/raid1/www/Hosts/bankrupt/TCR_Public/180603.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, June 3, 2018, Vol. 22, No. 153
Headlines
245 PARK AVE 2017-245P: Fitch Affirms BB Rating on Class E Certs
ACC TRUST 2018-1: Moody's Gives (P)Ba1 Rating to Class B Notes
ARES XXXIIR: Moody's Gives Ba3 Rating on Class D Notes
ASCENTIUM EQUIPMENT 2018-1: Moody's Rates Class E Notes 'Ba3'
BARINGS CLO 2018-III: S&P Assigns Prelim B-(sf) Rating on F Notes
BX TRUST 2018-BILT: Fitch Gives B-sf Final Rating on Class F Certs
CIFC FUNDING 2014-II-R: Moody's Gives Ba3 Rating on Class B-2 Notes
CIFC FUNDING 2015-V: Moody's Rates $20.8MM Class D-R Notes 'Ba3'
CSFB COMMERCIAL 2005-C4: Moody's Affirms Caa3 Rating on F Certs
DBWY 2018-AMXP: Moody's Gives (P)Ba1 Rating to Class HRR Debt
DENALI CAPITAL XII: Moody's Rates $15.7MM Class E-R Notes 'Ba2'
ICG US CLO 2014-3: Moody's Assigns Ba3 Rating on Class D-RR Notes
INDYMAC HOME 2002-B: Moody's Lowers Class M-1 Debt Rating to B2
JP MORGAN 2007-LDP10: Moody's Cuts Rating on Cl. A-M Certs to Ba3
MADISON PARK XXVIII: S&P Assigns Prelim B-(sf) Rating on F Notes
MCA FUND I: DBRS Confirms BB(high) Rating on Class C Notes
MERRILL LYNCH 2006-1: Moody's Affirms C Rating on 3 Tranches
MORGAN STANLEY 1998-CF1: Moody's Cuts Class G Certs to Caa2
MORGAN STANLEY 2001-TOP3: Moody's Affirms C Rating on Cl. X-1 Certs
MSBAM 2013-C12: Fitch Affirms B-sf Rating on Class G Certs
NEW RESIDENTIAL 2018-2: Moody's Gives (P)Ba2 Rating on 4 Tranches
OCTAGON INVESTMENT 26: Moody's Gives (P)B3 Rating on Cl. F-R Notes
OCTAGON INVESTMENT 26: S&P Gives Prelim BB- Rating on Cl. E-R Notes
OCTAGON INVESTMENT XXIII: Moody's Rates Class E-R Notes 'Ba3'
ROCKFORD TOWER 2018-1: Moody's Gives Ba3 Rating on Class E Notes
SCF EQUIPMENT 2018-1: Moody's Assigns B1 Rating on Class F Notes
SEQUOIA MORTGAGE 2018-CH2: Moody's Rates Class B-5 Debt 'Ba3'
TICP CLO I-2: Moody's Assigns Ba3 Rating on Class D Notes
TOWD POINT 2015-5: Fitch Assigns 'B-sf' Rating on Class B-3 Notes
TOWD POINT 2018-2: DBRS Assigns Prov. BB Rating on Class B1 Notes
[*] Moody's Hikes $278MM of Scratch & Dent RMBS Issued 2004-2007
[*] Moody's Takes Action on 32 Tranches From 12 US RMBS Deals
[*] Moody's Ups Ratings on 7 Tranches of Scratch & Dent RMBS Loans
[*] S&P Takes Various Actions on 109 Classes From 26 US RMBS Deals
[] S&P Takes Various Actions on 72 Classes From 26 US RMBS Deals
*********
245 PARK AVE 2017-245P: Fitch Affirms BB Rating on Class E Certs
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Fitch Ratings affirms seven classes of 245 Park Avenue Trust
2017-245P (245 Park Avenue Trust 2017-245P) Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates.
KEY RATING DRIVERS
Stable Cash Flow: The affirmations reflect the stable performance
of the collateral, which consists of the fee simple interest in a
1.7 million square floor office tower located at 245 Park Avenue in
Midtown Manhattan. The property continues to maintain a high
occupancy of 91.1%. Per the servicer, the YE 2017 net cash flow
(NCF) debt service coverage ratio (DSCR) was 2.36x for this
interest only loan.
High-Quality Office Collateral in Prime Location: The loan is
secured by a 44-story class A office building located on an entire
block bound by Park Avenue, Lexington Avenue and 47th and 48th
Streets in the Grand Central office submarket of Midtown Manhattan.
Historical Occupancy and High-Quality Tenancy: The property was
91.1% leased as of the Dec. 31, 2017 rent roll (compared to 91.2%
at issuance) and has recorded average occupancy of close to 95%
since 2007. The property serves as a headquarters for Societe
Generale, Major League Baseball, Angelo Gordon, and RaboBank.
Creditworthy tenants account for approximately 68% of the
properties base rental revenue.
The subject property is performing in line with market levels. Per
Reis (1Q 2018), the Grand Central submarket had a class A office
vacancy rate of 8% and average asking rents of $88.71 psf. The
average in place rent at the subject was $82.66 psf, as of the Dec.
31, 2017 rent roll.
Rollover Risk and Departure of MLB: In total, 29.3% of property NRA
expires in 2022 with an additional 21.8% of NRA expiring in 2026,
one year prior to loan maturity. Further, Major League Baseball
(MLB) is the second largest tenant at the property, leasing 12.7%
of NRA. MLB's lease expires in October 2022, but the league
announced its intention to relocate to another property in 2019.
MLB currently subleases an estimated 73,000 sf to three tenants.
Subleased Space: J.P. Morgan currently leases 769,972 sf at the
property, of which 562,347 sf of space is subleased to Societe
Generale through October 2022. In 2012, Societe Generale executed a
direct lease with the prior owner with a start date of November
2022 with an initial term of 10 years, with two five-year extension
options. J.P. Morgan further subleases an estimated 190,000 sf of
space to various other tenants. No other subtenants have executed
direct leases. Fitch requested an update on the status of the other
J.P. Morgan Chase and MLB sub-tenants at the property, but has not
received any further details to date.
Fitch Leverage: The $500 million mortgage loan has a Fitch DSCR and
loan-to-value (LTV) of 1.07x and 81.5%, respectively, and debt of
$696 psf based on the current NRA.
The total debt package includes mezzanine financing in the amount
of $568 million that is not included in the trust.
Institutional Sponsorship: The loan funded the acquisition of the
subject property for $2.21 billion by HNA Group (HNA). HNA, based
in China, is a global Fortune 500 company with interests across an
array of sectors.
RATING SENSITIVITIES
The Rating Outlook for all classes remains Stable. No rating
actions are anticipated unless there are material changes in
property occupancy or cash flow. The property performance is
consistent with issuance.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
--$260,000,000 class A at 'AAAsf'; Outlook Stable;
--$260,000,000 interest only class X-A at 'AAAsf'; Outlook
Stable;
--$39,000,000 class B at 'AA-sf'; Outlook Stable;
--$31,000,000 class C at 'A-sf'; Outlook Stable;
--$50,000,000 class D at 'BBB-sf'; Outlook Stable;
--$90,000,000 class E at 'BBsf'; Outlook Stable;
--$30,000,000 class HHR* at 'BBsf'; Outlook Stable.
*HRR represents the horizontal credit risk retention interest,
which comprised at least 5% of the fair market value of the
non-residual classes in the aggregate (at issuance).
Fitch does not rate the class X-B certificates.
ACC TRUST 2018-1: Moody's Gives (P)Ba1 Rating to Class B Notes
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by ACC Trust 2018-1. This is the first auto
lease transaction for RAC King, LLC (not rated). The notes will be
backed by a pool of closed-end retail automobile leases originated
by RAC King, LLC. RAC Servicer, LLC is the servicer and
administrator for this transaction.
The complete rating actions are as follows:
Issuer: ACC Trust 2018-1
Class A Notes, Assigned (P)Baa2 (sf)
Class B Notes, Assigned (P)Ba1 (sf)
Class C Notes, Assigned (P)B2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of RAC Servicer, LLC as
the servicer and administrator.
Moody's median cumulative net credit loss expectation for ACC
2018-1 is 30%. Moody's based its cumulative net credit loss
expectation on an analysis of the quality of the underlying
collateral; managed portfolio performance; the historical credit
loss of similar collateral; the ability of RAC Servicer, LLC to
perform the servicing functions; and current expectations for the
macroeconomic environment during the life of the transaction.
Moody's also analyzed the residual risk of the pool based on the
exposure to residual value risk; the historical turn-in rate; and
the historical residual value performance.
At closing, the Class A notes, the Class B notes and the Class C
notes are expected to benefit from 44.85%, 33.10%, 23.25% of hard
credit enhancement, respectively. Hard credit enhancement for the
notes consists of a combination of overcollateralization, a
non-declining reserve account and subordination, except for the
Class C notes, which do not benefit from subordination. The notes
may also benefit from excess spread.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the subordinate notes if levels of credit
enhancement are higher than necessary to protect investors against
current expectations of portfolio losses. 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 vehicles
securing an obligor's promise of payment. Portfolio losses also
depend greatly on the US job market and the market for used
vehicles. Other reasons for better-than-expected performance
include changes to servicing practices that enhance collections or
refinancing opportunities that result in prepayments.
Down
Moody's could downgrade the notes if levels of credit enhancement
are insufficient to protect investors against current expectations
of portfolio losses. 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 vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the US
job market and the market for used vehicles. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
ARES XXXIIR: Moody's Gives Ba3 Rating on Class D Notes
------------------------------------------------------
Moody's Investors Service has assigned ratings to nine classes of
notes issued by Ares XXXIIR CLO Ltd.
Moody's rating action is as follows:
US$4,000,000 Class X Senior Floating Rate Notes due 2030 (the
"Class X Notes"), Definitive Rating Assigned Aaa (sf)
US$297,000,000 Class A-1A Senior Floating Rate Notes due 2030 (the
"Class A-1A Notes"), Definitive Rating Assigned Aaa (sf)
US$29,700,000 Class A-1B Senior Floating Rate Notes due 2030 (the
"Class A-1B Notes"), Definitive Rating Assigned Aaa (sf)
US$39,500,000 Class A-2A Senior Floating Rate Notes due 2030 (the
"Class A-2A Notes"), Definitive Rating Assigned Aa2 (sf)
U.S.$10,000,000 Class A-2B Senior Fixed Rate Notes due 2030 (the
"Class A-2B Notes"), Definitive Rating Assigned Aa2 (sf)
US$25,200,000 Class B Mezzanine Deferrable Floating Rate Notes due
2030 (the "Class B Notes"), Definitive Rating Assigned A2 (sf)
US$32,000,000 Class C Mezzanine Deferrable Floating Rate Notes due
2030 (the "Class C Notes"), Definitive Rating Assigned Baa3 (sf)
US$22,000,000 Class D Mezzanine Deferrable Floating Rate Notes due
2030 (the "Class D Notes"), Definitive Rating Assigned Ba3 (sf)
US$9,900,000 Class E Mezzanine Deferrable Floating Rate Notes due
2030 (the "Class E Notes"), Definitive Rating Assigned B3 (sf)
The Class X Notes, the Class A-1A Notes, the Class A-1B Notes, the
Class A-2A Notes, the Class A-2B 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.
Ares XXXIIR is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans, and eligible investments, and up
to 10.0% of the portfolio may consist of collateral obligations
that are not senior secured loans. The portfolio is approximately
90% ramped as of the closing date.
Ares CLO Management LLC will direct the selection, acquisition and
disposition of the assets on behalf of the Issuer and may engage in
trading activity, including discretionary trading, during the
transaction's five year reinvestment period. Thereafter, the
Manager may reinvest 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.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $495,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 3000
Weighted Average Spread (WAS): 3.25%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 48.5%
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.
ASCENTIUM EQUIPMENT 2018-1: Moody's Rates Class E Notes 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Ascentium Equipment Receivables 2018-1 Trust (ACER
2018-1), sponsored by Ascentium Capital LLC (unrated). The
transaction is a securitization of contracts backed by small ticket
equipment used for commercial purposes in physician offices, gas
stations, hotels and restaurants, among others.
The complete rating actions are as follows
Issuer: Ascentium Equipment Receivables 2018-1 Trust
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class A-3 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa2 (sf)
Class C Notes, Definitive Rating Assigned A2 (sf)
Class D Notes, Definitive Rating Assigned Baa3 (sf)
Class E Notes, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying equipment
contracts and its expected performance, the strength of the capital
structure, the experience and expertise of Ascentium Capital LLC as
the servicer, and the back-up servicing arrangement with U.S. Bank
National Association (Aa2(cr) review for downgrade/P-1(cr)
counterparty risk assessment).
Moody's cumulative net loss expectation for the ACER 2018-1
transaction is 2.75%, and the loss at a Aaa stress is 23.00%.
Moody's based its cumulative net loss expectation for the ACER
2018-1 transaction on an analysis of the credit quality of the
underlying collateral; the historical performance of similar
collateral, including securitization performance and managed
portfolio performance; the ability of Ascentium Capital LLC to
perform the servicing functions; and current expectations for the
macroeconomic environment during the life of the transaction.
At closing the Class A, Class B, Class C, Class D, and Class E
notes benefit from 22.65%, 16.00%, 11.75%, 7.70% and 5.65% of hard
credit enhancement respectively. Hard credit enhancement for the
notes consists of a combination of overcollateralization of 4.40%,
a 1.25% fully funded, non-declining reserve account and
subordination, except for the Class E notes which do not benefit
from subordination. The notes may also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans"
published in December 2015.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
higher ratings. In sequential pay structures, such as the one in
this transaction, credit enhancement grows as a percentage of the
collateral balance as collections pay down senior notes.
Prepayments and interest collections directed toward note principal
payments will accelerate this build of enhancement. Moody's
expectation of pool losses could decline as a result of a lower
number of obligor defaults or appreciation in the value of the
equipment securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US economy, the market for used
equipment, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
equipment securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US economy, the market for used
equipment, and poor servicing. Other reasons for
worse-than-expected performance include error on the part of
transaction parties, inadequate transaction governance, and fraud.
BARINGS CLO 2018-III: S&P Assigns Prelim B-(sf) Rating on F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Barings CLO
Ltd. 2018-III's $624.50 million fixed and floating notes.
The note issuance is a collateralized loan obligation (CLO)
transaction backed by primarily broadly syndicated
speculative-grade senior secured term loans that are governed by
collateral quality tests.
The preliminary ratings are based on information as of May 25,
2018. 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
Barings CLO Ltd. 2018-III
Class Rating Amount
(mil. $)
X AAA (sf) 5.00
A-1 AAA (sf) 420.00
A-2 NR 35.00
B-1 AA (sf) 56.50
B-2 AA (sf) 18.75
C (deferrable) A (sf) 42.00
D (deferrable) BBB- (sf) 43.75
E (deferrable) BB- (sf) 26.25
F (deferrable) B- (sf) 12.25
Subordinated notes NR 99.40
NR--Not rated.
BX TRUST 2018-BILT: Fitch Gives B-sf Final Rating on Class F Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks on BX Trust 2018-BILT Commercial Mortgage Pass-Through
Certificates, Series 2018-BILT:
--$110,000,000 class A 'AAAsf'; Outlook Stable;
--$22,000,000 class B 'AA-sf'; Outlook Stable;
--$16,000,000 class C 'A-sf'; Outlook Stable;
--$25,000,000 class D 'BBB-sf'; Outlook Stable;
--$37,000,000 class E 'BB-sf'; Outlook Stable;
--$43,000,000 class F 'B-sf'; Outlook Stable;
--$173,000,000a class X-CP 'BBB-sf'; Outlook Stable;
--$173,000,000a class X-EXT 'BBB-sf'; Outlook Stable.
The following classes are not rated by Fitch:
--$28,000,000b class HRR.
a) Notional amount and interest-only.
b) Horizontal credit risk retention interest.
The BX Trust 2018-BILT commercial mortgage pass-through
certificates represent the beneficial interest in a trust that
holds a single, two-year, floating-rate interest-only mortgage
loan, subject to five, one-year extension options in the amount of
$281.0 million secured by the fee simple and leasehold interest in
the Arizona Biltmore Resort (Arizona Biltmore), a 606-key, luxury,
full-service hotel located in Phoenix, AZ.
Loan proceeds in combination with $39.0 million of subordinate
mezzanine financing and approximately $109.4 million of sponsor
equity were used to acquire the property for an allocated purchase
price of approximately $429.4 million, including closing costs. The
certificates will follow a sequential-pay structure.
KEY RATING DRIVERS
Asset Quality and Amenities: Fitch assigned the Arizona Biltmore a
property quality grade of 'A-'. The historic hotel features 606
guestrooms, including 23 specialty suites and 119 'Club Level'
rooms in the Ocatilla building, six food and beverage (F&B)
outlets, 200,000 square feet (sf) of indoor and outdoor meeting
space, eight pools, seven tennis courts, seven retail shops and a
22,000-sf full-service health spa.
Capital Improvements: The property has benefited from approximately
$38.4 million ($63,438 per key) in capital expenditures since 2013
including comprehensive guestroom renovations in 2014 ($11.7
million; $19,348 per key). Other recent improvements included a
$2.4 million and $3.0 million renovation of the F&B outlets and
meeting spaces, respectively, from 2014 through 2016.
High Fitch Leverage: The Fitch stressed debt service coverage ratio
(DSCR) for the entire trust is 0.92x, with a Fitch stressed
loan-to-value (LTV) of 111.6%.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 5.2% below
the TTM March 2018 NCF. Included in Fitch's presale report are
numerous Rating Sensitivities that describe the potential impact
given further NCF declines below Fitch's NCF. Fitch evaluated the
sensitivity of the ratings for class A and found that a 30% decline
would result in a downgrade to 'BBBsf'.
CIFC FUNDING 2014-II-R: Moody's Gives Ba3 Rating on Class B-2 Notes
-------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by CIFC Funding 2014-II-R, Ltd.
Moody's rating action is as follows:
US$7,500,000 Class X Senior Secured Floating Rate Notes due 2030
(the "Class X Notes"), Assigned Aaa (sf)
US$512,000,000 Class A-1 Senior Secured Floating Rate Notes due
2030 (the "Class A-1 Notes"), Assigned Aaa (sf)
US$88,000,000 Class A-2 Senior Secured Floating Rate Notes due 2030
(the "Class A-2 Notes"), Assigned Aa2 (sf)
US$40,800,000 Class A-3 Senior Secured Deferrable Floating Rate
Notes due 2030 (the "Class A-3 Notes"), Assigned A2 (sf)
US$48,400,000 Class B-1 Senior Secured Deferrable Floating Rate
Notes due 2030 (the "Class B-1 Notes"), Assigned Baa3 (sf)
US$48,400,000 Class B-2 Senior Secured Deferrable Floating Rate
Notes due 2030 (the "Class B-2 Notes"), Assigned Ba3 (sf)
The Class X Notes, the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class B-1 Notes and the Class B-2 Notes are
referred to herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
CIFC Funding 2014-II-R is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of first lien senior secured loans and eligible investments, and up
to 10% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is over 93% ramped as of the closing
date.
CIFC Asset Management LLC will direct the selection, acquisition
and disposition of the assets on behalf of the Issuer and may
engage in trading activity, including discretionary trading, during
the transaction's four year reinvestment period. Thereafter, the
Manager may reinvest unscheduled principal payments and proceeds
from sales of credit risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer 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: 75
Weighted Average Rating Factor (WARF): 2979
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology Moody's 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.
CIFC FUNDING 2015-V: Moody's Rates $20.8MM Class D-R Notes 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has assigned the following ratings to the
following notes issued by CIFC Funding 2015-V, Ltd.:
US$330,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2027 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$49,200,000 Class A-2-R Senior Secured Floating Rate Notes due
2027 (the "Class A-2-R Notes"), Assigned Aa2 (sf)
US$31,750,000 Class B-R Mezzanine Secured Deferrable Floating Rate
Notes due 2027 (the "Class B-R Notes"), Assigned A2 (sf)
US$28,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2027 (the "Class C-R Notes"), Assigned Baa3 (sf)
US$20,800,000 Class D-R Junior Secured Deferrable Floating Rate
Notes due 2027 (the "Class D-R Notes"), Assigned Ba3 (sf)
Additionally, Moody's has taken a rating action on the following
outstanding notes issued by the Issuer on the original issuance
date:
US$50,000,000 Combination Securities (composed of components
representing $8,250,000 Class A-2-R Notes, $31,750,000 Class B-R
Notes, and $10,000,000 Subordinated Notes) due 2027 (the
"Combination Notes") (current rated balance of $41,774,121),
Upgraded to A1 (sf); previously on December 8, 2016 Confirmed at A2
(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.
CIFC Asset Management LLC 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 April 25, 2018 in
connection with the refinancing of certain classes of notes
previously issued on November 24, 2015, the Original Closing Date.
On the Refinancing Date, the Issuer used the 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 non-call period,
changes to the collateral quality matrix and recovery rate modifier
matrix; and an amendment to section 9.2 of the indenture which, in
connection with a refinancing, requires either the rated balance of
the Combination Securities to be reduced to zero or rating agency
confirmation.
The upgrade on the Combination Securities is primarily a result of
the reduction of the rated balance and the mitigation of future
refinancing risk that could cause the rated components to prepay.
Since April 2017, the combination securities' rated balance has
been reduced by $3.3 million or 7.3%. Additionally, the refinancing
will increase excess spread available as credit enhancement to the
notes.
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 each class of the Issuer's notes is subject to
uncertainty relating to certain factors and circumstances, and this
uncertainty could lead to either an upgrade or downgrade of Moody's
ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the Manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by the Manager or other transaction parties owing to embedded
ambiguities.
3) Collateral credit risk: Investing in collateral of better credit
quality, or better than Moody's expected credit performance of the
assets collateralizing the transaction can lead to positive CLO
performance. Conversely, a negative shift in the credit quality or
performance of the collateral can have adverse consequences for CLO
performance.
4) Deleveraging: During the amortization period, the pace of
deleveraging from unscheduled principal proceeds is an important
source of uncertainty. Deleveraging of the CLO could accelerate
owing to high prepayment levels in the loan market and/or
collateral sales by the Manager, which could have a significant
impact on the ratings. Note repayments that are faster than Moody's
current expectations will usually have a positive impact on CLO
notes, beginning with those notes having the highest payment
priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the Manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Weighted average life (WAL): The notes' ratings can be sensitive
to the weighted average life assumption of the portfolio, which
could lengthen owing to any decision by the Manager to reinvest
into new issue loans or loans with longer maturities, or
participate in amend-to-extend offerings. Life extension can
increase the default risk horizon and assumed cumulative default
probability of CLO collateral.
7) Combination notes: The rating on Combination Securities which
combines cash flows from one or more of the CLO's debt tranches and
the equity tranche, is subject to a higher degree of volatility
than the other rated notes. Actual equity distributions that differ
significantly from Moody's assumptions can lead to a faster (or
slower) speed of reduction in the combination notes' rated balance,
thereby resulting in better (or worse) ratings performance than
previously expected.
8) Weighted Average Spread (WAS): CLO performance can be sensitive
to WAS, which is a key factor driving the amount of excess spread
available as credit enhancement when a deal fails its
over-collateralization or interest coverage tests. A decrease in
excess spread, because market conditions make it difficult for the
deal to source assets of appropriate credit quality in order to
maintain its WAS target, would reduce the effective credit
enhancement available for the notes.
CSFB COMMERCIAL 2005-C4: Moody's Affirms Caa3 Rating on F Certs
---------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class in
CSFB Commercial Mortgage Trust 2005-C4, Commercial Mortgage Pass
Through Certificates, Series 2005-C4 as follows:
Cl. F, Affirmed Caa3 (sf); previously on Jun 1, 2017 Affirmed Caa3
(sf)
RATINGS RATIONALE
The rating on Class F was affirmed because the ratings are
consistent with Moody's expected loss.
Moody's rating action reflects a base expected loss of 39% of the
current pooled balance, compared to 33% at Moody's last review.
Moody's base expected loss plus realized losses is now 6.3% of the
original pooled balance, compared to 6.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
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 this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017.
DEAL PERFORMANCE
As of the May 2018 distribution date, the transaction's aggregate
certificate balance has decreased by over 99% to $8.6 million from
$1.33 billion at securitization. The certificates are
collateralized by two remaining loans which represent an A/B note
split modification of a single mortgage loan.
Twenty-five loans have been liquidated from the pool, contributing
to an aggregate realized loss of $81 million (for an average loss
severity of 36%).
The remaining loans are the Southport Centre - A Note Loan ($6.8
million -- 79% of the pool) and Southport Centre - B note ($1.8
million -- 21% of the pool). The loans are secured by an 86,000
square foot shadow-anchored retail center in Indianapolis, Indiana.
The shadow anchor is a Walmart Supercenter, and other tenants at
the property include Dollar Tree, Gamestop, and Key Bank. The loan
passed its anticipated repayment date (ARD) in August 2015. The
original Southport Center loan was modified in December 2013 and
split into an A Note ($7.4 million) and B Note ($1.6 million). The
loan returned to the master servicer in March 2014 and the A note
is on the master servicer's watchlist. The loans are performing
based on the terms of the modification. Moody's identified the B
Note as a troubled loan and estimates a high loss severity on this
note. Moody's A Note LTV and stressed DSCR are 145% and 0.71X,
respectively.
DBWY 2018-AMXP: Moody's Gives (P)Ba1 Rating to Class HRR Debt
-------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of CMBS securities, issued by DBWF 2018-AMXP Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series
2018-AMXP:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa2 (sf)
Cl. HRR, Assigned (P)Ba1 (sf)
RATINGS RATIONALE
The Certificates are collateralized by a single loan secured by the
borrower's fee simple interest in the newly-constructed, 672,581 SF
Ala Moana Expansion of the 2.7 million SF super-regional mall known
as the Ala Moana Center. Ala Moana Center is the largest outdoor
shopping center in the world and is considered the dominant
regional mall for Earth's Pacific region. The collateral, also
known as the Ewa wing, represents the latest mall expansion which
seamlessly integrates into larger mall.
The Property is anchored by Nordstrom and Bloomingdale's. The
Inline tenancy includes a mix of national and international
retailers, as well as dining and entertainment options. Retail
tenants range from high-end, luxury brands including Hermes,
Christian Dior, David Yurman, Tory Burch and Ben Bridge Jewelers to
contemporary brands such as Zara, the North Face, Lego and Uniqlo.
Additionally, the Property also contains an entertainment component
including a Japanese food court (Shirokiya) and seven food and
beverage outlets. As of February 28, 2018, the collateral was 95.7%
leased, including the recently executed Uniqlo and Shabuya leases.
The loan is a five-year, fixed-rate interest-only, first-lien
mortgage loan with an original and outstanding principal balance of
$500,000,000. The ratings are based on the collateral and the
structure of the transaction.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
CMBS methodology. The rating approach for securities backed by a
single loan compares the credit risk inherent in the underlying
collateral with the credit protection offered by the structure. The
structure's credit enhancement is quantified by the maximum
deterioration in property value that the securities are able to
withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also considers a range
of qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's LTV ratio.
The first mortgage balance of $500,000,000 represents a Moody's LTV
of 87.9%. The Moody's First Mortgage Actual DSCR is 2.09X and
Moody's First Mortgage Actual Stressed DSCR is 0.86X.
Notable strengths of the transaction include the asset's trophy
qualities, diversified shoppers base, sales productivity, inline
sales, rollover profile, and strong sponsorship. Offsetting these
strengths are the lack of asset diversification, interest-only
mortgage loan profile, and credit negative legal features.
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.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating to
the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan paydowns or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed and may
have a significant effect on yield to investors.
The ratings do not represent any assessment of (i) the likelihood
or frequency of prepayment on the mortgage loans, (ii) the
allocation of net aggregate prepayment interest shortfalls, (iii)
whether or to what extent prepayment premiums might be received, or
(iv) in the case of any class of interest-only certificates, the
likelihood that the holders thereof might not fully recover their
investment in the event of a rapid rate of prepayment of the
mortgage loans.
DENALI CAPITAL XII: Moody's Rates $15.7MM Class E-R Notes 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
CLO refinancing notes issued by Denali Capital CLO XII, Ltd.:
Moody's rating actions are as follows:
US$1,350,000 Class X Amortizing Senior Secured Floating Rate Notes
Due 2031 (the "Class X Notes"), Assigned Aaa (sf)
US$209,000,000 Class A-1R Senior Secured Floating Rate Notes Due
2031 (the "Class A-1R Notes"), Assigned Aaa (sf)
US$15,000,000 Class A-2R Senior Secured Fixed Rate Notes Due 2031
(the "Class A-2R Notes"), Assigned Aaa (sf)
US$42,000,000 Class B-R Senior Secured Floating Rate Notes Due 2031
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$21,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes Due 2031 (the "Class C-R Notes"), Assigned A2 (sf)
US$19,250,000 Class D-R Senior Secured Deferrable Floating Rate
Notes Due 2031 (the "Class D-R Notes"), Assigned Baa3 (sf)
US$15,750,000 Class E-R Secured Deferrable Floating Rate Notes Due
2031 (the "Class E-R Notes"), Assigned Ba3 (sf)
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Crestline Denali Capital, L.P. 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 April 25, 2018 in
connection with the refinancing of all classes of the secured notes
previously issued on March 30, 2016. On the Refinancing Date, the
Issuer used proceeds from the issuance of the Refinancing Notes and
additional subordinated notes, to redeem in full the Refinanced
Original Notes.
In addition to the issuance of the Refinancing Notes and additional
subordinated notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels.
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: $350,000,000
Defaulted par: $0
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2892
Weighted Average Spread (WAS): 3.50%
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 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.
ICG US CLO 2014-3: Moody's Assigns Ba3 Rating on Class D-RR Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
CLO refinancing notes issued by ICG US CLO 2014-3, Ltd.
Moody's rating action is as follows:
US$258,400,000 Class A-1-RR Senior Secured Floating Rate Notes due
2031 (the "Class A-1-RR Notes"), Assigned Aaa (sf)
US$44,500,000 Class A-2-RR Senior Secured Floating Rate Notes due
2031 (the "Class A-2-RR Notes"), Assigned Aa2 (sf)
US$16,500,000 Class B-1-RR Senior Secured Deferrable Floating Rate
Notes due 2031 (the "Class B-1-RR Notes"), Assigned A2 (sf)
US$6,250,000 Class B-2-RR Senior Secured Deferrable Fixed Rate
Notes due 2031 (the "Class B-2-RR Notes"), Assigned A2 (sf)
US$27,000,000 Class C-RR Senior Secured Deferrable Floating Rate
Notes due 2031 (the "Class C-RR Notes"), Assigned Baa3 (sf)
U.S.$18,800,000 Class D-RR Senior Secured Deferrable Floating Rate
Notes due 2031 (the "Class D-RR Notes"), Assigned Ba3 (sf)
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
ICG Debt Advisors LLC - Manager Series 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 April 25, 2018 in
connection with the refinancing of the Class A-1A-R, Class A-1B-R,
Class A-2-R, Class B-1-R, and Class B-2-R secured notes previously
issued on May 30, 2017, and the Class C and Class D secured notes
previously issued on December 23, 2014. On the Refinancing Date,
the Issuer used proceeds from the issuance of the Refinancing Notes
to redeem in full the Refinanced 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; and changes to the
overcollateralization test levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique.
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: $400,851,083
Defaulted par: $2,891,422
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3058
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 6.50%
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 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.
INDYMAC HOME 2002-B: Moody's Lowers Class M-1 Debt Rating to B2
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of Classes AF
and M-1 from IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2002-B.
Complete rating actions are as follows:
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2002-B
Cl. AF, Downgraded to Baa2 (sf); previously on Apr 28, 2014
Downgraded to A3 (sf)
Cl. M-1, Downgraded to B2 (sf); previously on Aug 14, 2013
Confirmed at Ba3 (sf)
RATINGS RATIONALE
The actions reflect the recent performance of the underlying pools
and Moody's updated loss expectations on the pools. The rating
actions also reflect a correction to the data previously used by
Moody's in rating this transaction. In prior rating actions, the
maturity term for balloon loans in the underlying pools was
incorrectly set at 180 months, resulting in lower losses applied to
the bonds through the cash-flow model than the losses projected on
the loan pools. These loans are still outstanding and amortizing.
As a result, the maturity term for these loans has now been
extended, allowing for the model to accurately run through the
entire expected loss on the pools.
Additionally, the bonds in the transaction have received no
principal and interest since September 2017 due to recoupment of
servicer advances. As a result, Class AF has a current outstanding
interest shortfall of 5bps. However, Moody's expects this shortfall
to be reimbursed due to the strong interest recoupment mechanism
for the senior bonds in the transaction and the available funds
waterfall.
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 macroeconomic
uncertainty, and in particular the unemployment rate. The
unemployment rate fell to 4.1% in March 2018 from 4.5% in March
2017. Moody's forecasts an unemployment central range of 3.5% to
4.5% for the 2018 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 2018. 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.
JP MORGAN 2007-LDP10: Moody's Cuts Rating on Cl. A-M Certs to Ba3
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
and downgraded the ratings on three classes in J.P. Morgan Chase
Commercial Mortgage Securities Corp. Series 2007-LDP10, Commercial
Pass-Through Certificates, Series 2007-LDP10 as follows:
Cl. A-M, Downgraded to Ba3 (sf); previously on Apr 28, 2017
Downgraded to Ba1 (sf)
Cl. A-JS, Affirmed Caa3 (sf); previously on Apr 28, 2017 Affirmed
Caa3 (sf)
Cl. A-J, Downgraded to C (sf); previously on Apr 28, 2017 Affirmed
Caa3 (sf)
Cl. A-JFX, Downgraded to C (sf); previously on Apr 28, 2017
Affirmed Caa3 (sf)
Cl. B, Affirmed C (sf); previously on Apr 28, 2017 Affirmed C (sf)
Cl. B-S, Affirmed C (sf); previously on Apr 28, 2017 Affirmed C
(sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The ratings on three P&I classes, Classes AJS, B and B-S, were
affirmed because the ratings are consistent with Moody's expected
loss.
The ratings on three P&I classes, Classes A-M, A-J and AJ-FX, were
downgraded due to anticipated losses and realized losses from
specially serviced and troubled loans that were higher than Moody's
had previously expected.
The rating on the IO class, Class X, was affirmed based on the
credit quality of the referenced classes.
Moody's rating action reflects a base expected loss of 78.2% of the
current pooled balance, compared to 57.7% at Moody's last review.
Moody's base expected loss plus realized losses is now 17.6% of the
original pooled balance, compared to 17.3% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating J.P. Morgan Chase
Commercial Mortgage Securities Corp. Series 2007-LDP10, Cl. A-M,
Cl. A-JS, Cl. A-J, Cl. A-JFX, Cl. B, and Cl. B-S was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017. The methodologies used in rating J.P.
Morgan Chase Commercial Mortgage Securities Corp. Series
2007-LDP10, Cl. X were "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017 and
"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 95.5% 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 services to the most junior classes and the recovery
as a pay down of principal to the most senior classes as described
in the Prospectus Supplement for Commercial Mortgage Pass-Through
Certificates, Series 2007-LDP10.
DEAL PERFORMANCE
As of the April 16, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to $512.7
million from $5.3 billion at securitization. The certificates are
collateralized by 19 mortgage loans ranging in size from less than
1% to 27.9% of the pool.
One loan, constituting less than 1% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Fifty-five loans have been liquidated from the pool, resulting in
an aggregate realized loss of $538.7 million (for an average loss
severity of 42.7%). Sixteen loans, constituting 95.5% of the pool,
are currently in special servicing. The largest specially serviced
loan is the Lafayette Property Trust Loan ($143.3 million -- 27.9%
of the pool), which was originally secured by nine
cross-collateralized and cross-defaulted office properties
containing approximately 840,000 square feet (SF) located in
Alexandria, Virginia. The properties are directly off of I-395 and
are approximately 1-mile from another loan in this transaction,
Skyline Portfolio. The loan transferred to special servicing in
November 2014 due to imminent default associated with an August
2015 tenant lease expiration. As of December 2016, the portfolio
was 30% leased, compared to 65% in December 2015. As of April 2018,
eight of the nine properties have been sold, leaving only the 1700
N. Beauregard St property as collateral. The loan has been deemed
non-recoverable and Moody's anticipates a significant loss on this
loan.
The second and third largest specially serviced loan is the Skyline
Portfolio A- Note ($105 million-- 20.5% of the pool), and Skyline
Portfolio B-note ($98.4 million -- 19.2% of the pool), which are
secured by a portfolio of eight cross-collateralized and
cross-defaulted office properties located in Falls Church, VA
outside of Washington, DC. The total loan represents a portion of
an aggregate $678 million mortgage loan (a total $350 million
A-Note and $328 million B-Note). The original loan first
transferred to the special servicer in July 2012 due to imminent
monetary default and was subsequently modified with an A-note /
B-note split effective October 2013. Post-modification, the loan
returned to the master servicer in February 2014, however, the loan
transferred back to the special servicer again in April 2016 due to
imminent monetary default. In December 2016 the loan became REO.
The portfolio was only 45% leased as of April 2017.
The fourth largest specially serviced loan is the Ross Retail
Portfolio ($45.3 million -- 8.8% of the pool), which is secured by
six retail properties located in three states, North Carolina,
Florida, and Tennessee. The loan transferred to special servicing
in July 2016 due to imminent maturity default. The special servicer
is pursuing foreclosure. As of December 2017, the portfolio was 81%
leased. The anchor tenants at the various properties include
Surplus Warehouse, Bravo's Supermarket, Food Lion, Food City,
Tractor Supply, and Piggly Wiggly.
The remaining 12 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $399.3 million loss
for the specially serviced loans (81.5% expected loss on average).
The three performing loans represent 4.5% of the pool balance. The
largest perfoming loan is the WI Industrial Portfolio ($12.4
million -- 2.4% of the pool), which is secured by three industrial
properties located in Wisconsin, totaling 264,600 SF. As of
December 2017, the portfolio was 99% leased, compared to 93% leased
as of December 2016. The loan benefits from amortization. Moody's
LTV and stressed DSCR are 94% and 1.09X, respectively, compared to
98% and 1.05X at the last review.
MADISON PARK XXVIII: S&P Assigns Prelim B-(sf) Rating on F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Madison Park
Funding XXVIII Ltd./Madison Park Funding XXVIII LLC's $596.00
million floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by broadly syndicated senior secured term loans.
The preliminary ratings are based on information as of May 25,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans that
are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Madison Park Funding XXVIII Ltd./Madison Park Funding XXVIII LLC
Class Rating Amount (mil. $)
A-1 AAA (sf) 399.00
A-2 NR 56.00
B AA (sf) 70.00
C (deferrable) A (sf) 43.00
D (deferrable) BBB- (sf) 44.00
E (deferrable) BB- (sf) 26.50
F (deferrable) B- (sf) 13.50
Subordinated notes NR 60.35
NR--Not rated.
MCA FUND I: DBRS Confirms BB(high) Rating on Class C Notes
----------------------------------------------------------
DBRS, Inc. has taken the following rating actions on the classes of
collateralized fund obligation (CFO) notes issued by MCA Fund I
Holding LLC, as well as the Liquidity Loan Facility between MCA
Fund I Holding LLC as Issuer and Barclays Bank PLC as Liquidity
Lender (the Liquidity Facility), as follows:
-- Class A Notes confirmed at A (sf)
-- Class B Notes upgraded to A (low) (sf) from BBB (high) (sf)
-- Class C Deferrable Notes confirmed at BB (high) (sf)
-- Liquidity Facility confirmed at A (sf)
The Under Review with Positive Implications designation on the
ratings of the Class B Notes and the Class C Deferrable Notes have
been removed. The ratings of the Class B Notes and Class C
Deferrable Notes were previously placed Under Review with Positive
Implications on June 14, 2017. The removal of the Under Review with
Positive Implications designation reflects the deleveraging of the
rated notes and the consistency of the quarterly net cash inflows,
which allowed the rating on the Class B Notes to be upgraded;
however, the impact was more limited on the rating of the Class C
Deferrable Notes.
The ratings on the Class A Notes, Class B Notes and the Liquidity
Facility address the timely payment of interest and the ultimate
payment of principal on or before their respective maturities. The
rating on the Class C Deferrable Notes addresses the ultimate
payment of interest and principal on or before their maturity.
The notes are backed by a portfolio of limited partnership
interests in leveraged buyout, mezzanine debt and venture capital
private equity funds. Each class of notes is able to withstand a
percentage of tranche defaults from a Monte Carlo asset analysis
commensurate with its respective rating.
MERRILL LYNCH 2006-1: Moody's Affirms C Rating on 3 Tranches
------------------------------------------------------------
Moody's Investors Service affirmed the ratings of three interest
only (IO) classes of Merrill Lynch Floating Trust Commercial
Pass-Through Certificates, Series 2006-1 as follows:
Cl. X-1B, Affirmed C (sf); previously on Jun 29, 2017 Affirmed C
(sf)
Cl. X-3B, Affirmed C (sf); previously on Jun 29, 2017 Affirmed C
(sf)
Cl. X-3C, Affirmed C (sf); previously on Jun 29, 2017 Affirmed C
(sf)
RATINGS RATIONALE
The rating of Class X-1B was affirmed based on the credit quality
of its referenced classes. Moody's does not rate Classes L and M.
The ratings of Classes X-3B and X-3C were affirmed based on the
credit quality of their referenced loan, the Royal Holiday
Portfolio loan, the only loan remaining in the pool.
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 or
loan, 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 methodologies used in rating Merrill Lynch Floating Trust
Pass-Through Certificates, Series 2006-1, Cl. X-1B, Cl. X-3B, and
Cl. X-3C were "Moody's Approach to Rating Large Loan and Single
Asset/Single Borrower CMBS" published in July 2017 and "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the April 16, 2018 Payment Date, the certificate balance has
remains unchanged from the last review at $65 million. The trust
balance has decreased by 98% from $2.6 billion at securitization
from the payoff of 14 loans. The trust has experienced $1.0 million
in cumulative bond losses, affecting Class M. Interest shortfalls
total approximately $10.0 million and affect Classes L, M, X-3B,
and X-3C. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
One specially-serviced loan remains in the pool, the Royal Holiday
Portfolio loan ($65 million), secured by six hotels located in
Mexico with a total of 1,495-keys. Two of the hotels are located in
Cancun, and the other four hotels are located in Cozumel, Ixtapa,
Acapulco and San Jose del Cabo. The $103 million whole loan
includes $38 million in non-trust subordinate debt.
The loan was transferred to special servicing in February 2010 and
is a non-performing matured loan. The borrower had filed a Mexican
bankruptcy petition for the Cozumel Caribe Hotel in May 2010. The
bankruptcy court terminated the flow of funds into the lender's
cash management system and blocked the lender from pursuing
remedies against the five other assets or the guarantors. The
borrower has not made debt service payments since May 2010, nor has
the borrower provided financials for the hotel properties. Interest
advances were terminated in late 2012.
Currently, approximately $22 million in servicer advances are
outstanding, including $4.5 million in interest advances with the
balance primarily for legal and insurance expenses, cumulative
accrued unpaid advance interest and taxes and insurance. The
special servicer is defending and pursuing multiple legal actions
and foresees a lengthy litigation.
MORGAN STANLEY 1998-CF1: Moody's Cuts Class G Certs to Caa2
-----------------------------------------------------------
Moody's Investors Service has downgraded the rating on one class
and affirmed the rating on one class in Morgan Stanley Capital I
Inc. 1998-CF1, Commercial Mortgage Pass-Through Certificates,
Series 1998-CF1 as follows:
Cl. G, Downgraded to Caa2 (sf); previously on Jun 1, 2017 Affirmed
Caa1 (sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on Cl. G was downgraded due to anticipated losses from
the specially serviced loan that are higher than Moody's had
previously expected.
The rating on the IO class, Cl. X, was affirmed based on the credit
quality of its referenced classes.
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 rating Morgan Stanley Capital I
Inc. 1998-CF1, Cl. G was "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating Morgan Stanley Capital I Inc.
1998-CF1, Cl. X were "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017 and
"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 51% 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 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 May 2018 distribution date, the transaction's aggregate
certificate balance has decreased by over 99% to $5 million from
$1.11 billion at securitization. The certificates are
collateralized by five mortgage loans ranging in size from less
than 1% to 51% of the pool. Three loans, constituting 32% of the
pool, have defeased and are secured by US government securities.
Fifty-six loans have been liquidated from the pool, contributing to
an aggregate realized loss of approximately $80 million (for an
average loss severity of 47%). One loan, the Gardenside Shopping
Center ($2.6 million -- 51% of the pool), is currently in special
servicing. The loan is secured by a 189,000 square foot (SF)
shopping center located in Henderson, Kentucky. The loan
transferred to special servicing in January 2018 for imminent
default, the same month that former lead anchor Kmart closed its
store at the subject property. The property was 78% leased as of
the September 2017 rent roll, however, this includes the currently
dark Kmart space (86,000 SF, or 46% the property's net rentable
area). The original Kmart lease has an expiration date in November
2018. Due to occupancy concerns and the dark anchor space, Moody's
estimates a high loss severity for the specially serviced loan.
The only non-defeased, performing loan is the 75 Montgomery Street
Loan ($901,700 -- 17% of the pool), which is secured by a 45,000
square foot, mid-rise, Class B office property located in Jersey
City, New Jersey. The property was 56% occupied as of September
2017, up from 46% in December 2016. The loan is on the master
servicer's watchlist due to low DSCR, however, the loan is
performing and has amortized over 62% since securitization. Moody's
LTV for this loan is 67%.
MORGAN STANLEY 2001-TOP3: Moody's Affirms C Rating on Cl. X-1 Certs
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
in Morgan Stanley Dean Witter Capital I Inc. Commercial Mortgage
Pass-Through Certificates, Series 2001-TOP3 as follows:
Cl. E, Affirmed Baa1 (sf); previously on May 18, 2017 Affirmed Baa1
(sf)
Cl. F, Affirmed Ca (sf); previously on May 18, 2017 Affirmed Ca
(sf)
Cl. X-1, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating of the Cl. E was affirmed because the transactions 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 Cl. F was affirmed because the rating is consistent with
Moody's expected loss plus realized losses.
The rating of the IO class, Cl. X-1, was affirmed because of the
credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 13.4% of the
current pooled balance, compared to 2.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.8% of the
original pooled balance, compared to 5.6% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating Morgan Stanley Dean Witter
Capital I Inc. Commercial Mortgage Pass-Through Certificates,
Series 2001-TOP3, Cl. E and Cl. F was "Moody's Approach to Rating
Large Loan and Single Asset/Single Borrower CMBS" published in July
2017. The methodologies used in rating Morgan Stanley Dean Witter
Capital I Inc. Commercial Mortgage Pass-Through Certificates,
Series 2001-TOP3, Cl. X-1 were "Moody's Approach to Rating Large
Loan and Single Asset/Single Borrower CMBS" published in July 2017
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in June 2017.
DEAL PERFORMANCE
As of the May 15, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 98.3% to $17.5
million from $1.03 billion at securitization. The certificates are
collateralized by 10 mortgage loans ranging in size from less than
1% to 27.0% of the pool. Three loans, constituting 16.0% of the
pool, have defeased and are 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 four, compared to five at Moody's last review.
Three loans, constituting 48.1% 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.
Twenty-six loans have been liquidated from the pool at a loss,
contributing to an aggregate realized loss of $57.0 million (for an
average loss severity of 38%). There are currently no loans in
special servicing.
Moody's has assumed a high default probability for two poorly
performing loans, constituting 42% of the pool, and has estimated a
moderate loss from these troubled loans.
The top three performing loans represent 68.8% of the pool balance.
The largest loan is the former A&P (Waldbaums) Belle Harbor Loan
($4.7 million -- 27.0% of the pool), which is secured by a
single-tenant, grocery-anchored, retail center located in Belle
Harbor, New York. The property is now 100% leased to Shop & Stop
through May 2021. The loan benefits from amortization and has paid
down 40% since securitization. Moody's analysis incorporated a
Lit/Dark approach to account for the single-tenant exposure.
Moody's LTV and stressed DSCR are 63% and 1.67X, respectively,
compared to 71% and 1.49X at the last review.
The second largest loan is the Marsh's Supermarket Store Loan ($4.4
million -- 25.2% of the pool), which is secured by a 57,000 SF,
formerly grocery-anchored, retail center located in Indianapolis,
Indiana. The property was previously 100% leased to Marsh's
Supermarkets through February 2021, however, Marsh filed for
bankruptcy in 2017 and the property is now vacant. The borrower has
indicated that they intend to keep the loan current. Moody's
analysis incorporated a Lit/Dark approach to account for the
single-tenant exposure and has identified this as a troubled loan.
The third largest loan is the Kash N' Karry Grocery Store Loan
($2.9 million -- 16.7% of the pool), which is secured by a 48,000
SF, formerly grocery-anchored, retail center located in Tampa,
Florida. The property is shadow anchored by a Home Depot. The
property was previously occupied by Sweatbay Supermarkets, a
subsidiary of Southeastern Grocers / Bi-Lo, which has been dark
since February 2013. Southeastern Grocers subsequently declared
Chapter 11 bankruptcy in March 2018. Moody's analysis incorporated
a Lit/Dark approach to account for the single-tenant exposure and
has identified this as a troubled loan.
MSBAM 2013-C12: Fitch Affirms B-sf Rating on Class G Certs
----------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Morgan Stanley Bank of
America Merrill Lynch Trust, Commercial Mortgage Pass-Through
Certificates, Series 2013-C12 (MSBAM 2013-C12).
KEY RATING DRIVERS
Overall Stable Performance: The affirmations are the result of the
overall stable performance of the majority of the pool. Current
loss expectations are slightly higher than issuance expectations
due to concerns related to several Fitch Loans of Concern (FLOCs).
As of the May 2018 distribution date, the pool's aggregate
principal balance had been reduced by 6.4% to $1.2 billion from
$1.28 billion at issuance. All loans are current with no specially
serviced loans since issuance. Five loans (9.5%) are designated
FLOCs. Four loans (3.9%) are fully defeased. Only one loan, Monte
Carlo at Wilcrest (0.5% of the pool at issuance), has paid off
since issuance. Interest shortfalls are currently affecting the
non-rated class H.
Fitch Loans of Concern: Five loans (9.5% of the pool) have been
designated FLOCs due to recent property performance declines (5.5%)
or Toys "R" Us exposure (4.0%). In September 2017, Toys "R" Us
filed for bankruptcy and officially announced in March 2018 its
plans to close all 735 of its U.S. stores. Store closing sales
began in March 2018, and it is reported that most locations will
likely close for business by June 2018.
The largest FLOC, Point at Las Colinas (3.6%), is secured by an
18-story, 398,771-sf office property located in Irving, TX, that
has suffered declining occupancy since issuance. The second largest
FLOC, Deer Springs Town Center (2.4%), is secured by a 184,403-sf
anchored retail center located in North Las Vegas, NV that is
anchored by a Toys "R" Us (35.6% of NRA) that is expected to close
in late June 2018. The remaining FLOCs include Peninsula Boardwalk
(1.7%), which is secured by a retail property that is 45.5% leased
to Babies "R" Us/Toys "R" Us, and two loans (1.8% total) secured by
multifamily properties located in Grand Forks, ND that have
suffered performance decline, since issuance. Fitch will continue
to monitor all of the FLOCs.
Retail Concentration and Outlet Center/Regional Mall Exposure:
Fitch has a declining overall outlook for the retail sector. Retail
properties represent the largest property type concentration at
48.2% of the pool. The majority of the retail exposure is from
three of the top five loans, which are secured by Merrimack Premium
Outlets (10.3%) - a factory outlet center located in Merrimack, NH;
City Creek Center (6.5%) - a lifestyle center located in Salt Lake
City, UT; and Westfield Countryside (4.6%) - a regional mall
located in Clearwater, FL. The three malls have exhibited positive
performance relative to nearby competition. Twelve additional loans
(19.1%) are secured by anchored community or power centers. Retail
shopping centers comprise 4.0% of the FLOCs.
Amortization: The pool is scheduled to amortize by 15.4% prior to
maturity. Eight loans (11.1%) are fully interest-only. By October
2018, all loans with partial interest-only periods at issuance will
be amortizing. One loan has paid in full since last review. 85.9%
of the pool consists of 10-year loans that mature in 2023 and 13.2%
of the pool consists of five-year loans that mature between August
and October 2018. An additional two loans mature in 2020 (0.6%) and
2033 (0.3%), respectively.
RATING SENSITIVITIES
The Negative Outlook assigned to class G reflects concerns
surrounding the five FLOCs (9.5% of the pool) as well as the pool's
high retail concentration of 48.2%, including three of the top five
loans in the pool and eight of the top 15 loans. Downgrades are
possible should the performance of the FLOCs decline further. The
Rating Outlooks on classes A-1 through F remain Stable due to the
relatively stable performance of the majority of the pool and
expected continued amortization. Upgrades, although unlikely in the
near term due to pool concentrations, may occur with improved pool
performance and additional paydown or defeasance.
DUE DILIGENCE USAGE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating.
Fitch affirms the following classes and revises Outlooks as
indicated:
-- $160.3 million class A-2 at 'AAAsf'; Outlook Stable;
-- $107.2 million class A-SB at 'AAAsf'; Outlook Stable;
-- $260.0 million class A-3 at 'AAAsf'; Outlook Stable;
-- $284.7 million class A-4 at 'AAAsf'; Outlook Stable;
-- $917.5 million class X-A* at 'AAAsf'; Outlook Stable;
-- $105.3 million class A-S at 'AAAsf'; Outlook Stable;
-- $75.0 million class B at 'AA-sf'; Outlook Stable;
-- $232.9 million class PST at 'A-sf'; Outlook Stable;
-- $52.6 million class C at 'A-sf'; Outlook Stable;
-- $52.6 million class D at 'BBB-sf'; Outlook Stable;
-- $19.1 million class E at 'BB+sf'; Outlook Stable;
-- $20.7 million class F at 'BB-sf'; Outlook Stable;
-- $14.4 million class G at 'B-sf'; Outlook to Negative from
Stable.
*Notional amount and interest only.
The class A-1 certificates have paid in full. Fitch does not rate
the class H certificates or the interest-only class X-C
certificates. The class A-S, B, and C certificates may be exchanged
for class PST certificates, and the class PST certificates may be
exchanged for the class A-S, B, and C certificates.
NEW RESIDENTIAL 2018-2: Moody's Gives (P)Ba2 Rating on 4 Tranches
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 31
classes of notes issued by New Residential Mortgage Loan Trust
2018-2 ("NRMLT 2018-2"). The NRMLT 2018-2 transaction is a $426.0
million securitization of first lien, seasoned performing and
re-performing mortgage loans with weighted average seasoning of 164
months, a weighted average updated LTV ratio of 57.4% and a
weighted average updated FICO score of 692. Based on the OTS
methodology, 84.1% of the loans by scheduled balance have been
current every month in the past 24 months. Additionally, 35.8% of
the loans in the pool have been previously modified. Nationstar
Mortgage LLC (Nationstar Mortgage), Ocwen Loan Servicing, LLC
(Ocwen), Wells Fargo Bank, N.A. (Wells Fargo), PNC Mortgage,
Specialized Loan Servicing LLC (SLS), New Penn Financial, LLC d/b/a
Shellpoint Mortgage Servicing (Shellpoint), and Fay Servicing, LLC
(Fay) will act as primary servicers. Nationstar Mortgage will act
as master servicer and successor servicer and Shellpoint will act
as the special servicer.
The complete rating action is as follows:
Issuer: New Residential Mortgage Loan Trust 2018-2
Cl. A, Assigned (P)Aaa (sf)
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1A, Assigned (P)Aaa (sf)
Cl. A-1B, Assigned (P)Aaa (sf)
Cl. A-1C, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa2 (sf)
Cl. B-1A, Assigned (P)Aa2 (sf)
Cl. B-1B, Assigned (P)Aa2 (sf)
Cl. B-1C, Assigned (P)Aa2 (sf)
Cl. B-1D, Assigned (P)Aa2 (sf)
Cl. B-2, Assigned (P)A2 (sf)
Cl. B-2A, Assigned (P)A2 (sf)
Cl. B-2B, Assigned (P)A2 (sf)
Cl. B-2C, Assigned (P)A2 (sf)
Cl. B-2D, Assigned (P)A2 (sf)
Cl. B-3, Assigned (P)Baa2 (sf)
Cl. B-3A, Assigned (P)Baa2 (sf)
Cl. B-3B, Assigned (P)Baa2 (sf)
Cl. B-3C, Assigned (P)Baa2 (sf)
Cl. B-3D, Assigned (P)Baa2 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-4A, Assigned (P)Ba2 (sf)
Cl. B-4B, Assigned (P)Ba2 (sf)
Cl. B-4C, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B2 (sf)
Cl. B-5A, Assigned (P)B2 (sf)
Cl. B-5B, Assigned (P)B2 (sf)
Cl. B-5C, Assigned (P)B2 (sf)
Cl. B-5D, Assigned (P)B2 (sf)
Cl. B-7, Assigned (P)B1 (sf)
RATINGS RATIONALE
Moody's losses on the collateral pool equal 4.85% in an expected
scenario and reach 23.35% at a stress level consistent with the Aaa
ratings on the senior classes. Moody's based their expected losses
for the pool on their estimates of (1) the default rate on the
remaining balance of the loans and (2) the principal recovery rate
on the defaulted balances. The final expected losses for the pool
reflect the third party review (TPR) findings and Moody's
assessment of the representations and warranties (R&Ws) framework
for this transaction. Also, the transaction contains a mortgage
loan sale provision, the exercise of which is subject to potential
conflicts of interest. As a result of this provision, Moody's
increased Moody's expected losses for the pool.
To estimate the losses on the pool, Moody's used an approach
similar to their surveillance approach. Under this approach,
Moody's apply expected annual delinquency rates, conditional
prepayment rates (CPRs), loss severity rates and other variables to
estimate future losses on the pool. Moody's assumptions on these
variables are based on the observed rate of delinquency on seasoned
modified and non-modified loans, the collateral attributes of the
pool including the percentage of loans that were delinquent in the
past 24 months, and the observed performance of recent New
Residential Mortgage Loan Trust issuances rated by Moody's. For
this pool, Moody's used default burnout and voluntary CPR
assumptions similar to those detailed in Moody's "US RMBS
Surveillance Methodology" for Alt-A loans originated before 2005.
Moody's then aggregated the delinquencies and converted them to
losses by applying pool-specific lifetime default frequency and
loss severity assumptions.
Collateral Description
NRMLT 2018-2 is a securitization of seasoned performing and
re-performing residential mortgage loans which the seller, NRZ
Sponsor IX LLC, has previously purchased in connection with the
termination of various securitization trusts. The transaction is
comprised of 3,628 loans of which 9.9% by principal balance are
ARMs. For the loans in the pool, 64.2% by balance have never been
modified and have been performing while 35.8% of the loans were
previously modified but are now current and cash flowing.
The updated value of properties in this pool were provided by a
third party firm using a home data index (HDI) and/or an updated
broker price opinion (BPO). BPOs were provided for a sample of
1,864 out of the 3,628 properties contained within the
securitization. HDI values were provided for 3,614 of the
properties contained within the securitization. The weighted
average updated LTV ratio on the collateral is 57.4%, implying an
average of 42.6% borrower equity in the properties. The LTV is
calculated using the lower of the updated BPO and HDI when both
values are available.
Third-Party Review ("TPR") and Representations & Warranties
("R&W")
Two third party due diligence providers, AMC and Recovco, conducted
a compliance review on a sample of 1,878 and 77 seasoned mortgage
loans respectively for the securitization pool. In addition, AMC
reviewed 11 newly refinanced mortgage loans originated by Fay. For
the seasoned loans, the regulatory compliance review consisted of a
review of compliance with the federal Truth in Lending Act (TILA)
as implemented by Regulation Z, the federal Real Estate Settlement
Procedures Act (RESPA) as implemented by Regulation X, the
disclosure requirements and prohibitions of Section 50(a)(6),
Article XVI of the Texas Constitution, federal, state and local
anti-predatory regulations, federal and state specific late charge
and prepayment penalty regulations, and document review. For the
newly issued loans, AMC also reviewed compliance with Dodd-Frank
provisions implemented on October 3, 2015 and ATR/QM regulations.
AMC found that 1,711 out of 1,878 seasoned loans had compliance
exceptions with 806 loans having rating agency C or D level
exceptions. Recovco identified three loans with grade D exceptions
in its review of 77 loans and AMC identified one loan with a grade
C property valuation exception in its review of the 11 newly
originated loans. Also, based on information provided by the
seller, there were additional loans were dropped from the
securitization due to compliance exceptions. The C or D level
exceptions broadly fell into four categories: missing final HUD-1
settlement statements/HUD errors, Texas (TX50(a)(6)) cash-out loan
violations, other state compliance exceptions (including North
Carolina CHL Tangible Net Benefit violations), and missing
documents or missing information.
Moody's applied a small adjustment to loss severities to account
for the C or D level missing final HUD-1 settlement statement and
HUD errors. For these types of issues, borrowers can raise legal
claims in defense against foreclosure as a set off or recoupment
and win damages that can reduce the amount of the foreclosure
proceeds. Such damages can include up to $4,000 in statutory
damages, borrowers' legal fees and other actual damages. Moody's
also applied small adjustments to loss severities for TX50(a)(6)
violations, North Carolina CHL Tangible Net Benefit exceptions, and
other state law compliance exceptions. Moody's did not apply an
adjustment for missing documents or missing information identified
by the diligence provider in part because Moody's separately
received and assessed a title report and a custodial report for the
mortgage loans in the pool.
AMC and Recovco reviewed the findings of various title search
reports covering 798 and 77 mortgage loans respectively in the
preliminary sample population in order to confirm the first lien
position of the related mortgages. Overall, AMC's review confirmed
that 780 mortgages were in first lien position. For the 18
remaining loans reviewed by AMC, proof of first lien position could
only be confirmed using the final title policy as of loan
origination. Recovco reported that all of the 77 mortgage loans
reviewed were in first-lien position. Given the relatively clean
title/lien results, Moody's did not apply any adjustments based on
the results of this review.
The seller, NRZ Sponsor IX LLC, is providing a representation and
warranty for missing mortgage files. To the extent that the
indenture trustee, master servicer, related servicer or depositor
has actual knowledge of a defective or missing mortgage loan
document or a breach of a representation or warranty regarding the
completeness of the mortgage file or the accuracy of the mortgage
loan documents, and such missing document, defect or breach is
preventing or materially delaying the (a) realization against the
related mortgaged property through foreclosure or similar loss
mitigation activity or (b) processing of any title claim under the
related title insurance policy, the party with such actual
knowledge will give written notice of such breach, defect or
missing document, as applicable, to the related seller, indenture
trustee, depositor, master servicer and related servicer. Upon
notification of a missing or defective mortgage loan file, the
related seller will have 120 days from the date it receives such
notification to deliver the missing document or otherwise cure the
defect or breach. If it is unable to do so, the related seller will
be obligated to replace or repurchase the mortgage loan.
Moody's did not apply an adjustment for missing documents or
missing information identified by AMC in part because Moody's
separately received and assessed a title report and a custodial
report for the mortgage loans in the pool. Moody's reviewed a draft
of the custodial report and identified seven loans with note
instrument issues. Even though this exception and the missing file
exceptions noted in the compliance review are protected by the R&W
framework, Moody's assumed that 0.2% (seven out of 3,628) of the
projected defaults will have missing document breaches that will
not be effectively remedied and will result in higher loss
severities. This adjustment is due in part to Moody's view of the
financial strength of the R&W provider.
Trustee, Custodian, Paying Agent, Servicers, Master Servicer,
Successor Servicer and Special Servicer
The transaction indenture trustee is Wilmington Trust, National
Association. The custodian functions will be performed by Wells
Fargo Bank, N.A., The Bank of New York Mellon Trust Company, N.A.,
and U.S. Bank National Association. The paying agent and cash
management functions will be performed by Citibank, N.A. In
addition, Nationstar Mortgage, as master servicer, is responsible
for servicer oversight, termination of servicers, and the
appointment of successor servicers. Having Nationstar Mortgage as a
master servicer mitigates servicing-related risk due to the
performance oversight that it will provide. Nationstar Mortgage
will serve as the designated successor servicer for the transaction
and Shellpoint will serve as the special servicer. As the special
servicer, Shellpoint will be responsible for servicing mortgage
loans that become 60 or more days delinquent.
Nationstar Mortgage (58.7%), Ocwen (19.7%), Wells Fargo (9.6%), PNC
Mortgage (6.3%), SLS (4.6%), Shellpoint (0.8%), and Fay (0.3%) will
act as the primary servicers of the collateral pool. Ocwen
Financial Corporation (the parent company of Ocwen) currently has a
Corporate Family Rating is Caa1 with a negative outlook. Ocwen's
ratings reflect the regulatory scrutiny the company is experiencing
and the company's very weak profitability, largely due to the
impact of high legal, regulatory and servicing expenses. In NRMLT
2018-2, the risk of Ocwen bankruptcy is mitigated by Nationstar
Mortgage's role as master servicer and designated successor
servicer.
Transaction Structure
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to increasingly receive principal
prepayments after an initial lock-out period of five years,
provided two performance tests are met. To pass the first test, the
delinquent and recently modified loan balance cannot exceed 50% of
the subordinate bonds outstanding. To pass the second test,
cumulative losses cannot exceed certain thresholds that gradually
increase over time.
Because a shifting interest structure allows subordinated bonds to
pay down over time as the loan pool shrinks, senior bonds are
exposed to tail risk, i.e., risk of back-ended losses when fewer
loans remain in the pool. The transaction provides for a
subordination floor that helps to reduce this tail risk.
Specifically, the subordination floor prevents subordinate bonds
from receiving any principal if the amount of subordinate bonds
outstanding falls below 6.25% of the closing principal balance.
There is also a provision that prevents subordinate bonds from
receiving principal if the credit enhancement for the Class A-1
Note falls below its percentage at closing, 25.00%. These
provisions mitigate tail risk by protecting the senior bonds from
eroding credit enhancement over time.
Other Considerations
The transaction contains a mortgage loan sale provision, the
exercise of which is subject to potential conflicts of interest.
The servicers in the transaction may sell mortgage loans that
become 60 or more days delinquent according to the MBA methodology
to any party in the secondary market in an arms-length transaction
and at a fair market value. For such sale to take place, the
servicer must determine, in its reasonable commercial judgment,
that such sale would maximize proceeds on a present value basis. If
the sponsor or any of its subsidiaries is the purchaser, the
servicers must obtain at least two additional independent bids. The
transaction documents provide little detail on the method of
receipt of bids and there is no set minimum sale price. Such lack
of detail creates a risk that the independent bids could be weak
bids from purchasers that do not actively participate in the
market. Furthermore, the transaction documents provide little
detail regarding how servicers should conduct present value
calculations when determining if a note sale should be pursued. The
two largest servicers in the transaction, Nationstar Mortgage and
Ocwen, have commercial relationships with the sponsor outside of
the transaction and the special servicer, Shellpoint, is an
affiliate of the sponsor. These business arrangements could lead to
conflicts of interest. Moody's took this into account and adjusted
the losses accordingly.
When analyzing the transaction, Moody's reviewed the transaction's
exposure to large potential indemnification payments owed to
transaction parties due to potential lawsuits. In particular,
Moody's assessed the risk that the indenture trustee would be
subject to lawsuits from investors for a failure to adequately
enforce the R&Ws against the seller. Moody's believes that NRMLT
2018-2 is adequately protected against such risk primarily because
nearly all of the loans in this transaction are more than 10 years
seasoned and the weighted average seasoning is approximately 14
years. Although some loans in the pool were previously delinquent
and modified, the loans all have a substantial history of payment
performance. This includes payment performance during the recent
recession. As such, if loans in the pool were materially defective,
such issues would likely have been discovered prior to the
securitization. Furthermore, third party due diligence was
conducted on a significant random sample of the loans for issues
such as data integrity, compliance, and title. As such, Moody's did
not apply adjustments in this transaction to account for
indemnification payment risk.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from the 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. Other reasons for
better-than-expected performance include changes to servicing
practices that enhance collections or refinancing opportunities
that result in prepayments.
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.
OCTAGON INVESTMENT 26: Moody's Gives (P)B3 Rating on Cl. F-R Notes
------------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to three classes of CLO refinancing notes to be issued by
Octagon Investment Partners 26, Ltd.
Moody's rating action is as follows:
US$302,500,000 Class A-1-R Senior Secured Floating Rate Notes due
2030 (the "Class A-1-R Notes"), Assigned (P)Aaa (sf)
US$25,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2030 (the "Class A-2-R Notes"), Assigned (P)Aaa (sf)
US$10,000,000 Class F-R Secured Deferrable Floating Rate Notes due
2030 (the "Class F-R Notes"), Assigned (P)B3 (sf)
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.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Octagon Credit Investors, LLC manages the CLO. It directs the
selection, acquisition, and disposition of collateral on behalf of
the Issuer.
RATINGS RATIONALE
Moody's provisional 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 intends to issue the Refinancing Notes on June 13, 2018
in connection with the refinancing of all classes of the secured
notes previously issued on April 27, 2016. On the Refinancing Date,
the Issuer will use proceeds from the issuance of the Refinancing
Notes, along with the proceeds from the issuance of four other
classes of secured notes, to redeem in full the Refinanced Original
Notes.
In addition to the issuance of the Refinancing Notes, the other
classes of secured notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels.
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: $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9.09 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 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.
OCTAGON INVESTMENT 26: S&P Gives Prelim BB- Rating on Cl. E-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, B-R, C-R, D-R and E-R replacement notes from Octagon
Investment Partners 26 Ltd., a collateralized loan obligation (CLO)
originally issued in April 2016. The transaction that is managed by
Octagon Credit Investors LLC. The replacement notes will be issued
via a proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels. The replacement classes are expected to be issued at a
lower weighted average cost of debt than the current notes.
Furthermore, all replacement classes are expected to be issued at
floating spreads, replacing the current fixed and floating rates.
The preliminary ratings are based on information as of May 25,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the June 13, 2018, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. S&P said, "At that time, we anticipate withdrawing
the ratings on the original Class A notes and assigning ratings to
the replacement A-1-R, B-R, C-R, D-R, and E-R notes. However, if
the refinancing doesn't occur, we may affirm the ratings on the
original class A notes and withdraw our preliminary ratings on the
replacement A-1-R, B-R, C-R, D-R, and E-R notes."
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, is expected to: Issue the replacement classes at
a lower weighted average cost of debt than the current notes.
Issue the all replacement classes at floating spreads, replacing
the current fixed and floating rates. The stated maturity,
reinvestment period, and non-call period will be extended by 3.25,
2.75, and 2.16 years, respectively.
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."
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and S&P will take further rating actions
as it deems necessary.
PRELIMINARY RATINGS ASSIGNED
Octagon Investment Partners 26 Ltd./Octagon Investment Partners
26 LLC Replacement class Rating Amount (mil. $)
A-1-R AAA (sf) 302.50
A-2-R NR 25.00
B-R AA (sf) 52.50
C-R (deferrable) A (sf) 33.75
D-R (deferrable) BBB- (sf) 26.25
E-R (deferrable) BB- (sf) 20.00
F-R (deferrable) NR 10.00
Subordinated notes NR 49.10
NR--Not rated.
OCTAGON INVESTMENT XXIII: Moody's Rates Class E-R Notes 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
CLO refinancing notes issued by Octagon Investment Partners XXIII,
Ltd.:
Moody's rating action is as follows:
US$390,000,000 Class A-1-R Senior Secured Floating Rate Notes Due
2027 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$18,000,000 Class A-2-R Senior Secured Floating Rate Notes Due
2027 (the "Class A-2-R Notes"), Assigned Aaa (sf)
US$51,000,000 Class B-R Senior Secured Floating Rate Notes Due 2027
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$33,750,000 Class C-R Secured Deferrable Floating Rate Notes Due
2027 (the "Class C-R Notes"), Assigned A2 (sf)
US$31,750,000 Class D-R Secured Deferrable Floating Rate Notes Due
2027 (the "Class D-R Notes"), Assigned Baa3 (sf)
US$29,000,000 Class E-R Secured Deferrable Floating Rate Notes Due
2027 (the "Class E-R Notes"), Assigned Ba3 (sf)
US$9,000,000 Class F-R Secured Deferrable Floating Rate Notes Due
2027 (the "Class F-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 broadly syndicated senior secured corporate loans.
Octagon Credit Investors, LLC 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 April 26, 2018 in
connection with the refinancing of all classes of the secured notes
previously issued on July 15, 2015. 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 non-call and
reinvestment period; changes to certain collateral quality tests;
changes to the overcollateralization and interest diversion test
levels; changes to the Asset Quality Matrix and Recovery Rate
Modifier Matrix; addition of a Moody's Weighted Average Spread
Adjustment; changes to reflect sequential payment of the Class
A-1-R and Class A-2-R Notes; and the reduction of the Minimum
Floating Spread.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique.
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: $600,000,000
Defaulted par: $0
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2712
Weighted Average Spread (WAS): 3.10%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 6.0 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 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.
ROCKFORD TOWER 2018-1: Moody's Gives Ba3 Rating on Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Rockford Tower CLO 2018-1, Ltd.
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2031
(the "Class A Notes"), Assigned Aaa (sf)
US$55,000,000 Class B Senior Secured Floating Rate Notes due 2031
(the "Class B Notes"), Assigned Aa2 (sf)
US$25,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Assigned A2 (sf)
US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class D Notes"), Assigned Baa3 (sf)
US$27,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), 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.
Rockford Tower CLO 2018-1 is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of senior secured loans, cash and eligible investments, and up to
10% of the portfolio may consist of second lien loans and unsecured
loans. The portfolio is approximately 90% ramped as of the closing
date.
Rockford Tower Capital Management, L.L.C. 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: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2752
Weighted Average Spread (WAS): 3.00%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.0%
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.
SCF EQUIPMENT 2018-1: Moody's Assigns B1 Rating on Class F Notes
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
equipment contract backed notes, Series 2018-1, Class A, Class B,
Class C, Class D, Class E, and Class F issued by SCF Equipment
Leasing 2018-1 LLC and SCF Equipment Leasing Canada 2018 Limited
Partnership. Stonebriar Commercial Finance LLC (unrated,
Stonebriar) along with its Canadian counterpart - Stonebriar
Commercial Finance Canada Inc. (unrated) are the originators and
Stonebriar alone is the servicer of the assets backing this
transaction. The issuers are wholly-owned, limited purpose
subsidiaries of Stonebriar and Stonebriar Commercial Finance Canada
Inc. The assets in the pool consist of fixed rate loan and lease
contracts, secured primarily by corporate aircraft, railcars, and
manufacturing and assembly equipment.
The complete rating actions are as follows:.
Issuer: SCF Equipment Leasing 2018-1 LLC/SCF Equipment Leasing
Canada 2018 Limited Partnership Series 2018-1
Class A-1 Notes, Definitive Rating Assigned Aaa (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa2 (sf)
Class C Notes, Definitive Rating Assigned A3 (sf)
Class D Notes, Definitive Rating Assigned Baa3 (sf)
Class E Notes, Definitive Rating Assigned Ba2 (sf)
Class F Notes, Definitive Rating Assigned B1 (sf)
RATINGS RATIONALE
The Series 2018-1 transaction is the fourth securitization
sponsored by Stonebriar and the third that Moody's rates.
Stonebriar was founded in 2015 and is led by a management team with
an average of over 25 years of experience in equipment financing.
The definitive ratings that Moody's assigned to the notes are
primarily based on:
(1) the experience of Stonebriar's management team;
(2) the experience and expertise of Stonebriar as the servicer;
(3) U.S. Bank National Association (long-term deposits Aa1/
long-term CR assessment Aa2(cr), short-term deposits P-1, BCA aa3)
as backup servicer for contracts;
(4) the weak credit quality and small number of obligors backing
the loans and leases in the pool;
(5) the assessed value of the collateral backing the loans and
leases in the pool;
(6) the credit enhancement, including overcollateralization,
excess spread and a non-declining reserve account; and
(7) the sequential pay structure.
Credit enhancement to the notes include (i) initial
overcollateralization of 3.50%, which is expected to grow to a
target of 5.50% of the initial collateral balance, (ii) excess
spread, (iii) a non-declining reserve account funded at 1.50% of
the initial collateral balance, and (iv) subordination in the case
of the Class A, Class B, Class C, Class D, Class E, and Class F
notes (45.00%, 33.50%, 22.00%, 18.00%, 13.00%, and 7.00%,
respectively).
The equipment loans and leases that back the notes are extended
primarily to middle market obligors and are secured by various
types of equipment including; aircraft (36.41%), railcars (21.69%)
manufacturing and assembly (7.83%), steel mill infrastructure
(6.97%), and real estate (6.47%).
The pool consists of 71 contracts with 43 unique obligors and an
initial securitization value of $ $598,544,543. The average
securitization value per contract is $8,430,205. The weighted
average original and remaining terms to maturity is 70 and 61
months, respectively. The largest obligor account for 19.98% of the
initial securitization value and the top five obligors account for
53.37%. Nearly all of the contracts in this deal are fixed interest
rate and monthly pay.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans"
published in December 2015.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the notes if levels of credit
protection are greater than necessary to protect investors against
current expectations of loss. Moody's updated expectations of loss
may be better than its original expectations because of lower
frequency of default by the underlying obligors or appreciation in
the value of the equipment that secure the obligor's promise of
payment. As the primary drivers of performance, positive changes in
the US macro economy and the performance of various sectors where
the obligors operate could also affect the ratings.
Down
Moody's could downgrade the ratings of the notes if levels of
credit protection are insufficient to protect investors against
current expectations of loss. Moody's updated expectations of loss
may be worse than its original expectations because of higher
frequency of default by the underlying obligors of the contracts or
a greater than expected deterioration in the value of the equipment
that secure the obligor's promise of payment. As the primary
drivers of performance, negative changes in the US macro economy
could also affect Moody's ratings. Other reasons for worse
performance than Moody's expectations could include poor servicing,
error on the part of transaction parties, lack of transaction
governance and fraud.
SEQUOIA MORTGAGE 2018-CH2: Moody's Rates Class B-5 Debt 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
classes of residential mortgage-backed securities (RMBS) issued by
Sequoia Mortgage Trust 2018-CH2 ("SEMT 2018-CH2"), except for the
interest-only classes. The certificates are backed by one pool of
prime quality, first-lien mortgage loans.
SEMT 2018-CH2 is the fourth securitization that includes loans
acquired by Redwood Residential Acquisition Corporation ("Redwood"
or "Seller"), a subsidiary of Redwood Trust, Inc., under its
expanded credit prime loan program called "Redwood Choice".
Redwood's Choice program is a prime program with credit parameters
outside of Redwood's traditional prime jumbo program, "Redwood
Select." The Choice program expands the low end of Redwood's FICO
range to 661 from 700, while increasing the high end of eligible
loan-to-value ratios from 85% to 90%. The pool also includes loans
with non-QM characteristics (23.4%), such as debt-to-income ratios
up to 58.8%. Non-QM loans were acquired by Redwood under each of
the Select and Choice programs.
The assets of the trust consist of 718 fixed rate mortgage loans,
all of which are fully amortizing, except for four mortgage loans
that have an interest-only term. The mortgage loans have an
original term to maturity of 30 years except for 8 loans which have
an original term to maturity of 20 years. The loans were sourced
from multiple originators and acquired by Redwood. All of the loans
conform to the Seller's guidelines, except for loans originated by
First Republic Bank, which were originated to conform with First
Republic Bank's guidelines.
The transaction benefits from nearly 100% due diligence of data
integrity, credit, property valuation, and compliance conducted by
an independent third-party firm.
CitiMortgage, Inc. will act as the master servicer of the loans in
this transaction. Shellpoint Mortgage Servicing, First Republic
Bank and Homestreet Bank will be primary servicers on the deal.
The complete rating actions are as follows:
Issuer: Sequoia Mortgage Trust 2018-CH2
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aaa (sf)
Cl. A-14, Assigned Aaa (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aaa (sf)
Cl. A-17, Assigned Aaa (sf)
Cl. A-18, Assigned Aaa (sf)
Cl. A-19, Assigned Aa1 (sf)
Cl. A-20, Assigned Aa1 (sf)
Cl. A-21, Assigned Aa1 (sf)
Cl. A-22, Assigned Aaa (sf)
Cl. A-23, Assigned Aaa (sf)
Cl. A-24, Assigned Aaa (sf)
Cl. B-1A, Assigned Aa3 (sf)
Cl. B-1B, Assigned Aa3 (sf)
Cl. B-2A, Assigned A1 (sf)
Cl. B-2B, Assigned A1 (sf)
Cl. B-3, Assigned A3 (sf)
Cl. B-4, Assigned Baa3 (sf)
Cl. B-5, Assigned Ba3 (sf)
RATINGS RATIONALE
Summary Credit Analysis
Moody's expected cumulative net loss on the aggregate pool is 0.90%
in a base scenario and reaches 10.50% at a stress level roughly
consistent with Aaa ratings. The MILAN CE may be different from the
credit enhancement that is consistent with a Aaa rating for a
tranche, because the MILAN CE does not take into account the
structural features of the transaction. Moody's took this
difference into account in its ratings of the senior classes. The
MILAN CE may be different from the credit enhancement that is
consistent with a Aaa rating for a tranche, because the MILAN CE
does not take into account the structural features of the
transaction. Moody's took this difference into account in its
ratings of the senior classes. Moody's loss estimates are based on
a loan-by-loan assessment of the securitized collateral pool using
Moody's Individual Loan Level Analysis (MILAN) model. Loan-level
adjustments to the model included: adjustments to borrower
probability of default for higher and lower borrower DTIs,
borrowers with multiple mortgaged properties, self-employed
borrowers, origination channels and at a pool level, for the
default risk of HOA properties in super lien states. The adjustment
to its Aaa stress loss above the model output also includes
adjustments related to aggregator and originators assessments. The
model combines loan-level characteristics with economic drivers to
determine the probability of default for each loan, and hence for
the portfolio as a whole. Severity is also calculated on a
loan-level basis. The pool loss level is then adjusted for
borrower, zip code, and MSA level concentrations.
Collateral Description
The SEMT 2018-CH2 transaction is a securitization of 718 first lien
residential mortgage loans, with an aggregate unpaid principal
balance of 520,479,976. There are 132 originators in this pool,
including Fairway (5.33%), the remaining contributed less than 5%
of the principal balance of the loans in the pool. The loan-level
third party due diligence review (TPR) encompassed credit
underwriting, property value and regulatory compliance. In
addition, Redwood has agreed to backstop the rep and warranty
repurchase obligation of all originators other than First Republic
Bank.
SEMT 2018-CH2 includes loans acquired by Redwood under its Choice
program. Although from a FICO and LTV perspective, the borrowers in
SEMT 2018-CH2 are not the super prime borrowers included in
traditional SEMT transactions, these borrowers are prime borrowers
with a demonstrated ability to manage household finance. On
average, borrowers in this pool have made a 26% down payment on a
mortgage loan of $727,436. In addition, the majority of borrowers
have more than 24 months of liquid cash reserves or enough money to
pay the mortgage for two years should there be an interruption to
the borrower's cash flow. Moreover, the borrowers on average have a
monthly residual income of $15,746.85. The WA FICO is 743, which is
lower than traditional SEMT transactions, which has averaged 772 in
2018 SEMT transactions. The lower WA FICO for SEMT 2018-CH2 may
reflect recent mortgage lates (0x30x3, 1x30x12, 2x30x24) which are
allowed under the Choice program, but not under Redwood's
traditional product, Redwood Select (0x30x24). While the WA FICO
may be lower for this transaction, Moody's does not believe that
the limited mortgage lates demonstrates a history of financial
mismanagement.
Moody's also notes that SEMT 2018-CH2 is the fourth SEMT
transaction to include an increasing number of non-QM loans (156)
compared to SEMT 2018-CH1 (157) and SEMT 2017-CH2 (112).
Redwood's Choice program is in its early stages, having been
launched by Redwood in April 2016. In contrast to Redwood's
traditional program, Select, Redwood's Choice program allows for
higher LTVs, lower FICOs, non-occupant co-borrowers,
non-warrantable condos, limited loans with adverse credit events,
among other loan attributes. Under both Select and Choice, Redwood
also allows for loans with non-QM features, such as interest-only,
DTIs greater than 43%, asset depletion, among other loan
attributes.
However, Moody's notes that Redwood historically has been on
average stronger than its peers as an aggregator of prime jumbo
loans, including a limited number of non-QM loans in previous SEMT
transactions. As of the March 2018 remittance report, there have
been no losses on Redwood-aggregated transactions that Moody's has
rated to date, and delinquencies to date have also been very low.
While in traditional SEMT transactions, Moody's has factored this
qualitative strength into its analysis, in SEMT 2018-CH2, it has a
neutral assessment of the Choice Program until it is able to review
a longer performance history of Choice mortgage loans.
Structural considerations
Similar to recent rated Sequoia transactions, in this transaction,
Redwood is adding a feature prohibiting the servicer, or securities
administrator, from advancing principal and interest to loans that
are 120 days or more delinquent. These loans on which principal and
interest advances are not made are called the Stop Advance Mortgage
Loans ("SAML"). The balance of the SAML will be removed from the
principal and interest distribution amounts calculations. Moody's
views the SAML concept as something that strengthens the integrity
of senior and subordination relationships in the structure. Yet, in
certain scenarios the SAML concept, as implemented in this
transaction, can lead to a reduction in interest payment to certain
tranches even when more subordinated tranches are outstanding. The
senior/subordination relationship between tranches is strengthened
as the removal of SAML in the calculation of the senior percentage
amount, directs more principal to the senior bonds and less to the
subordinate bonds. Further, this feature limits the amount of
servicer advances that could increase the loss severity on the
liquidated loans and preserves the subordination amount for the
most senior bonds. On the other hand, this feature can cause a
reduction in the interest distribution amount paid to the bonds;
and if that were to happen such a reduction in interest payment is
unlikely to be recovered. The final ratings on the bonds, which are
expected loss ratings, take into consideration Moody's expected
losses on the collateral and the potential reduction in interest
distributions to the bonds. Furthermore, the likelihood that in
particular the subordinate tranches could potentially permanently
lose some interest as a result of this feature was considered. As
such, Moody's incorporated some additional sensitivity runs in its
cashflow analysis in which it increases the tranche losses due to
potential interest shortfalls during the loan's liquidation period
in order to reflect this feature and to assess the potential impact
to the bonds.
Moody's believes there is a low likelihood that the rated
securities of SEMT 2018-CH2 will incur any losses 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, Redwood (or
a majority-owned affiliate of the sponsor), who will retain credit
risk in accordance with the U.S. Risk Retention Rules and provides
a back-stop to the representations and warranties of all the
originators except for First Republic Bank, has a strong alignment
of interest with investors, and is incentivized to actively manage
the pool to optimize performance. 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 loan becomes 120 days delinquent, which
reduces the likelihood that parties will be sued for inaction.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to increased performance
volatility, known as tail risk. The transaction provides for a
subordination floor of 1.25% of the closing pool balance, which
mitigates tail risk by protecting the senior bonds from eroding
credit enhancement over time.
Third-party Review and Reps & Warranties
Two TPR firms conducted a due diligence review of 100% of the
mortgage loans in the pool. For 683 loans, the TPR firm conducted a
review for credit, property valuation, compliance and data
integrity ("full review") and limited review for 35 loans
originated by First Republic, Home Street Bank, and Primelending.
For the 35 loans, Redwood Trust elected to conduct a limited
review, which did not include a TPR firm check for TRID
compliance.
For the full review loans, the third party review found that the
majority of reviewed loans were compliant with Redwood's
underwriting guidelines and had no valuation or regulatory defects.
Most of the loans that were not compliant with Redwood's
underwriting guidelines had strong compensating factors.
Additionally, the third party review didn't identify material
compliance-related exceptions relating to the TILA-RESPA Integrated
Disclosure (TRID) rule for the full review loans.
For the full review loans, the TPR report identified one loan with
a final grade "D" property valuation-related condition relating to
escrow hold back. The conditions cited by Clayton included the
appraisal was "subject to completion" per plans and specification.
The escrow holdback distribution amount was $7,530. Moody's
believes that such conditions are not material and thus, it did not
make any adjustments for this loan.
No TRID compliance reviews were performed by the TPR firm on the
limited review loans. Therefore, there is a possibility that some
of these loans could have unresolved TRID issues. Moody's, however
reviewed the initial compliance findings of loans from Homestreet
Bank and Primelending where a full review was conducted and there
were no material compliance findings. As a result, it did not
increase its Aaa loss for the limited review loans originated by
Homestreet Bank or PrimeLending.
The property valuation review conducted by the TPR firm consisted
of (i) a review of all of the appraisals for full review loans,
checking for issues with the comparables selected in the appraisal
and (ii) a value supported analysis for all loans. After a review
of the TPR appraisal findings, Moody's found only one loan with a
final grade "D" for escrow holdback distribution amount.
Moody's has received the results of the inspection report or
appraisal confirmation for all the mortgage loans secured by
properties in the areas affected by FEMA disaster areas. The
results indicate that the properties did not receive any material
damage. SEMT 2018-CH2 includes a representation that the pool does
not include properties with material damage that would adversely
affect the value of the mortgaged property.
The originators and Redwood have provided unambiguous
representations and warranties (R&Ws) including an unqualified
fraud R&W. There is provision for binding arbitration in the event
of dispute between investors and the R&W provider concerning R&W
breaches.
Trustee & Master Servicer
The transaction trustee is Wilmington Trust, National Association.
The paying agent and cash management functions will be performed by
Citibank, N.A. and the custodian functions will be performed by
Wells Fargo Bank, N.A., rather than the trustee. In addition,
CitiMortgage Inc., as Master Servicer, is responsible for servicer
oversight, and termination of servicers and for the appointment of
successor servicers. In addition, CitiMortgage is committed to act
as successor if no other successor servicer can be found.
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.
Significant weight was put on judgment taking into account the
results of the modeling tools as well as the aggregate impact of
the third-party review and the quality of the servicers and
originators.
TICP CLO I-2: Moody's Assigns Ba3 Rating on Class D Notes
---------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by TICP CLO I-2, Ltd.
Moody's rating action is as follows:
US$5,675,000 Class X Senior Secured Floating Rate Notes due 2028
(the "Class X Notes"), Assigned Aaa (sf)
US$314,000,000 Class A-1 Senior Secured Floating Rate Notes due
2028 (the "Class A-1 Notes"), Assigned Aaa (sf)
US$34,700,000 Class A-2 Senior Secured Floating Rate Notes due 2028
(the "Class A-2 Notes"), Assigned Aa2 (sf)
US$23,250,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes due 2028 (the "Class B Notes"), Assigned A2 (sf)
US$29,100,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2028 (the "Class C Notes"), Assigned Baa3 (sf)
US$24,600,000 Class D Junior Secured Deferrable Floating Rate Notes
due 2028 (the "Class D Notes"), Assigned Ba3 (sf)
US$4,200,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2028 (the "Class E Notes"), Assigned B3 (sf)
The Class X Notes, the Class A-1 Notes, the Class A-2 Notes, the
Class B Notes, the Class C Notes, the Class D 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.
TICP CLO I-2 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans
and unsecured loans. The portfolio is approximately 84% ramped as
of the closing date.
TICP CLO I Management, LLC will direct the selection, acquisition
and disposition of the assets on behalf of the Issuer and may
engage in trading activity, including discretionary trading, during
the transaction's two 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.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $462,177,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3050
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 6.0 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.
TOWD POINT 2015-5: Fitch Assigns 'B-sf' Rating on Class B-3 Notes
-----------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Outlooks to 12
previously unrated classes from seven Towd Point Mortgage Trust
(TPMT) transactions issued between 2015 and 2017:
--Series 2015-3 class B-3 notes 'Bsf'; Outlook Stable;
--Series 2015-5 class B-3 notes 'B-sf'; Outlook Stable;
--Series 2016-1 class B-3 notes 'Bsf'; Outlook Stable;
--Series 2016-2 class B-3 notes 'B-sf'; Outlook Stable;
--Series 2016-3 class B-3 notes 'Bsf'; Outlook Stable;
--Series 2016-4 class A-2 notes 'AAAsf'; Outlook Stable;
--Series 2016-4 class M-1 notes 'AAsf'; Outlook Stable;
--Series 2016-4 class M-2 notes 'Asf'; Outlook Stable;
--Series 2016-4 class B-1 notes 'BBBsf'; Outlook Stable;
--Series 2016-4 class B-2 notes 'BBsf'; Outlook Stable;
--Series 2016-4 class B-3 notes 'Bsf'; Outlook Stable;
--Series 2017-1 class B-3 notes 'Bsf'; Outlook Stable.
Fitch had previously rated more senior classes from these
transactions at deal close. All of the transactions have performed
well since closing with many of the rated bonds upgraded or
assigned a Positive Rating Outlook.
KEY RATING DRIVERS
Solid Early Performance (Positive): Serious delinquency has
increased since issuance for each transaction under review with an
average of under 3.5% with the highest delinquency just under 5%.
These early values indicate lower lifetime defaults than Fitch's
base case default expectations at the initial rating, which ranged
from 20% to 38%. Realized losses have also been limited with losses
as a percentage of original balance generally less than 1%. An
exception to this is Towd Point 2015-5 with a realized loss to date
greater than 2.5%. The majority of this loss is due to contractual
principal reduction modification programs, which should lead to a
lower chance of default on the remaining balance. Loss severities
on defaulted loans have generally been in line or slightly below
Fitch's initial base case expectations.
Improved Loss Expectations (Positive): The expected losses for the
underlying pools backing the rated notes have improved since
issuance. On average the 'Bsf' expected loss has fallen by three to
four hundred basis points. The reduced loss expectation is driven
by strong home price appreciation over the past few years, solid
borrower performance and criteria changes. Since the initial
rating, Fitch has increased the seasoned performing credit for
borrower's that have been current for at least three years, which
has also positively influenced loss expectations.
Increased Subordination Percentage (Positive): Since the
transactions have closed, the subordination on the classes being
rated has increased by two to three hundred basis points on
average. The increase in subordination percentage has been driven
by limited losses to date, steady paydown of the senior classes and
the use of excess spread to build up additional protection to the
rated notes.
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, loan-level loss severity is less
for this transaction than for those where the servicer is obligated
to advance P&I.
Third-Party Review Results (Negative): A third-party due diligence
review was conducted and focused on regulatory compliance, pay
history and a tax and title lien search at the time of the initial
deal close. Any loan level adjustments that were done at the time
of the initial rating assignment were repeated for this analysis to
the extent that the loans are still remaining in the transaction.
Sequential-Pay Structure (Positive): All of the transactions' 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 original two most senior notes (with the exception of series
2016-4) prior to other principal distributions is supportive of
timely interest payments to those classes in the absence of
servicer advancing.
Representation Framework (Negative): Fitch considers the
representation, warranty and enforcement (RW&E) mechanism construct
for these transactions to generally be consistent with what it
views as a Tier 2 framework, due to the inclusion of knowledge
qualifiers and the exclusion of loans from certain reps as a result
of third-party due diligence findings. Thus, Fitch increased its
expected loss at each category to account for a potential increase
in defaults and losses arising from weaknesses in the reps.
TOWD POINT 2018-2: DBRS Assigns Prov. BB Rating on Class B1 Notes
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the Asset-Backed
Securities Series 2018-2 (the Notes) issued by Towd Point Mortgage
Trust 2018-2 (the Trust):
-- $943.1 million Class A1 at AAA (sf)
-- $106.0 million Class A2 at AA (sf)
-- $96.7 million Class M1 at A (sf)
-- $90.4 million Class M2 at BBB (sf)
-- $56.1 million Class B1 at BB (sf)
-- $24.9 million Class B2 at B (sf)
-- $1.0 billion Class A3 at AA (sf)
-- $1.1 billion Class A4 at A (sf)
Classes A3 and A4 are exchangeable notes. These classes can be
exchanged for combinations of exchange notes as specified in the
offering documents.
The AAA (sf) rating on the Class A1 Notes reflects the 39.50% of
credit enhancement provided by subordinated Notes in the pool. The
AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect
credit enhancement of 32.70%, 26.50%, 20.70%, 17.10% and 15.50%,
respectively.
Other than the specified classes above, DBRS does not rate any
other classes in this transaction.
This transaction is a securitization of a portfolio of seasoned
performing and re-performing first- or second-lien residential
mortgages. The Notes are backed by 9,936 loans with a total
principal balance of $1,558,896,597 as of the Statistical
Calculation Date (March 31, 2018). Unless specified otherwise, all
the statistics regarding the mortgage loans in this press release
are based on the Statistical Calculation Date.
The portfolio is approximately 141 months seasoned and contains
80.1% modified loans. The modifications happened more than two
years ago for 76.4% of the modified loans. Within the pool, 3,888
mortgages have non-interest-bearing deferred amounts, which equate
to 11.4% of the total principal balance. Included in the deferred
amounts are proprietary principal forgiveness and Home Affordable
Modification Program principal reduction alternative amounts, which
comprise approximately 0.2% of the total principal balance.
As of the Statistical Calculation Date, 94.2% of the pool is
current, 5.8% is 30 days delinquent under the Mortgage Bankers
Association (MBA) delinquency method and 0.9% is in bankruptcy (all
bankruptcy loans are performing or 30 days delinquent).
Approximately 56.4% of the mortgage loans have been zero times 30
days delinquent (0 x 30) for at least the past 24 months under the
MBA delinquency method. In accordance with the Consumer Financial
Protection Bureau Ability-to-Repay (ATR) and Qualified Mortgage
(QM) rules, 32 loans are classified as Safe-Harbor (0.6% of the
pool), eight loans are classified as Non-QM (0.1% of the pool) and
five loans are classified as Rebuttable Presumption (0.1% of the
pool). Additionally, certain loans (3.5% of the pool; 40 borrowers)
are secured by multiple investor properties.
FirstKey Mortgage, LLC (FirstKey) will acquire the loans from
various transferring trusts on or prior to the Closing Date. The
transferring trusts acquired the mortgage loans between 2013 and
2018 and are beneficially owned by funds managed by affiliates of
Cerberus Capital Management, L.P. Upon acquiring the loans from the
transferring trusts, FirstKey, through a wholly owned subsidiary,
Towd Point Asset Funding, LLC (the Depositor), will contribute
loans to the Trust. As the Sponsor, FirstKey, through a
majority-owned affiliate, will acquire and retain a 5% eligible
vertical interest in each class of securities to be issued (other
than any residual certificates) to satisfy the credit risk
retention requirements. These loans were originated and previously
serviced by various entities through purchases in the secondary
market.
As of the Closing Date, 96.9% the loans will be serviced by Select
Portfolio Servicing, Inc., and 3.1% of the loans will be serviced
by Cohen Financial Services (DE), LLC (Cohen). Cohen will service
all of the portfolio investment property loans secured by first
liens on a portfolio of one- to 16-family investment properties.
There will not be any advancing of delinquent principal or interest
on any mortgages by the servicers or any other party to the
transaction; however, the servicers are obligated to make advances
in respect of homeowner association fees, taxes and insurance,
installment payments on energy improvement liens and reasonable
costs and expenses incurred in the course of servicing and
disposing of properties.
FirstKey, as the Asset Manager, has the option to sell certain
non-performing loans or real estate owned (REO) properties to
unaffiliated third parties individually or in bulk sales. The asset
sale price has to equal a minimum reserve amount to maximize
liquidation proceeds of such loans or properties. The minimum
reserve amount equals the product of 59.3% and the then-current
principal amount of the mortgage loans or REO properties. In
addition, on any payment date on or after the first payment date
when the aggregate pool balance of the mortgage loans is reduced to
less than 30.0% of the Cut-Off Date balance, the holders of more
than 50% of the Class X Certificates will have the option to cause
the Issuer to sell all of its remaining property (other than
amounts in the Breach Reserve Account) to one or more third-party
purchasers so long as the aggregate proceeds meet a minimum price.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on Class M1
and more subordinate bonds will not be paid from principal proceeds
until the more senior classes are retired.
The lack of principal and interest advances on delinquent mortgages
may increase the possibility of periodic interest shortfalls to the
Note holders; however, principal proceeds can be used to pay
interest to the Notes sequentially, and subordination levels are
greater than expected losses, which may provide for timely payment
of interest to the rated Notes.
The ratings reflect transactional strengths that include underlying
assets that generally performed well through the crisis, a strong
servicer and Asset Manager oversight. Additionally, a satisfactory
third-party due diligence review was performed on the portfolio
with respect to regulatory compliance, payment history and data
capture, as well as title and tax review. Servicing comments were
reviewed for a sample of loans. Updated broker price opinions or
exterior appraisals were provided for most of the pool; however,
reconciliation was not performed on the updated values.
As compared with prior TPMT securitizations, the representations
and warranties (R&W) framework for this transaction has changed to
incorporate a pool level review trigger, as well as a Breach
Reserve Account that is unfunded on the Closing Date. Although
these updates weaken the R&W framework, the historical experience
of having zero put backs since the first TPMT deal in 2015
mitigates these features.
The DBRS ratings of AAA (sf) and AA (sf) address the timely payment
of interest and full payment of principal by the legal final
maturity date in accordance with the terms and conditions of the
related Notes. The DBRS ratings of A (sf), BBB (sf), BB (sf) and B
(sf) address the ultimate payment of interest and full payment of
principal by the legal final maturity date in accordance with the
terms and conditions of the related Notes.
[*] Moody's Hikes $278MM of Scratch & Dent RMBS Issued 2004-2007
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of twenty
tranches from twelve transactions, backed by "scratch and dent"
RMBS loans, issued by multiple issuers.
Complete rating actions are as follows:
Issuer: MASTR Specialized Loan Trust 2004-01
Cl. M-3, Upgraded to B3 (sf); previously on Mar 5, 2009 Downgraded
to C (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2004-SD2
Cl. A, Upgraded to Aaa (sf); previously on Jun 21, 2012 Downgraded
to A2 (sf)
Issuer: RAAC Series 2006-RP3 Trust
Cl. A, Upgraded to Baa3 (sf); previously on Jun 19, 2017 Upgraded
to Ba2 (sf)
Issuer: Structured Asset Securities Corp Trust 2004-GEL2
Cl. M1, Upgraded to Aaa (sf); previously on Jun 18, 2012 Downgraded
to A1 (sf)
Cl. M2, Upgraded to Baa1 (sf); previously on Jun 18, 2012
Downgraded to Baa3 (sf)
Issuer: Structured Asset Securities Corp Trust 2007-TC1
Cl. A, Upgraded to Aa3 (sf); previously on Jun 19, 2017 Upgraded to
A3 (sf)
Cl. M-1, Upgraded to Baa2 (sf); previously on Jun 19, 2017 Upgraded
to Ba2 (sf)
Cl. M-2, Upgraded to Ba3 (sf); previously on Jun 19, 2017 Upgraded
to Caa1 (sf)
Cl. M-3, Upgraded to Caa2 (sf); previously on Jun 19, 2017 Upgraded
to Ca (sf)
Issuer: Structured Asset Securities Corporation 2005-GEL1
Cl. M1, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to Aa3 (sf)
Cl. M2, Upgraded to A3 (sf); previously on Nov 20, 2015 Upgraded to
Baa2 (sf)
Issuer: Structured Asset Securities Corporation 2005-GEL3
Cl. M4, Upgraded to A1 (sf); previously on Jun 19, 2017 Upgraded to
A3 (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL1
Cl. M2, Upgraded to Baa3 (sf); previously on Jun 19, 2017 Upgraded
to Ba2 (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL2
Cl. M1, Upgraded to Ba1 (sf); previously on Jun 19, 2017 Upgraded
to B2 (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL3
Cl. A3, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to A3 (sf)
Cl. M1, Upgraded to Ca (sf); previously on Mar 5, 2009 Downgraded
to C (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL4
Cl. A3, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to A1 (sf)
Cl. M1, Upgraded to Caa2 (sf); previously on Jun 19, 2017 Upgraded
to Ca (sf)
Issuer: Structured Asset Securities Corporation 2007-GEL2
Cl. A2, Upgraded to Ba1 (sf); previously on May 19, 2013 Upgraded
to B1 (sf)
Cl. A3, Upgraded to B3 (sf); previously on Jan 20, 2015 Upgraded to
Caa2 (sf)
RATINGS RATIONALE
The rating upgrades are due to an increase in credit enhancement
available to the bonds or an improvement in Moody's projected pool
losses or recoveries on 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.
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 4.1% in March 2018 from 4.5% in March
2017. Moody's forecasts an unemployment central range of 3.5% to
4.5% for 2018. 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 2018. 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 32 Tranches From 12 US RMBS Deals
-------------------------------------------------------------
Moody's Investors Service has upgraded ratings of 31 tranches and
downgraded one tranche from 12 US residential mortgage backed
transactions (RMBS), backed by Subprime loans, issued by multiple
issuers.
Complete rating actions are as follows:
Issuer: CWABS Asset-Backed Certificates Trust 2004-10
Cl. AF-5A, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A3 (sf)
Cl. AF-6, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A2 (sf)
Cl. AF-5B, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A3 (sf)
Underlying Rating: Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A3 (sf)
Financial Guarantor: MBIA Insurance Corporation (Affirmed at Caa1,
Outlook Developing on Jan 17, 2018.)
Cl. MF-1, Downgraded to B1 (sf); previously on Oct 2, 2017 Upgraded
to Ba3 (sf)
Cl. MF-2, Upgraded to B3 (sf); previously on Oct 2, 2017 Upgraded
to Ca (sf)
Cl. MV-4, Upgraded to B2 (sf); previously on Oct 2, 2017 Upgraded
to Caa3 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2004-12
Cl. AF-5, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A3 (sf)
Cl. AF-6, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A2 (sf)
Cl. MF-1, Upgraded to B1 (sf); previously on Oct 2, 2017 Upgraded
to B2 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2004-15
Cl. AF-5, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at Baa1 (sf)
Cl. AF-6, Upgraded to Aaa (sf); previously on Oct 12, 2016
Confirmed at A2 (sf)
Cl. MF-3, Upgraded to B1 (sf); previously on Oct 2, 2017 Upgraded
to B3 (sf)
Cl. MF-4, Upgraded to Caa2 (sf); previously on Apr 16, 2012
Downgraded to C (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2004-AB2
Cl. M-3, Upgraded to B1 (sf); previously on Oct 19, 2016 Upgraded
to Caa2 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-9
Cl. 2-AV, Upgraded to A3 (sf); previously on Oct 2, 2017 Upgraded
to Ba1 (sf)
Cl. 3-AV-3, Upgraded to Baa1 (sf); previously on Oct 2, 2017
Upgraded to Ba3 (sf)
Cl. 3-AV-4, Upgraded to B1 (sf); previously on Oct 19, 2016
Upgraded to Caa2 (sf)
Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2004-3
Cl. 3-A-3, Upgraded to Aa1 (sf); previously on Oct 12, 2016
Confirmed at A1 (sf)
Cl. 3-A-4, Upgraded to Aa1 (sf); previously on Oct 12, 2016
Confirmed at A1 (sf)
Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2004-4
Cl. M-4, Upgraded to Caa2 (sf); previously on Apr 16, 2012
Downgraded to C (sf)
Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2004-7
Cl. AF-5, Upgraded to Aaa (sf); previously on Oct 19, 2016
Confirmed at A3 (sf)
Cl. AF-6, Upgraded to Aaa (sf); previously on Oct 19, 2016
Confirmed at A2 (sf)
Cl. MF-2, Upgraded to B1 (sf); previously on Oct 2, 2017 Upgraded
to B3 (sf)
Cl. MV-5, Upgraded to Caa2 (sf); previously on Oct 19, 2016
Confirmed at Ca (sf)
Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2004-9
Cl. AF-5, Upgraded to Aaa (sf); previously on Oct 17, 2016
Confirmed at A1 (sf)
Cl. AF-6, Upgraded to Aaa (sf); previously on Oct 17, 2016
Confirmed at Aa3 (sf)
Cl. MF-2, Upgraded to Caa3 (sf); previously on Mar 5, 2013 Affirmed
C (sf)
Cl. MV-4, Upgraded to Caa3 (sf); previously on Oct 2, 2017 Upgraded
to Ca (sf)
Issuer: First Franklin Mortgage Loan Trust 2002-FF3
Cl. A1, Upgraded to Ba3 (sf); previously on Mar 15, 2011 Downgraded
to B3 (sf)
Cl. M1, Upgraded to B2 (sf); previously on Mar 15, 2011 Downgraded
to Ca (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE5
Cl. M-3, Upgraded to B1 (sf); previously on Oct 10, 2017 Upgraded
to B3 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC6
Cl. M-5, Upgraded to Caa3 (sf); previously on Apr 1, 2013 Affirmed
C (sf)
RATINGS RATIONALE
Moody's rating actions reflect the recent performance of the
underlying pools and Moody's updated loss expectations on those
pools. Moody's rating upgrades are primarily due to an improvement
in the credit enhancement available to the bonds and an improvement
in pool performance.
The downgrade on CL. MF-1 from CWABS Asset-Backed Certificates
Trust 2004-10 is due to the level of the outstanding interest
shortfalls on the bond, which are not expected to be reimbursed due
to the weak reimbursement mechanism on the bond.
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 3.9% in April 2018 from 4.4% in April
2017. Moody's forecasts an unemployment central range of 3.5% to
4.5% for the 2018 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 2018. 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 Ups Ratings on 7 Tranches of Scratch & Dent RMBS Loans
------------------------------------------------------------------
Moody's Investors Service, in late April 2018, upgraded the ratings
of seven tranches from three transactions backed by "scratch and
dent" RMBS loans.
Complete rating actions are as follows:
Issuer: Bear Stearns Asset Backed Securities Trust 2004-SD3
Cl. A-3, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to Aa3 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to Aa3 (sf)
Cl. M-3, Upgraded to B3 (sf); previously on May 20, 2011 Downgraded
to Caa3 (sf)
Issuer: Bear Stearns Asset Backed Securities Trust 2006-3
Cl. A-3, Upgraded to Aaa (sf); previously on Jun 19, 2017 Upgraded
to Aa2 (sf)
Cl. M-1, Upgraded to B2 (sf); previously on Jan 20, 2015 Upgraded
to Caa3 (sf)
Issuer: Bear Stearns Asset Backed Securities Trust 2006-4
Cl. A-2, Upgraded to Baa3 (sf); previously on Nov 10, 2015 Upgraded
to Ba3 (sf)
Cl. A-3, Upgraded to Ba2 (sf); previously on May 20, 2011
Downgraded to B2 (sf)
RATINGS RATIONALE
The actions reflect the recent performance of the underlying pools
and reflect Moody's updated loss expectations on the pools. The
ratings upgraded are a result of an increase in credit enhancement
available to the bonds.
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 4.1% in March 2018 from 4.5% in March
2017. Moody's forecasts an unemployment central range of 3.5% to
4.5% for the 2018 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 2018. Lower increases than Moody's expects or
decreases could lead to negative rating actions. Finally,
performance of RMBS continues to remain highly dependent on
servicer procedures. Any change resulting from servicing transfers
or other policy or regulatory change can impact the performance of
these transactions.
[*] S&P Takes Various Actions on 109 Classes From 26 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 109 classes from 26 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2000 and 2014. All of these transactions are backed by
mixed collateral, including prime jumbo, negative amortization, and
subprime The review yielded 51 upgrades, one downgrade, 53
affirmations, three withdrawals, and one discontinuance.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations include:
-- Collateral performance/delinquency trends;
-- Historical interest shortfalls;
-- Priority of principal payments; and
-- Available subordination and/or overcollateralization.
Rating Actions
The affirmations of ratings reflect our opinion that our projected
credit support and collateral performance on these classes has
remained relatively consistent with our prior projections.
Seventeen reviewed transactions previously received funds related
to an August 2016 settlement regarding the alleged breach of
certain representations and warranties in 127 Washington Mutual
Mortgage Securities Corp./JPMorgan Chase & Co. legacy RMBS trusts'
governing agreements. Settlement proceeds for these transactions
were distributed during the February and March 2018 remittance
periods. The trustee applied the settlement funds as subsequent
recoveries and unscheduled principal payments. S&P said, "As a
result, we raised our ratings on 34 classes from 11 of these
transactions because their credit support sufficiently increased to
cover our projected losses at higher rating levels. We also removed
23 of these raised ratings from CreditWatch, where we placed them
with positive implications on April 10, 2018."
Seven other reviewed transactions received funds related to a July
2014 settlement regarding the alleged breach of certain
representations and warranties in 330 JPMorgan Chase & Co. legacy
RMBS trusts' governing agreements. Settlement proceeds for these
transactions were distributed during the January 2018 remittance
period. The trustee applied the settlement funds as subsequent
recoveries and unscheduled principal payments. S&P said, "As a
result, we raised our ratings on 17 classes from these seven
transactions because their credit support sufficiently increased to
cover our projected losses at higher rating levels. We also removed
14 of these raised ratings from CreditWatch, where we placed them
with positive implications on Feb. 26, 2018."
We raised 12 of these ratings (related to both settlements) from
eight transactions by five or more notches due to increased credit
support, which is attributed to sequential principal payments
because of failing cumulative loss triggers. As a result, the
upgrades on these classes reflect the classes' ability to withstand
a higher level of projected losses than previously anticipated.
A list of Affected ratings can be viewed at:
https://bit.ly/2L1NGLA
[] S&P Takes Various Actions on 72 Classes From 26 US RMBS Deals
----------------------------------------------------------------
S&P Global Ratings completed its review of 72 classes from 26 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2001 and 2007. All of these transactions are backed by
subprime and alternative-A collateral. The review yielded 32
upgrades, four downgrades, and 36 affirmations. S&P also removed
eight of the raised ratings from CreditWatch, where it placed them
with positive implications on Feb. 26, 2018.
Analytical Considerations
S&P said, "We incorporate various considerations in our decisions
to raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows." These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. Some of these considerations include:
-- Collateral performance/delinquency trends;
-- Historical missed interest payments;
-- Priority of principal payments; and
-- Available subordination and/or overcollateralization.
Rating Actions
The rating affirmations reflect S&P's opinion that its projected
credit support and collateral performance on these classes has
remained relatively consistent with its prior projections.
Four of the transactions in this review had received funds related
to an August 2016 settlement regarding the alleged breach of
certain representations and warranties in the governing agreements
of 127 Washington Mutual Mortgage Securities Corp. (WAMU) and
JPMorgan Chase & Co. legacy RMBS trusts. Settlement proceeds for
these transactions were distributed during the February and March
2018 remittance periods. The trustee applied the settlement funds
as subsequent recoveries and unscheduled principal payments. As a
result, S&P raised its ratings on three classes from these four
transactions because their credit support sufficiently increased to
cover our projected losses at higher rating levels.
Five other transactions in this review had received funds related
to a July 2014 settlement regarding the alleged breach of certain
representations and warranties in the governing agreements of 330
JPMorgan Chase & Co. legacy RMBS trusts. Settlement proceeds were
distributed during the January 2018 remittance period. The trustee
applied the settlement funds as subsequent recoveries and
unscheduled principal payments. S&P said, "As a result, we raised
our ratings on 11 classes from these five transactions because
their credit support sufficiently increased to cover our projected
losses at higher rating levels. We also removed eight of these
raised ratings from CreditWatch positive."
S&P said, "We raised another 13 ratings from seven transactions by
five or more notches due to increased credit support attributed to
sequential principal payments because of failing cumulative loss
triggers. As a result, the upgrades on these classes reflect the
classes' ability to withstand a higher level of projected losses
than previously anticipated. We also raised our rating to 'BB+
(sf)' from 'CCC (sf)' on class A-4 from MASTR Asset Backed
Securities Trust 2006-FRE1 due to decreased delinquencies. Severe
delinquencies decreased to 26.41% in April 2018 from 46.74% during
the last review."
A list of Affected ratings can be viewed at:
https://bit.ly/2L3cH9p
*********
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