the
servicer, which strengthens the overall servicing framework in the
transaction. Wells Fargo Bank N.A. and U.S. Bank National
Association are the Custodians of the transaction. The Delaware
Trustee for TPMT 2017-5 is Wilmington Trust, National Association.
TPMT 2017-5's Indenture Trustee is U.S. Bank National Association.
Factors that would lead to an upgrade or downgrade of the ratings:
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 obligors defaulting 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.
TRUPS FINANCIALS 2017-2: Moody's Rates Class B Notes Ba1
--------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to three
classes of notes issued by TruPS Financials Note Securitization
2017-2 Ltd.
Moody's rating action is:
US$205,000,000 Class A-1 Senior Secured Floating Rate Notes due
2039 (the "Class A-1 Notes"), Definitive Rating Assigned Aa3 (sf)
US$35,000,000 Class A-2 Senior Secured Fixed-Floating Rate Notes
due 2039 (the "Class A-2 Notes"), Definitive Rating Assigned Aa3
(sf)
US$45,900,000 Class B Mezzanine Deferrable Floating Rate Notes due
2039 (the "Class B Notes"), Definitive Rating Assigned Ba1 (sf)
The Class A-1 Notes, the Class A-2 Notes and the Class B Notes are
referred to herein 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.
TFINS 2017-2 is a static cash flow CDO. The issued notes will be
collateralized primarily by a portfolio of (1) trust preferred
securities ("TruPS") and subordinated debt issued by US community
banks and their holding companies and (2) TruPS, senior notes and
surplus notes issued by insurance companies and their holding
companies. The portfolio is 100% ramped as of the closing date.
EJF CDO Manager LLC (the "Manager"), an affiliate of EJF Capital
LLC, will direct the selection, acquisition and disposition of the
assets on behalf of the Issuer. The Manager will direct the
disposition of any defaulted securities or credit risk securities.
The transaction prohibits any asset purchases or substitutions at
any time.
In addition to the Rated Notes, the Issuer issued one class of
preferred shares.
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. The transaction also includes an
interest diversion feature beginning in October 2025 whereby 60% of
the interest at a junior step in the priority of interest payments
is used to pay the principal on the Class A Notes until the Class A
Notes' principal has been paid in full.
The portfolio of this CDO consists of (1) TruPS and subordinated
debt issued by 29 US community banks and (2) TruPS, senior notes
and surplus notes issued by 23 insurance companies, the majority of
which Moody's does not rate. Moody's assesses the default
probability of bank obligors that do not have public ratings
through credit scores derived using RiskCalc™, an econometric
model developed by Moody's Analytics. Moody's evaluation of the
credit risk of the bank obligors in the pool relies on FDIC Q1-2017
financial data. Moody's assesses the default probability of
insurance company obligors that do not have public ratings through
credit assessments provided by its insurance team based on the
credit analysis of the underlying insurance companies' annual
statutory financial reports. Moody's assumes a fixed recovery rate
of 10% for both the bank and insurance obligations.
Moody's ratings of the Rated Notes also took into account the
concentrated nature of the portfolio. There are 22 issuers that
each make up between 2.80% and 3.0% of the portfolio par. Moody's
ran a stress scenario in which Moody's assumed a two-notch
downgrade for up to 30% of the portfolio par. This stress scenario
was an important factor in the assigned ratings.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $353,010,000
Weighted Average Rating Factor (WARF): 897
Weighted Average Spread (WAS): 3.12%
Weighted Average Coupon (WAC): 7.68%
Weighted Average Recovery Rate (WARR): 10.0%
Weighted Average Life (WAL): 10.7 years
In addition to the quantitative factors that Moody's explicitly
models, qualitative factors were part of the rating committee
consideration. Moody's considers the structural protections in the
transaction, the risk of an event of default, the legal environment
and specific documentation features. All information available to
rating committees, including macroeconomic forecasts, inputs from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transaction, influenced the final rating decision.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in 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, as described below:
1) Macroeconomic uncertainty: The transaction's performance could
be negatively affected by uncertainty about credit conditions in
the general economy. Moody's has a stable outlook on the US banking
sector and the US P&C insurance sector, and a negative outlook on
the US life insurance sector.
2) Portfolio credit risk: Credit performance of the assets
collateralizing the transaction that is better than Moody's current
expectations could have a positive impact on the transaction's
performance. Conversely, asset credit performance weaker than
Moody's current expectations could have adverse consequences on the
transaction's performance.
3) Deleveraging: One source of uncertainty in this transaction is
whether deleveraging from unscheduled principal proceeds due to
redemptions will occur and at what pace. Note repayments that are
faster than Moody's current expectations could have an impact on
the notes' ratings.
4) Exposure to non-publicly rated assets: The portfolio consists
primarily of unrated assets whose default probability Moody's
assesses through credit scores derived using RiskCalc™ or credit
assessments. Because these are not public ratings, they are subject
to additional estimation uncertainty.
Loss and Cash Flow Analysis:
Moody's obtained a loss distribution for this CDO's portfolio by
simulating defaults using Moody's CDROM(TM), which used Moody's
assumptions for asset correlations and fixed recoveries in a Monte
Carlo simulation framework. Moody's then used the resulting loss
distribution, together with structural features of the CDO, as an
input in its CDOEdge(TM) cash flow model. Moody's CDROM(TM) is
available on www.moodys.com under Products and Solutions --
Analytical Models, upon receipt of a signed free license
agreement.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of different default
probabilities on the Rated Notes relative to the base case modeling
results, which may be different from the ratings assigned to the
Rated Notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF level) on the Rated Notes
(shown in terms of the number of notch difference versus the base
case modeling results, whereby a negative difference corresponds to
higher expected losses), assuming that all other factors are held
equal:
Assuming a two-notch upgrade to assets with below-investment grade
rating estimates (WARF of 594)
Class A-1 Notes: +1
Class A-2 Notes: +1
Class B Notes: +2
Assuming a two-notch downgrade to assets with below-investment
grade rating estimates (WARF of 1303)
Class A-1 Notes: -1
Class A-2 Notes: -1
Class B Notes: -2
US CAPITAL V: Moody's Hikes Class A-3 Senior Notes Rating to Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by U.S. Capital Funding V, Ltd.:
US$193,000,000 Class A-1 Floating Rate Senior Notes Due 2040
(current balance of $81,118,900), Upgraded to A3 (sf); previously
on April 28, 2015 Upgraded to Baa2 (sf)
US$30,000,000 Class A-2 Floating Rate Senior Notes Due 2040,
Upgraded to Baa2 (sf); previously on April 28, 2015 Upgraded to Ba1
(sf)
US$42,000,000 Class A-3 Floating Rate Senior Notes Due 2040,
Upgraded to Ba2 (sf); previously on April 28, 2015 Upgraded to B1
(sf)
U.S. Capital Funding V, Ltd., issued in October 2006, is a
collateralized debt obligation backed by a portfolio of bank trust
preferred securities (TruPS).
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-1 notes, an increase in the transaction's
over-collateralization (OC) ratios, and the reduction in the
notional amount of the deal's out-of-money interest rate swap since
October 2016.
The Class A-1 notes have paid down by approximately 5.8% or $5.0
million since October 2016, using principal proceeds from the
redemption of the underlying assets and the diversion of excess
interest proceeds. Based on Moody's calculations, the OC ratios for
the Class A-1, Class A-2, and Class A-3 notes have improved to
204.82%, 149.52%, and 108.51%, respectively, from October 2016
levels of 195.15%, 144.86%, and 106.46%, respectively. The Class
A-1 notes will continue to benefit from principal proceeds from the
redemptions of any assets in the collateral pool. Additionally, due
to the failure of the Class A OC test (reported at 107.99% on the
October 2017 trustee report compared to a trigger level of 114.22%)
excess interest will continue to be diverted to pay down the Class
A-1 notes as long as the test is failing.
Furthermore, the notes will continue to benefit from credit
enhancement available in the form of excess spread, because the
notional amount of the deal's out-of-money interest rate swap has
stepped down to $3.0 million from $20.0 million as of October
2016.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs," 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, as described below:
1) Macroeconomic uncertainty: TruPS CDOs performance could be
negatively affected by uncertainty about credit conditions in the
general economy. Moody's has a stable outlook on the US banking
sector.
2) Portfolio credit risk: Credit performance of the assets
collateralizing the transaction that is better than Moody's current
expectations could have a positive impact on the transaction's
performance. Conversely, asset credit performance weaker than
Moody's current expectations could have adverse consequences on the
transaction's performance.
3) Deleveraging: One source of uncertainty in this transaction is
whether deleveraging from unscheduled principal proceeds and excess
interest proceeds will continue and at what pace. Note repayments
that are faster than Moody's current expectations could have a
positive impact on the notes' ratings, beginning with the notes
with the highest payment priority.
4) Exposure to non-publicly rated assets: The deal contains a large
number of securities whose default probability Moody's assesses
through credit scores derived using RiskCalc(TM) or credit
estimates. Because these are not public ratings, they are subject
to additional uncertainties.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment grade
ratings or rating estimates (WARF of 389)
Class A-1: +2
Class A-2: +2
Class A-3: +1
Class B-1: 0
Class B-2: 0
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 901)
Class A-1: -1
Class A-2: -1
Class A-3: -2
Class B-1: 0
Class B-2: 0
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDROM(TM) to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo
scenarios defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge(TM) cash
flow model. CDROM(TM) is available on www.moodys.com under Products
and Solutions -- Analytical models, upon receipt of a signed free
license agreement.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool as having a performing par) of $171.2 million,
defaulted par of $65.5 million, a weighted average default
probability of 6.85% (implying a WARF of 606), and a weighted
average recovery rate upon default of 10.0%.
In addition to the quantitative factors Moody's explicitly models,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of an event of default, recent deal performance under
current market conditions, the legal environment and specific
documentation features. All information available to rating
committees, including macroeconomic forecasts, inputs from other
Moody's analytical groups, market factors, and judgments regarding
the nature and severity of credit stress on the transactions, can
influence the final rating decision.
The portfolio of this CDO contains TruPS issued by small to medium
sized U.S. community banks that Moody's does not rate publicly. To
evaluate the credit quality of bank TruPS that do not have public
ratings, Moody's uses RiskCalc(TM), an econometric model developed
by Moody's Analytics, to derive credit scores. Moody's evaluation
of the credit risk of most of the bank obligors in the pool relies
on the latest FDIC financial data.
VENTURE CLO XXX: Moody's Assigns (P)Ba3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by Venture XXX CLO, Limited (the
"Issuer" or "Venture XXX").
Moody's rating action is:
US$434,000,000 Class A-1 Senior Secured Floating Rate Notes due
2031 (the "Class A-1 Notes"), Assigned (P)Aaa (sf)
US$35,000,000 Class A-2 Senior Secured Floating Rate Notes due 2031
(the "Class A-2 Notes"), Assigned (P)Aaa (sf)
US$62,000,000 Class B Senior Secured Floating Rate Notes due 2031
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$43,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Assigned (P)A2 (sf)
US$38,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$31,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class A-1 Notes, Class A-2 Notes, the Class B Notes, the Class
C Notes, the Class D Notes, and the Class E Notes referred to
herein 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 XXX 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 assets that are second-lien loans and
unsecured loans. Moody's expect the portfolio to be approximately
90% ramped as of the closing date.
MJX Venture Management II LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five-year
reinvestment period. Thereafter, the Manager may reinvest
unscheduled principal payments and proceeds from sales of credit
risk and credit improved assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer will issue one class of
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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $700,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2750
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 45.0%
Weighted Average Life (WAL): 9.1 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
August 2017.
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-2 Notes: -1
Class B Notes: -2
Class C Notes: -2
Class D 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-2 Notes: -3
Class B Notes: -4
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
WACHOVIA BANK 20015-C16: S&P Lowers Class J Certs Rating to B-(sf)
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from Wachovia Bank
Commercial Mortgage Trust's series 2005-C16, a U.S. commercial
mortgage-backed securities (CMBS) transaction. In addition, S&P
affirmed its rating on class H from the same transaction.
The downgrades on classes J, K, L, and M reflect susceptibility of
these classes to interest shortfalls from the sole specially
serviced asset, the AON Office Building real estate owned (REO)
asset ($41.1 million, 92.6%), as well as credit support erosion
(anticipated principal losses) on classes K, L, and M, which we
anticipate will occur upon the eventual resolution of the AON
Office Building asset.
S&P said, "For the affirmation on class H, our expectation of
credit enhancement was generally in line with the affirmed rating
level.
"While available credit enhancement levels may suggest positive
rating movements on classes H and J, our analysis also considered
the bonds' susceptibility to reduced liquidity support from the
specially serviced asset."
TRANSACTION SUMMARY
As of the Oct. 17, 2017, trustee remittance report, the collateral
pool balance was $44.3 million, which is 2.1% of the pool balance
at issuance. The pool currently includes five loans and one REO
asset, down from 183 loans at issuance. The AON Office Building
asset is with the special servicer, two loans ($0.8 million, 1.9%)
are defeased, and none of the loans appear on the master servicer's
watchlist.
S&P said, "Excluding the specially serviced asset and two defeased
loans, we calculated a 1.29x S&P Global Ratings weighted average
debt service coverage (DSC) and 35.9% S&P Global Ratings weighted
average loan-to-value (LTV) ratio using an 8.01% S&P Global Ratings
weighted average capitalization rate for the remaining loans.
"To date, the transaction has experienced $31.2 million in
principal losses, or 1.5% of the original pool trust balance. We
expect 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 we expect upon the eventual resolution of the
specially serviced asset."
CREDIT CONSIDERATIONS
As of the Oct. 17, 2017, trustee remittance report, the AON Office
Building REO asset, the largest asset in the pool, is with the
special servicer, CWCapital Asset Management LLC (CWCapital). The
asset has a reported total exposure of $42.2 million. The asset is
a suburban office property totaling 412,411 sq. ft. in Glenview,
Ill. The loan was transferred to the special servicer on Nov. 22,
2016, due to imminent monetary default, and the property became REO
on Aug. 31, 2017. CWCapital stated that property will be marketed
in their November auction, with disposition anticipated by year's
end. Although an appraisal reduction amount of $32.7 million is
reported on the asset, no appraisal subordinate entitlement
reduction amount is currently affecting the trust. S&P expects a
significant loss (approximately 78.5%) upon this asset's eventual
resolution.
RATINGS LIST
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2005-C16
Rating
Class Identifier To From
H 929766ZS5 BB+ (sf) BB+ (sf)
J 929766ZU0 B- (sf) BB (sf)
K 929766ZW6 CCC- (sf) BB- (sf)
L 929766ZY2 CCC- (sf) B+ (sf)
M 929766A29 CCC- (sf) B (sf)
WAVE LLC 2017-1: S&P Assigns Prelim BB(sf) Rating on Class C Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to WAVE 2017-1
LLC's $480.07 million fixed-rate series A, B, and C notes.
The note issuance is an asset-backed security (ABS) transaction
backed by 19 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 preliminary ratings are based on information as of Nov. 2,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The likelihood of timely interest on the series A notes
excluding the step-up amount) on each payment date, the timely
interest on the series B notes (excluding the step-up amount) when
they are the senior-most notes outstanding on each payment date,
and ultimate interest and principal payments made to the series A,
B, and C notes on the legal final maturity in our rating stress
scenario.
-- The 69.39% loan-to-value (LTV) ratio on the series A notes, the
79.59% LTV ratio on the series B notes, and the 84.70% LTV ratio on
the series C notes. The LTV ratios are based on the S&P Global
Ratings-adjusted lower of the mean and median of the three
half-life base values and the three half-life current market
values.
-- The aircraft collateral's quality and lease rental and residual
value generating capability. The portfolio comprises 19 planes
currently leased to 17 airlines worldwide, with a weighted average
age of approximately 7.2 years and remaining average lease term of
approximately 4.1 years.
-- Many of the initial lessees' low credit quality, with 63% of
(by aircraft value) domiciled in emerging markets. S&P's view of
the lessee credit quality, country risk, lessee concentration, and
country concentration is reflected in our lessee default rate
assumptions.
-- A revolving credit facility that equals nine months of interest
on the series A and B notes.
-- Morten Beyer & Agnew Inc.'s maintenance analysis, which it will
provide at closing and annually thereafter.
-- That the senior maintenance reserve account and junior reserve
account must keep a balance of the higher of $1 million, or if
less, the sum of the outstanding principal balance of the series A
and series B notes, and the sum of forward-looking maintenance
expenses. The maintenance reserve account will be funded at $3.46
million at closing. The excess maintenance amounts over the
required amount will be transferred to the payment waterfall.
-- The senior indemnification, which is capped at $10 million and
is modeled to occur in the first 12 months.
-- The junior indemnification, which is uncapped and is
subordinated to the rated series' principal payment.
-- The servicer, Wings, which is a new aircraft leasing company.
Wings' in-house aircraft assets and aviation finance team is
experienced in managing new and mid-life aircraft assets.
PRELIMINARY RATINGS ASSIGNED
WAVE 2017-1 LLC
Class Rating Amount
(mil. $)
A A (sf) 393.31
B BBB (sf) 57.84
C BB (sf) 28.92
WELLS FARGO 2015-P2: Fitch Affirms 'Bsf' Rating on Class F Certs
----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Wells Fargo Commercial
Mortgage Trust, commercial mortgage pass-through certificates,
series 2015-P2 (WFCM 2015-P2).
KEY RATING DRIVERS
The affirmations reflect the pool exhibiting stable performance
since issuance, with minimal paydown or changes to credit
enhancement. As of the October 2017 distribution date, the pool's
aggregate principal balance paid down by 0.7% to $995.6 million
from $1 billion at issuance. There are no delinquent or specially
served loans.
Fitch Loans of Concern (FLOC): Fitch has designated one loan within
the top 15, The Heritage Industrial Portfolio (4.1% of pool), as a
FLOC. The largest tenant, Staples, which occupies 24% of the net
rentable area, has an upcoming lease expiration at the end of March
2018. Fitch has an outstanding inquiry to the servicer for a lease
update. The loan is structured with on-going leasing cost reserves
of $33,333 per month for the first 15 months of the loan term and
$83,333 on the first payment date 12 months prior to the Staples
lease expiration. The current balance of the reserve account was
$1.12 million as of October 2017.
Pool Concentration: The top 10 loans comprise 50.5% of the pool,
which is slightly above the average for similar 2015-vintage
transactions of 49.3%.
Property Type Diversity: Retail comprises 25.7% of the pool
balance, followed by multifamily at 19.2% and industrial at 11%.
Hurricane and Wildfire Exposure: Fitch has identified seven loans
(10.9% of the pool), which are located in areas of Texas, Florida
and California impacted by Hurricane Harvey, Hurricane Irma and the
recent wildfires, respectively. According to the master servicer's
most recent significant insurance event (SIE) reporting on the two
Texas properties (2.5% of pool) with exposure to Hurricane Harvey,
there was no damage to the Green Caye property (1.9%) located in
Dickinson, TX and the servicer is still awaiting a response from
the borrower on the LA Fitness property (0.6%) located in Pearland,
TX. The most recent SIE reporting on the four Florida properties
(7%) with exposure to Hurricane Irma noted minor damage to the
Adler Office & Industrial property (5.7%) located in Doral, FL and
the URS Corporate Center property (0.5%) located in Boca Raton, FL
and no damage to the 3325 Hollywood Boulevard property (0.5%)
located in Hollywood, FL and the University Center South property
(0.3%) located in Jacksonville, FL. The pool's exposure to the
recent wildfires in California consists of the 2200 Harbor
Boulevard loan (1.4%), which is secured by a retail property in
Costa Mesa, CA. Fitch awaits an update from the servicer.
Below-Average Amortization: At issuance, the pool was scheduled to
pay down by 9.1% of the initial pool balance prior to maturity,
which is below the 2015 and 2014 averages of 11.7% and 12%,
respectively. There are 19 loans (28.6% of pool balance) that are
full-term interest-only and 27 loans (48.3%) that are partial
interest-only. The remaining 25 loans (23%) are balloon loans.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable due to overall
stable pool performance. Fitch does not foresee positive or
negative ratings migration until a material economic or asset level
event changes the transaction's overall portfolio level metrics.
Fitch has affirmed the following classes as indicated:
-- $22 million class A-1 at 'AAAsf'; Outlook Stable;
-- $70 million class A-2A at 'AAAsf'; Outlook Stable;
-- $82.5 million class A-2B at 'AAAsf'; Outlook Stable;
-- $209 million class A-3 at 'AAAsf'; Outlook Stable;
-- $253.8 million class A-4 at 'AAAsf'; Outlook Stable;
-- $57.6 million class A-SB at 'AAAsf'; Outlook Stable;
-- $47.6 million class A-S at 'AAAsf'; Outlook Stable;
-- $742.5 million* class X-A at 'AAAsf'; Outlook Stable;
-- $61.4 million class B at 'AA-sf'; Outlook Stable;
-- $61.4 million* class X-B at 'AA-sf'; Outlook Stable;
-- $50.1 million class C at 'A-sf'; Outlook Stable;
-- $56.4 million class D at 'BBB-sf'; Outlook Stable;
-- $56.4 million* class X-D at 'BBB-sf'; Outlook Stable;
-- $22.6 million class E at 'BBsf'; Outlook Stable;
-- $11.3 million class F at 'Bsf'; Outlook Stable.
*Notional amount and interest only.
Fitch does not rate the class G certificates.
[*] Fitch: US Bank TruPS CDOs Default & Deferral Rate Drops in 3Q17
-------------------------------------------------------------------
The number of combined defaults and deferrals for U.S. bank TruPS
CDOs declined to 12.8% of the original collateral balance of $37.7
billion at the end of 3Q17 from 13.1% at the end of 2Q17, according
to the latest index results published on Oct. 26 by Fitch Ratings.
Cures: In 3Q17, two banks representing $10 million across two CDOs
cured.
Deferrals: Allied First Bancorp, Inc. with $4 million of notional
in two CDOs re-deferred in 3Q17 for a third time, following its
second cure in 2Q17. In addition, Spirit Bankcorp, Inc.
representing $17 million of notional in three CDOs re-deferred in
3Q17 for a second time, following its cure in 2Q15.
Defaults: There were no new defaults in 3Q17. Fitch retroactively
marked $48 million of TruPS, held in five CDOs, issued by Total
Bancshares Corp. as defaulted in 2Q17. Total Bankshares Corp. was
acquired by Banco Popular Espanol (Banco Popular) in July 2007.
After deterioration of Banco Popular's liquidity position in, the
European Central Bank arranged for Banco Popular's takeover by
Banco Santander in June 2017. Investors of Banco Popular's shares
and subordinated bonds, including U.S. denominated TruPS, are
currently seeking to improve their recovery prospects through legal
proceedings.
Redemptions and Sales: Six performing issuers representing $179.7
million across 15 CDOs redeemed their TruPS. Chicago-based
PrivateBancorp Inc. (PB) redeemed $88 million of TruPS across seven
CDOs following the acquisition of the bank by Canadian Imperial
Bank of Commerce in June 2017. $10 million of PB TruPS in one CDO
are yet to be confirmed as redeemed due to timing of reporting.
Two issuers selectively redeemed TruPS with a higher spread. Sun
Bancorp Inc. called $25 million of its TruPS with a spread of 2.8%,
leaving $50 million of TruPS with a weighted average spread of 1.4%
outstanding. Northrim BanCorp, Inc. redeemed $8 million of TruPS
with a spread of 3.2% and kept $10 million of TruPS with a spread
of 1.4% outstanding.
The remaining $58.7 million of redemptions came from three issuers
across five CDOs.
Two deferring issuers, representing $15 million in notional, were
sold realizing recoveries of 54% and 34%. Six defaulted issuers
with a notional of $86.5 million across eight CDOs were sold
realizing recoveries between 0% and 17%. In addition, one defaulted
issuer representing $3 million in notional in one CDOs was
exchanged for common stock.
At the end of 3Q17, 1,182 bank issuers with total notional of $22
billion remain outstanding across 70 Fitch-rated bank and mixed
bank & insurance TruPS CDOs, including 215 defaulted bank issuers
with approximately $4.4 billion of collateral, and 56 deferring
issuers with $416.2 million of collateral. This compares to 76
issuers deferring on $615 million of notional at the end of 3Q16.
[*] Fitch: US Bank TruPS CDOs Default & Deferral Rate Drops in 3Q17
-------------------------------------------------------------------
The number of combined defaults and deferrals for U.S. bank TruPS
CDOs declined to 12.8% of the original collateral balance of $37.7
billion at the end of 3Q17 from 13.1% at the end of 2Q17, according
to the latest index results published on Oct. 26 by Fitch Ratings.
Cures: In 3Q17, two banks representing $10 million across two CDOs
cured.
Deferrals: Allied First Bancorp, Inc. with $4 million of notional
in two CDOs re-deferred in 3Q17 for a third time, following its
second cure in 2Q17. In addition, Spirit Bankcorp, Inc.
representing $17 million of notional in three CDOs re-deferred in
3Q17 for a second time, following its cure in 2Q15.
Defaults: There were no new defaults in 3Q17. Fitch retroactively
marked $48 million of TruPS, held in five CDOs, issued by Total
Bancshares Corp. as defaulted in 2Q17. Total Bankshares Corp. was
acquired by Banco Popular Espanol (Banco Popular) in July 2007.
After deterioration of Banco Popular's liquidity position in, the
European Central Bank arranged for Banco Popular's takeover by
Banco Santander in June 2017. Investors of Banco Popular's shares
and subordinated bonds, including U.S. denominated TruPS, are
currently seeking to improve their recovery prospects through legal
proceedings.
Redemptions and Sales: Six performing issuers representing $179.7
million across 15 CDOs redeemed their TruPS. Chicago-based
PrivateBancorp Inc. (PB) redeemed $88 million of TruPS across seven
CDOs following the acquisition of the bank by Canadian Imperial
Bank of Commerce in June 2017. $10 million of PB TruPS in one CDO
are yet to be confirmed as redeemed due to timing of reporting.
Two issuers selectively redeemed TruPS with a higher spread. Sun
Bancorp Inc. called $25 million of its TruPS with a spread of 2.8%,
leaving $50 million of TruPS with a weighted average spread of 1.4%
outstanding. Northrim BanCorp, Inc. redeemed $8 million of TruPS
with a spread of 3.2% and kept $10 million of TruPS with a spread
of 1.4% outstanding.
The remaining $58.7 million of redemptions came from three issuers
across five CDOs.
Two deferring issuers, representing $15 million in notional, were
sold realizing recoveries of 54% and 34%. Six defaulted issuers
with a notional of $86.5 million across eight CDOs were sold
realizing recoveries between 0% and 17%. In addition, one defaulted
issuer representing $3 million in notional in one CDOs was
exchanged for common stock.
At the end of 3Q17, 1,182 bank issuers with total notional of $22
billion remain outstanding across 70 Fitch-rated bank and mixed
bank & insurance TruPS CDOs, including 215 defaulted bank issuers
with approximately $4.4 billion of collateral, and 56 deferring
issuers with $416.2 million of collateral. This compares to 76
issuers deferring on $615 million of notional at the end of 3Q16.
[*] Moody's Takes Action on $226.3MM of RMBS Issued 2004-2007
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of thirty-seven
tranches and downgraded the ratings of twenty-two tranches from ten
transactions, backed by Prime Jumbo RMBS loans, issued by multiple
issuers.
Complete rating actions are:
Issuer: Banc of America Funding Corporation, Mortgage Pass-Through
Certificates, Series 2005-7
Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jul 31, 2013
Downgraded to Caa1 (sf)
Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Jul 31, 2013
Downgraded to Caa1 (sf)
Cl. 1-A-4, Downgraded to Caa2 (sf); previously on Jul 31, 2013
Downgraded to Caa1 (sf)
Cl. 1-A-5, Downgraded to Caa2 (sf); previously on Jul 31, 2013
Downgraded to Caa1 (sf)
Cl. 2-A-4, Downgraded to C (sf); previously on Aug 6, 2012
Downgraded to Ca (sf)
Cl. 2-A-7, Downgraded to C (sf); previously on Nov 24, 2015
Downgraded to Ca (sf)
Cl. 3-A-1, Upgraded to Baa3 (sf); previously on Nov 24, 2015
Upgraded to Ba2 (sf)
Cl. 3-A-8, Upgraded to Ba1 (sf); previously on Nov 24, 2015
Upgraded to Ba3 (sf)
Cl. 3-A-9, Upgraded to Ba1 (sf); previously on Nov 24, 2015
Upgraded to Ba3 (sf)
Cl. 3-A-10, Upgraded to Ba1 (sf); previously on Nov 24, 2015
Upgraded to Ba3 (sf)
Cl. 3-A-11, Upgraded to Ba1 (sf); previously on Nov 24, 2015
Upgraded to Ba2 (sf)
Cl. 3-A-15, Upgraded to Baa3 (sf); previously on Nov 24, 2015
Upgraded to Ba2 (sf)
Cl. 3-A-16, Upgraded to Ba3 (sf); previously on Sep 12, 2016
Upgraded to B3 (sf)
Cl. 3-A-17, Upgraded to Ba3 (sf); previously on Sep 12, 2016
Upgraded to B3 (sf)
Cl. 4-A-3, Upgraded to Baa3 (sf); previously on Jan 23, 2017
Upgraded to Ba2 (sf)
Cl. 4-A-4, Upgraded to Ba3 (sf); previously on Jan 23, 2017
Upgraded to B2 (sf)
Cl. 4-A-7, Upgraded to Ba1 (sf); previously on Jan 23, 2017
Upgraded to Ba3 (sf)
Cl. 4-A-8, Upgraded to Ba1 (sf); previously on Jan 23, 2017
Upgraded to Ba3 (sf)
Issuer: Banc of America Mortgage 2005-3 Trust
Cl. 1-A-15, Upgraded to Ba2 (sf); previously on Jul 31, 2013
Downgraded to B2 (sf)
Cl. 1-A-21, Upgraded to Ba1 (sf); previously on Jul 31, 2013
Downgraded to B1 (sf)
Cl. 1-A-22, Upgraded to B3 (sf); previously on Jul 31, 2013
Downgraded to Caa3 (sf)
Cl. 1-A-23, Upgraded to Ba3 (sf); previously on Jul 31, 2013
Downgraded to B2 (sf)
Cl. 1-A-24, Upgraded to Ba1 (sf); previously on Jul 31, 2013
Downgraded to B1 (sf)
Cl. 1-A-28, Upgraded to Ba2 (sf); previously on Jul 31, 2013
Downgraded to B2 (sf)
Cl. 1-A-30, Upgraded to B3 (sf); previously on Jul 31, 2013
Downgraded to Ca (sf)
Issuer: Chase Mortgage Finance Trust, Series 2004-S2
Cl. A-P, Downgraded to B3 (sf); previously on Oct 27, 2015
Downgraded to B1 (sf)
Cl. B-1, Downgraded to C (sf); previously on Nov 8, 2012 Downgraded
to Caa3 (sf)
Cl. IIA-3, Downgraded to Ba2 (sf); previously on Jun 26, 2014
Downgraded to Ba1 (sf)
Cl. IIA-4, Downgraded to Ba2 (sf); previously on Jun 26, 2014
Downgraded to Ba1 (sf)
Cl. IIA-6, Downgraded to Ba2 (sf); previously on Jun 26, 2014
Downgraded to Ba1 (sf)
Cl. IA-4, Downgraded to Ba2 (sf); previously on Jun 26, 2014
Downgraded to Baa3 (sf)
Cl. IA-5, Downgraded to Ba2 (sf); previously on Jun 26, 2014
Downgraded to Baa3 (sf)
Issuer: Chase Mortgage Finance Trust, Series 2005-S3
Cl. A-1, Downgraded to Caa2 (sf); previously on Jul 3, 2014
Affirmed Caa1 (sf)
Cl. A-14, Downgraded to Caa2 (sf); previously on Jul 3, 2014
Affirmed Caa1 (sf)
Cl. A-P, Downgraded to Ca (sf); previously on Jul 3, 2014
Reinstated to Caa1 (sf)
Issuer: Citicorp Mortgage Securities, Inc. 2005-2
Cl. IA-3, Upgraded to B3 (sf); previously on Sep 21, 2012
Downgraded to Caa1 (sf)
Underlying Rating: Upgraded to B3 (sf); previously on Sep 21, 2012
Downgraded to Caa1 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. IA-5, Upgraded to B3 (sf); previously on Sep 21, 2012
Downgraded to Caa1 (sf)
Issuer: Citicorp Mortgage Securities, Inc. 2005-7
Cl. IIA-1, Upgraded to Baa1 (sf); previously on Sep 21, 2012
Confirmed at Baa3 (sf)
Cl. IIIA-1, Upgraded to Baa1 (sf); previously on Jun 4, 2010
Confirmed at Ba2 (sf)
Issuer: GSR Mortgage Loan Trust 2007-3F
Cl. 1A-1, Downgraded to Caa3 (sf); previously on May 18, 2015
Confirmed at Caa2 (sf)
Cl. 1A-4, Downgraded to Caa2 (sf); previously on May 18, 2015
Confirmed at Caa1 (sf)
Cl. 2A-1, Downgraded to Caa2 (sf); previously on May 18, 2015
Confirmed at Caa1 (sf)
Cl. 2A-7, Downgraded to Caa1 (sf); previously on May 18, 2015
Confirmed at B3 (sf)
Cl. 3A-1, Downgraded to Ca (sf); previously on May 18, 2015
Confirmed at Caa3 (sf)
Cl. 3A-7, Downgraded to Caa3 (sf); previously on May 18, 2015
Confirmed at Caa2 (sf)
Issuer: J.P. Morgan Mortgage Trust 2005-A2
Cl. B-1, Upgraded to Caa3 (sf); previously on Apr 6, 2010
Downgraded to C (sf)
Cl. 1-A-2, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Cl. 2-A-2, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Cl. 3-A-4, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Cl. 4-A-1, Upgraded to Baa2 (sf); previously on Aug 5, 2015
Upgraded to Ba1 (sf)
Cl. 5-A-3, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Cl. 6-A-2, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Cl. 7CB2, Upgraded to Ba1 (sf); previously on Aug 5, 2015 Upgraded
to Ba2 (sf)
Issuer: Provident Funding Mortgage Loan Trust 2005-2
Cl. 1-A-1A, Upgraded to Ba1 (sf); previously on Apr 12, 2010
Downgraded to Ba3 (sf)
Cl. 1-A-1B, Upgraded to B2 (sf); previously on Apr 12, 2010
Downgraded to Caa1 (sf)
Cl. 2-A-1A, Upgraded to Ba1 (sf); previously on Aug 5, 2015
Confirmed at Ba3 (sf)
Cl. 2-A-1B, Upgraded to B2 (sf); previously on Apr 12, 2010
Downgraded to Caa2 (sf)
Cl. 3-A, Upgraded to Ba2 (sf); previously on Apr 12, 2010
Downgraded to B1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2005-3 Trust
Cl. A-15, Upgraded to B1 (sf); previously on Jan 14, 2016
Downgraded to B3 (sf)
RATINGS RATIONALE
The rating downgrades are due to the erosion of credit enhancement
available to the bonds. The rating upgrades are primarily due to an
increase in the credit enhancement available to the bonds. The
rating 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 January 2017.
Additionally, the methodology used in rating Banc of America
Funding Corporation, Mortgage Pass-Through Certificates, Series
2005-7 Cl. 1-A-4 and Cl. 1-A-5 was "Moody's Approach to Rating
Structured Finance Interest-Only (IO) Securities" published in June
2017.
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 4.2% in September 2017 from 4.9% in
September 2016. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 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 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
[*] Moody's Takes Action on $295MM of RMBS Issued 2000-2005
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 20 tranches,
and downgraded the ratings of 3 tranche, from 13 transactions
issued by various issuers.
Complete rating actions are:
Issuer: ABSC Home Equity Loan Trust, Series 2003-HE3
Cl. M2, Upgraded to B1 (sf); previously on Nov 18, 2016 Upgraded to
Caa1 (sf)
Cl. M3, Upgraded to Caa1 (sf); previously on Apr 12, 2012
Downgraded to C (sf)
Issuer: Accredited Mortgage Loan Trust 2004-4, Asset-Backed Notes,
Series 2004-4
Cl. A-2D, Downgraded to Aa3 (sf); previously on May 11, 2012
Downgraded to Aa1 (sf)
Issuer: Ameriquest Mortgage Securities Inc., Series 2004-R7
Cl. M-3, Upgraded to Ba1 (sf); previously on Jan 13, 2016 Upgraded
to Ba3 (sf)
Cl. M-4, Upgraded to Ba1 (sf); previously on Nov 18, 2016 Upgraded
to Ba3 (sf)
Cl. M-5, Upgraded to Ba1 (sf); previously on Nov 18, 2016 Upgraded
to Ba3 (sf)
Cl. M-6, Upgraded to B1 (sf); previously on Nov 18, 2016 Upgraded
to B3 (sf)
Cl. M-7, Upgraded to B3 (sf); previously on Nov 18, 2016 Upgraded
to Caa2 (sf)
Issuer: Asset Backed Securities Corporation Home Equity Loan Trust
2003-HE6
Cl. A3-B, Downgraded to Aa1 (sf); previously on Apr 12, 2012
Confirmed at Aaa (sf)
Issuer: Asset Backed Securities Corporation, Long Beach Home Equity
Loan Trust 2000-LB1, Home ...s 2000-LB1
Cl. AF5, Upgraded to Ba2 (sf); previously on Apr 25, 2014
Downgraded to B2 (sf)
Cl. AF6, Upgraded to Baa3 (sf); previously on Apr 25, 2014
Downgraded to Ba3 (sf)
Cl. M2V, Upgraded to Caa2 (sf); previously on Mar 18, 2013 Affirmed
Caa3 (sf)
Issuer: First Franklin Mortgage Loan Trust 2004-FF7
Cl. M1, Upgraded to A1 (sf); previously on Nov 18, 2016 Upgraded to
Baa1 (sf)
Issuer: GSAMP Trust 2004-HE2
Cl. M-3, Upgraded to Ba3 (sf); previously on Nov 18, 2016 Upgraded
to B1 (sf)
Cl. M-4, Upgraded to B3 (sf); previously on Nov 18, 2016 Upgraded
to Caa1 (sf)
Issuer: GSAMP Trust 2004-NC1
Cl. M-1, Upgraded to Ba1 (sf); previously on Oct 9, 2013 Upgraded
to Ba3 (sf)
Issuer: Meritage Mortgage Loan Trust 2005-2
Cl. M-3, Upgraded to B2 (sf); previously on Nov 22, 2016 Upgraded
to Caa1 (sf)
Issuer: Merrill Lynch Mortgage Investors Trust, Series 2002-HE1
Cl. A-1, Upgraded to A3 (sf); previously on Dec 17, 2015 Upgraded
to Baa2 (sf)
Cl. M-2, Upgraded to Ba1 (sf); previously on Nov 7, 2016 Upgraded
to B2 (sf)
Issuer: Merrill Lynch Mortgage Investors, Inc. Series 2002-AFC1
Cl. MV-2, Downgraded to B1 (sf); previously on Apr 9, 2012
Downgraded to Ba3 (sf)
Issuer: Structured Asset Investment Loan Trust 2004-11
Cl. M1, Upgraded to Baa1 (sf); previously on Dec 30, 2015 Upgraded
to Ba1 (sf)
Issuer: Structured Asset Securities Corp Trust 2005-NC1
Cl. M2, Upgraded to Aaa (sf); previously on Nov 22, 2016 Upgraded
to Aa1 (sf)
Cl. M3, Upgraded to Aa2 (sf); previously on Nov 22, 2016 Upgraded
to A1 (sf)
RATINGS RATIONALE
The upgrades are primarily due to the total credit enhancement
available to the bonds. The downgrade for Accredited Mortgage Loan
Trust 2004-4, Cl. A-2D, and Asset Backed Securities Corporation
Home Equity Loan Trust 2003-HE6, Cl. A3-B, is related to depleting
credit enhancement for the senior bonds. The downgrade for Merrill
Lynch Mortgage Investors, Inc. Series 2002-AFC1, Cl. MV-2, is due
to interest shortfall outstanding on the bond. 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 January 2017.
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 4.2% in September 2017 from 4.9% in
September 2016. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 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 2017. 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.
[*] S&P Cuts Ratings to D(sf) on 35 Classes From 32 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on 35 classes of mortgage
pass-through certificates from 32 U.S. residential mortgage-backed
securities (RMBS) transactions issued between 2002 and 2007 to 'D
(sf)'.
The transactions in this review are backed by a mix of fixed- and
adjustable-rate mixed collateral mortgage loans, which are secured
primarily by first liens on one- to four-family residential
properties. The downgrades reflect S&P's assessment of the
principal write-downs' impact on the affected classes during recent
remittance periods.
All of the classes were rated either 'CCC (sf)' or 'CC (sf)' before
the rating actions.
Principal-Only Ratings
This review included two ratings on principal-only (PO) classes,
which are both categorized as PO strip classes.
Class PO from CHL Mortgage Pass-Through Trust 2005-13 and Class C-P
from Washington Mutual Mortgage Pass-Through Certificates WMALT
Series 2005-6 Trust are PO strip classes that receive principal
primarily from discount loans within the related transaction. When
a discount loan takes a loss, the PO strip class is allocated a
loan-specific percentage of that loss.
However, because these PO classes are senior classes in the
waterfall, they are reimbursed from cash flows that would otherwise
be paid to the most junior classes. S&P said, "Further, we do not
expect any future reimbursements from the transaction's cash flow
because the balances of the subordinate classes have been reduced
to zero. Therefore, the PO strip classes within this review have
incurred a loss on their principal obligation without the
likelihood of future reimbursement. We are therefore lowering the
ratings of these classes to 'D (sf)'."
The 35 defaulted classes consist of the following:
-- 14 from prime jumbo transactions (40%);
-- 10 from Alternative-A transactions (27.78%);
-- Six from subprime transactions (16.67%);
-- Three from negative amortization transactions (8.33%);
-- One from an outside the guidelines transaction (2.78%); and
-- One from a Risk transfer transaction (2.78%).
All of the transactions in this review receive credit enhancement
from a combination of subordination, excess spread, and
overcollateralization (where applicable).
S&P said, "We will continue to monitor our ratings on securities
that experience principal write-downs, and we will take rating
actions as we consider appropriate according to our criteria."
A list of Affected Ratings can be viewed at:
http://bit.ly/2gXztSP
[*] S&P Discontinues Ratings on 28 Classes From Seven CDO Deals
---------------------------------------------------------------
S&P Global Ratings discontinued its ratings on one class from one
cash flow (CF) collateral debt obligation (CDO) backed by
commercial mortgage-backed securities (CMBS), 21 classes from four
CF collateralized loan obligation (CLO) transactions, five classes
from one CF emerging market CDO transaction, and one class from one
transaction guaranteed by National Credit Union Administration
(NCUA), in its capacity as a U.S. government agency.
The discontinuances follow the complete paydown of the notes as
reflected in the most recent trustee-issued note payment reports
for each transaction:
-- Gallatin CLO IV 2012-1 Ltd. (CF CLO): optional redemption in
October 2017.
-- Gallatin CLO V 2013-1 Ltd. (CF CLO): optional redemption in
October 2017.
-- ICE Global Credit CLO Ltd. (CF CDO): optional redemption in
October 2017.
-- Kingsland IV Ltd. (CF CLO): optional redemption in October
2017.
-- Multi Security Asset Trust L.P. (CF emerging market CDO):
senior-most tranches paid down; other rated tranches still
outstanding.
-- NCUA Guaranteed Notes Trust 2011-R4 (guaranteed by NCUA): rated
tranche paid down.
-- Ocean Trails CLO V (CF CLO): senior-most tranche paid down;
other rated tranches still outstanding.
RATINGS DISCONTINUED
Gallatin CLO IV 2012-1 Ltd.
Rating
Class To From
A NR AAA (sf)
B NR AAA (sf)
C NR AA+ (sf)
D NR A+ (sf)
E NR BB+ (sf)
F NR B (sf)
Gallatin CLO V 2013-1 Ltd.
Rating
Class To From
A NR AAA (sf)
B-1 NR AA (sf)
B-2 NR AA (sf)
C NR A (sf)
D-1 NR BBB (sf)
D-2 NR BBB (sf)
E NR BB (sf)
F NR B (sf)
ICE Global Credit CLO Ltd.
Rating
Class To From
A NR AAA (sf)
B NR AA (sf)
C NR A (sf)
D NR BB+ (sf)
E NR B+ (sf)
Kingsland IV Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-1R NR AAA (sf)
B NR AA+ (sf)/Watch Pos
C NR AA- (sf)/Watch Pos
D NR BBB+ (sf)/Watch Pos
E NR BB (sf)
Multi Security Asset Trust L.P.
Rating
Class To From
F NR BB+ (sf)
NCUA Guaranteed Notes Trust 2011-R4
Rating
Class To From
Senior notes NR AA+ (sf)
Ocean Trails CLO V
Rating
Class To From
X(i) NR AAA (sf)
(i)An "X note" within a CLO is generally a note with a principal
balance intended to be repaid early in the CLO's life using
interest proceeds from the CLO's waterfall.
NR--Not rated.
*********
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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
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