/raid1/www/Hosts/bankrupt/TCR_Public/190428.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, April 28, 2019, Vol. 23, No. 117
Headlines
ASCENTIUM EQUIPMENT 2019-1: Moody's Rates Class E Notes 'Ba2'
ASCENTIUM EQUIPMENT 2019-1: S&P Rates Class E Notes 'BB- (sf)'
BENEFIT STREET IV: S&P Affirms BB (sf) Rating on Class D-R Notes
CARLYLE GLOBAL 2012-4: Moody's Rates $27MM Class E-RR Notes 'Ba3'
CARLYLE GLOBAL 2012-4: S&P Withdraws BB (sf) Rating on E-R Notes
CASTLELAKE AIRCRAFT 2019-1: Fitch Rates $73MM Class C Notes 'BBsf'
CITIGROUP MORTGAGE 2019-RP1: Moody's Gives (P)C Rating to B-3 Notes
COMM 2010-C1: Fitch Affirms B- Rating on $12.9MM Class G Certs
CONN'S RECEIVABLES 2019-A: Fitch Rates $62.5MM Class C Notes 'Bsf'
DBCCRE 2014-ARCP: S&P Affirms BB- (sf) Rating on Class F Certs
DEEPHAVEN RESIDENTIAL 2019-2: S&P Rates Class B-2 Notes 'B-(sf)'
EATON VANCE 2019-1: Moody's Assigns (P)Ba3 Rating on Class E Notes
EXETER AUTOMOBILE 2019-2: S&P Rates Class E Notes 'BB(sf)'
GLS AUTO 2019-2: S&P Assigns Prelim BB- (sf) Rating to Cl. D Notes
JP MORGAN 2019-3: Moody's Assigns (P)B3 Rating on Class B-5 Notes
LCM 29: S&P Assigns Prelim BB-(sf) Rating to $13.6MM Class E Notes
LCM 30: S&P Rates Class E Floating-Rate Notes 'BB-(sf)'
LMRK ISSUER 2016-1: Fitch Affirms BB- on $25.1MM Class B Notes
METLIFE SECURITIZATION 2019-1: Fitch to Rate Class B2 Notes 'Bsf'
MMCF CLO 2019-2: S&P Assigns Prelim BB- (sf) Rating to Cl. D Notes
NATIXIS COMMERCIAL 2019-LVL: S&P Rates Class E Certs 'BB-(sf)'
NXT CAPITAL 2015-1: Moody's Rates $31MM Class E-R Notes 'Ba3'
NXT CAPITAL 2017-1: S&P Rates Class E-R Notes 'BB (sf)'
OAKTREE CLO 2019-1: S&P Assigns BB-(sf) Rating to Class E Notes
OBX TRUST 2019-EXP1: Fitch Rates $2.32MM Class B-5 Notes 'Bsf'
OMI TRUST 2002-B: S&P Lowers Class A-2 Notes Rating to 'CC (sf)'
RESIDENTIAL 2019: S&P Assigns Prelim B-(sf) Rating to Cl. 13 Notes
TABERNA PREFERRED V: Moody's Hikes Class A-1LAD Notes Rating to Ba2
THL CREDIT I: Moody Rates $22M Class E Notes 'Ba3'
TRINITAS CLO V: S&P Affirms BB (sf) Rating on Class E Notes
WELLS FARGO 2016-C34: Fitch Cuts Rating on $7.9MM F Certs to CCC
[*] S&P Takes Various Actions on 107 Classes From 15 US RMBS Deals
[*] S&P Takes Various Actions on 112 Classes From 13 US RMBS Deals
[*] S&P Takes Various Actions on 78 Classes From 22 U.S. RMBS Deals
*********
ASCENTIUM EQUIPMENT 2019-1: Moody's Rates Class E Notes 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Ascentium Equipment Receivables 2019-1 Trust,
sponsored by Ascentium Capital LLC. Ascentium is also the servicer
of the assets backing the transaction and the administrator for the
issuer.
The securitization is backed by leases secured by small-ticket
equipment, such as medical equipment, titled vehicles,
furniture/fixtures, computer equipment, etc.
The complete rating actions are as follows:
Issuer: Ascentium Equipment Receivables 2019-1 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 A1 (sf)
Class D Notes, Definitive Rating Assigned Baa2 (sf)
Class E Notes, Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The ratings are based on the credit quality of the equipment leases
to be securitized and its expected performance, the historical
performance of Ascentium's managed portfolio, the experience and
expertise of Ascentium as the originator and servicer, the back-up
servicing arrangement with U.S. Bank National Association (Aa1/P-1;
stable), the strength of the transaction structure including the
sequential pay structure and amount of credit enhancement
supporting the notes, and the legal aspects of the transaction.
Moody's cumulative net loss expectation for the ACER 2019-1
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
2019-1 transaction on an analysis of the credit quality of the
securitized pool; the historical performance of similar collateral,
including the Ascentium's previous securitizations' performance and
its managed portfolio performance; the ability of Ascentium 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 22.00%, 17.50%, 12.70%, 8.45% and 5.45% of hard
credit enhancement respectively. Initial, hard credit enhancement
for the notes consists of a combination of overcollateralization of
4.45%, a 1.00% fully funded, non-declining, reserve account and
subordination, except for the Class E notes which do not benefit
from subordination. Excess spread may be available as additional
credit protection for the notes.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans"
published in March 2019.
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 greater than expected 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.
ASCENTIUM EQUIPMENT 2019-1: S&P Rates Class E Notes 'BB- (sf)'
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Ascentium Equipment
Receivables 2019-1 Trust's receivables-backed notes.
The note issuance is an asset-backed securities (ABS) transaction
backed by small-ticket equipment leases and loans, associated
equipment, and a special unit of beneficial interest in lease
contracts and underlying vehicles.
The ratings reflect:
-- The availability of approximately 21.9%, 17.4%, 12.8%, 8.7%,
and 5.1% credit support to the class A, B, C, D, and E notes,
respectively, based on stressed break-even cash flow scenarios.
These credit support levels provide coverage (based on multiples in
S&P's equipment leasing criteria and, for ratings below the 'BBB'
category, S&P's securitized consumer receivables criteria) of the
rating agency's cumulative net loss range, which is consistent with
the ratings. S&P's cumulative net loss ranges from 3.60% to 4.30%
because it reflects the rating agency's stressed recovery rate
range of 15.00%-30.00%, with higher recovery rates assumed for
lower rating categories."
-- S&P's expectation that, under its credit stability analysis, in
a moderate stress ('BBB') scenario, all else being equal, the
ratings on the class A and B notes would not decline by more than
one rating from S&P's 'AAA (sf)' and 'AA (sf)' ratings,
respectively, and the ratings on the class C, D, and E notes would
not decline by more than two rating categories from S&P's 'A (sf)',
'BBB (sf)', and 'BB- (sf)' ratings, respectively, in the first
year. These potential rating movements are consistent with the
rating agency's credit stability criteria."
-- S&P's expectation for the timely payment of periodic interest
and principal by the final maturity date according to the
transaction documents, based on stressed cash flow modeling
scenarios that it believes are appropriate for the assigned rating
categories.
-- The collateral characteristics of the securitized pool of
equipment leases and loans, including individual obligor
concentrations of less than 1.50%, a high percentage of contracts
with personal guarantees, and no residual values. Ascentium Capital
LLC's historical recovery rates, which are generally higher than
those of other small ticket commercial finance companies. S&P
believes this because of the high percentage of personal guarantees
and the servicer's pursuit of realizations on them.
-- The presence of a backup servicer, U.S. Bank N.A.
-- The transaction's legal structure.
RATINGS ASSIGNED
Ascentium Equipment Receivables 2019-1 Trust
Class Rating Amount (mil. $)
A-1 A-1+ (sf) 79.000
A-2 AAA (sf) 147.500
A-3 AAA (sf) 83.454
B AA (sf) 17.656
C A (sf) 18.833
D BBB (sf) 16.675
E BB- (sf) 11.771
BENEFIT STREET IV: S&P Affirms BB (sf) Rating on Class D-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-RR,
A-2-RR, B-RR, and C-RR replacement notes from Benefit Street
Partners CLO IV Ltd., a collateralized loan obligation (CLO) that
originally closed in May 2014 and was subsequently reset in
December 2016, and is managed by Benefit Street Partners LLC. S&P
withdrew its ratings on the original class A-1-R, A-2-R, B-R, and
C-R notes following payment in full on the April 22, 2019,
refinancing date. At the same time, S&P affirmed its ratings on the
class D-R notes, which were not affected by the refinancing.
On the April 22, 2019, refinancing date, the proceeds from the
class A-1-RR, A-2-RR, B-RR, and C-RR replacement note issuances
were used to redeem the original class A-1-R, A-2-R, B-R, and C-R
notes as outlined in the transaction document provisions.
Therefore, S&P withdrew its ratings on the original notes in line
with their full redemption, and it assigned ratings to the
replacement notes.
The replacement notes are being issued via a supplemental indenture
at a lower spread over three-month LIBOR than the corresponding
original notes. There is no change to the reinvestment period
duration, which ends in January 2021, or to the transaction's legal
final maturity, scheduled for January 2029.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement notes
Class Amount Interest
(mil. $) rate (%)
A-1-RR 305.000 LIBOR + 1.25
A-2-RR 65.000 LIBOR + 1.75
B-RR 41.000 LIBOR + 2.65
C-RR 27.000 LIBOR + 3.80
Original notes
Class Amount Interest
(mil. $) rate (%)
A-1-R 305.000 LIBOR + 1.49
A-2-R 65.000 LIBOR + 2.05
B-R 41.000 LIBOR + 2.90
C-R 27.000 LIBOR + 4.05
"On a standalone basis, the results of the cash flow analysis
indicated a lower rating on the class D-R notes than its current
rating level. However, we believe that the transaction will benefit
from the drop in the weighted average cost of debt as a result of
this refinance," S&P said. Also, as the transaction enters its
amortization period following the end of its reinvestment period,
the transaction may begin to pay down the rated notes sequentially,
which, all else remaining equal, will begin to increase the
overcollateralization levels, according to the rating agency.
"In addition, because the transaction currently has minimal
exposure to 'CCC' rated collateral obligations and no exposure to
long-dated assets (i.e., assets maturing after the CLO's stated
maturity), we believe it is not currently exposed to large risks
that would impair the current rating on the notes," S&P said.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction, to estimate future
performance. In line with its criteria, the rating agency's cash
flow scenarios applied forward-looking assumptions on the expected
timing and pattern of defaults, and recoveries upon default, under
various interest rate and macroeconomic scenarios. In addition,
S&P's analysis considered the transaction's ability to pay timely
interest or ultimate principal or both to each of the rated
tranches. The results of the cash flow analysis -- and other
qualitative factors, as applicable -- demonstrated, in S&P's view,
that all of the rated outstanding classes have adequate credit
enhancement to support the rating levels assigned.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as we deem
necessary," S&P said.
RATINGS ASSIGNED
Benefit Street Partners CLO IV Ltd.
Replacement class Ratings Amount (mil $)
A-1-RR AAA (sf) 305.000
A-2-RR AA (sf) 65.000
B-RR A (sf) 41.000
C-RR BBB (sf) 27.000
RATING AFFIRMED
Benefit Street Partners CLO IV Ltd.
Class Rating
D-R BB (sf)
RATINGS WITHDRAWN
Ratings
Original class To From
A-1-R NR AAA (sf)
A-2-R NR AA (sf)
B-R NR A (sf)
C-R NR BBB (sf)
NR--Not rated.
CARLYLE GLOBAL 2012-4: Moody's Rates $27MM Class E-RR Notes 'Ba3'
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
CLO refinancing notes issued by Carlyle Global Market Strategies
CLO 2012-4, Ltd.:
Moody's rating action is as follows:
US$1,300,000 Class X-RR Senior Secured Floating Rate
Notes due 2032 (the "Class X-RR Notes"), Assigned Aaa (sf)
US$372,000,000 Class A-1-RR Senior Secured Floating Rate
Notes due 2032 (the "Class A-1-RR Notes"), Assigned Aaa (sf)
US$12,000,000 Class A-2-RR Senior Secured Floating Rate Notes
due 2032 (the "Class A-2-RR Notes"), Assigned Aaa (sf)
US$27,000,000 Class E-RR Junior Secured Deferrable Floating
Rate Notes due 2032 (the "Class E-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.
Carlyle CLO Management L.L.C. (the "Manager") manages the CLO. It
directs the selection, acquisition, and disposition of collateral
on behalf of the Issuer.
RATINGS RATIONALE
The rationale for the rating is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.
The Issuer has issued the Refinancing Notes on April 22, 2019 in
connection with the refinancing of all classes of secured notes
previously refinanced on October 20, 2016 and originally issued on
December 12, 2012. On the Second Refinancing Date, the Issuer used
proceeds from the issuance of the Refinancing Notes, along with the
proceeds from the issuance of three other classes of secured notes,
to redeem in full the Refinanced Original Notes.
In addition to the issuance of the Refinancing Notes and 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 March 2019.
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: $594,711,117
Defaulted par: $7,578,482
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3001
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.7%
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
March 2019.
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.
CARLYLE GLOBAL 2012-4: S&P Withdraws BB (sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-RR, B-RR,
C-RR, and D-RR replacement notes, as well as to the new class X-RR
notes, from Carlyle Global Market Strategies CLO 2012-4 Ltd., a
collateralized loan obligation (CLO) originally issued on Dec. 12,
2012, and managed by Carlyle CLO Management LLC. The replacement
class A-2-RR and E-RR notes are not rated by S&P Global Ratings.
The replacement notes were issued via a third supplemental
indenture.
The ratings reflect S&P's view of the transaction's portfolio
characteristics and collateral manager, as well as the results of
the collateral quality tests and its quantitative analysis, among
other factors.
On the April 22, 2019, second refinancing date, the proceeds from
the issuance of the replacement notes (combined with available
proceeds in the transaction) were used to redeem the outstanding
notes. Therefore, S&P withdrew the ratings on the outstanding notes
and assigned ratings to the class A-1-RR, B-RR, C-RR, and D-RR
replacement notes, as well as to the new class X-RR notes. The
replacement class A-2-RR and E-RR notes are not rated by S&P Global
Ratings.
The replacement notes were issued via a third supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Amend the reinvestment period to April 22, 2024, from Jan. 20,
2021.
-- Extend the non-call period to April 22, 2021, from Jan. 20,
2019.
-- Extend the weighted average life test to nine years (calculated
from the April 22, 2019, second refinancing date) from 8.25 years
(calculated from the Oct. 20, 2016, first refinancing date).
-- Extend the legal final maturity date on the rated and
subordinated notes to April 22, 2032, from Jan. 20, 2029.
-- Issue additional class X-RR senior secured floating-rate notes,
which are expected to be paid down using interest proceeds in eight
equal quarterly installments of $162,500, beginning with the second
payment date following the second refinancing date.
-- Amend the minimum thresholds on the coverage tests, as well as
add an additional class E interest coverage test.
A portion of the underlying collateral held in the transaction's
principal collection account will be designated as interest
proceeds for payment on the second refinancing date, with the
remaining collateral following the April 2019 second refinancing
date totaling approximately $602.56 million.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Second Refinancing Replacement Notes
Amount Interest
Class (mil. $) rate (%)
A-1-RR 372.00 Three-month LIBOR + 1.36
A-2-RR 12.00 Three-month LIBOR + 1.70
B-RR 72.00 Three-month LIBOR + 1.90
C-RR 39.00 Three-month LIBOR + 2.90
D-RR 30.00 Three-month LIBOR + 3.90
E-RR 27.00 Three-month LIBOR + 7.29
X-RR 1.30 Three-month LIBOR + 0.75
Subordinated notes 61.55 N/A
First Refinancing Replacement Notes
Amount Interest
Class (mil. $) rate (%)
A-R 377.50 Three-month LIBOR + 1.45
B-R 80.50 Three-month LIBOR + 1.90
C-1-R 41.90 Three-month LIBOR + 2.60
C-2-R 5.00 3.90
D-R 27.80 Three-month LIBOR + 4.10
E-R 26.00 Three-month LIBOR + 7.51
Subordinated notes 61.55 N/A
Original Notes(i)
Amount Interest
Class (mil. $) rate (%)
A 377.50 Three-month LIBOR + 1.39
B-1 60.50 Three-month LIBOR + 2.25
B-2 20.00 3.5696
C 46.90 Three-month LIBOR + 3.25
D 27.80 Three-month LIBOR + 4.50
E 26.00 Three-month LIBOR + 5.50
Subordinated notes 61.55 N/A
(i)All original notes other than the subordinated notes were
redeemed on the Oct. 20, 2016, first refinancing date.
N/A--Not applicable.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the trustee
report, to estimate future performance. In line with its criteria,
S&P's 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, the rating agency's analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary," S&P said.
RATINGS ASSIGNED
Carlyle Global Market Strategies CLO 2012-4 Ltd./ Carlyle Global
Market Strategies CLO 2012-4 LLC
Replacement class Rating Amount (mil. $)
A-1-RR AAA (sf) 372.00
A-2-RR NR 12.00
B-RR AA (sf) 72.00
C-RR A (sf) 39.00
D-RR BBB- (sf) 30.00
E-RR NR 27.00
X-RR AAA (sf) 1.30
Subordinated notes NR 61.55
RATINGS WITHDRAWN
Carlyle Global Market Strategies CLO 2012-4 Ltd./ Carlyle Global
Market Strategies CLO 2012-4 LLC
Class Rating (To) Rating (From)
A-R NR AAA (sf)
B-R NR AA (sf)
C-1-R NR A (sf)
C-2-R NR A (sf)
D-R NR BBB (sf)
E-R NR BB (sf)
NR--Not rated.
CASTLELAKE AIRCRAFT 2019-1: Fitch Rates $73MM Class C Notes 'BBsf'
------------------------------------------------------------------
Fitch Ratings assigns the following ratings and Outlooks to the
notes issued by Castlelake Aircraft Structured Trust 2019-1 (CLAS
2019-1):
-- $679,420,000 class A notes 'Asf'; Outlook Stable;
-- $114,979,000 class B notes 'BBBsf'; Outlook Stable;
-- $73,168,000 class C notes 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Collateral Quality - Mostly Liquid Narrowbody Aircraft: The
pool is largely liquid, mid-life A320s and B737s with a nine-year
weighted average age. Two widebody B777-300ERs and one A330 total
28.4%, which are prone to higher transition costs. Notably, 13.8%
of the initial contracted cash flow is from one of the B777-300ER
aircraft. No aircraft will come off-lease until 2020, and 48.1% of
the pool comes off lease in 2024-2025.
Asset Value and Lease Rate Volatility: Fitch derives assumed
initial aircraft values from various appraisal sources and employs
future aircraft value and disposition stresses in its analysis.
These take into account aircraft age and marketability to simulate
the decline in values and lease rates expected to occur over the
course of multiple aviation market downturns.
Operational and Servicing Risk - Adequate Servicing Capability: The
transaction will be heavily reliant on Castlelake to remarket and
repossess aircraft, adequately manage and monitor the technical
upkeep of the aircraft, and legally protect trust assets in
multiple foreign jurisdictions. Fitch considers Castlelake a strong
servicer of mid- to end-of-life aircraft, evidenced by performance
of their total fleet and prior ABS, which have all performed within
expectations to date.
Lessee Credit Risk - Weak Credits: Most of the pool's 14 obligors
(13 lessees and the obligor under the promissory notes) are either
unrated or speculative-grade credits, typical of aircraft ABS.
However, Fitch does publically rate one lessee, GOL, at 'B', with
WestJet (BBB-/Negative) rated by another NRSRO. Fitch assumed a 'B'
or 'CCC' Issuer Default Rating for unrated lessees and stressed
IDRs downward in recessions, consistent with prior analyses.
Transaction Structure: The performance triggers and amortization
profiles have improved relative to CLAS 2018-1, as the senior
notes' schedules are faster and partial cash sweeps have been added
to the waterfall. The loan-to-value ratios (LTVs), utilizing the
maintenance-adjusted base values (MABVs), are 65.0%, 76.0%, and
83.0% for the class A, B, and C notes, respectively, all down from
2018-1. Fitch stresses initial LTVs to 69.1%, 80.8%, and 88.3% in
cash flow modeling scenarios by using lower initial aircraft
values. All series pay in full prior to their legal final maturity
dates when applying cash flows commensurate with the ratings.
Aviation Market Cyclicality: The commercial aviation industry has
exhibited significant cyclicality tied to the health of the overall
global economy. This cyclicality can produce increased lessee
defaults, lower demand for off-lease aircraft, and deterioration in
lease rates and asset values. Fitch stresses asset values,
utilization levels, lease rates and default probability during
assumed market down cycles to account for this risk.
RATING SENSITIVITIES
The performance of aircraft ABS can be affected by various factors,
which, in turn, could have an impact on the assigned ratings. Fitch
conducted multiple rating sensitivity analyses to evaluate the
impact of changes to a number of the variables in the analysis.
These sensitivity scenarios were also considered in determining
Fitch's recommended ratings.
Increased competition, largely from newly established APAC lessors,
has contributed to declining lease rates in the aircraft leasing
market over the past few years. Additionally, certain variants have
been more prone to value declines and lease rates due to oversupply
issues. Fitch performed a sensitivity analysis assuming lease rate
factors would not increase after an aircraft reached 11 years of
age, providing a material haircut to future lease cash flow
generation. Per Fitch's criteria LRF curve, no subsequent leases
were executed at a LRF greater than 1.13%.
Cash flow generated in this scenario declined from the primary
scenario by 6%-7%. All three series pass their respective rating
scenarios, and should not experience rating downgrades.
All aircraft in the pool face replacement programs over the next
decade, particularly the A320ceo and B737 NG aircraft in the form
of A320neo and B737 MAX aircraft, which have already started
delivering. Airbus plans to deliver the A330neo later this year,
which if received well, could affect the existing A330 fleet.
Certain appraisers have started to adjust market values in response
to this replacement risk; the majority of the pool's market value
appraisals are slightly lower than half-life base values. Fitch
believes current generation aircraft are well insulated due to
large operator bases and the long lead time for full replacement,
particularly when considering conservative retirement ages and
aggressive production schedules for Airbus and Boeing new
technology.
However, Fitch believes a sensitivity scenario is warranted to
address these risks. Therefore, Fitch utilized a scenario in which
the lower-of-mean-and-median (LMM) of market values from each
appraiser was utilized to determine each aircraft's value. Fitch
additionally utilized a 25% residual assumption rather than the
base level of 50% to stress end-of-life proceeds for each asset in
the pool. Lease rates drop fairly significantly under this
scenario, and aircraft are essentially sold for scrap at the end of
their useful lives. In addition, the first recession was assumed to
start two years following transaction close.
This scenario is the most stressful compared with the other two
scenarios, as 'Asf' cash flow drops to $1.01 billion, compared with
$1.12 billion in the primary scenario. The class A notes barely
fail the 'Asf' scenario, while the class B notes only pass the
'BBsf' and 'Bsf' scenarios. The class C notes would likely fall to
'Bsf' due to the severe drop in cash flows.
Although a relevant scenario to consider, Fitch believes the
stresses are very conservative, particularly when considering
observed market values for current generation A320s and B737s.
Fitch does not expect a significant effect from the neo or MAX
variants until well into the next decade.
As the tenure of the leases is materially shorter than that of the
transaction, new leases will continue to be executed over time. As
such, the future pool mix is unknown. Airlines are generally
speculative-grade credits and are sensitive to global economic
downturns. As aircraft are leased across the globe, some may be
placed in jurisdictions where repossession of aircraft may prove to
be more difficult than in others. As such, Fitch considered a
scenario in which the lessees in the pool performed notably worse
than Castelake's historical experience.
Fitch assumed that all unrated airlines had a default probability
in line with a 'CCC' credit. This rating was assumed to decline to
'CC' during recessionary periods. Furthermore, Fitch's assumed
repossession time was increased by one month under all scenarios.
Such assumptions are materially conservative, as the default rate
and aircraft downtime significantly increases over the primary
scenarios.
This scenario is more taxing on the structure than the LRF
sensitivity as additional stress is immediately felt as a result of
defaulting lessees. Under the rating scenarios, gross cash flow
declines approximately $120 million-$152 million while expenses
increased approximately $31million-$41 million as a result of the
increased repossession and remarketing activity. Class A is unable
to pass the 'Asf' scenario, but passes 'BBBsf' and below. Class B
is able to pass under the 'BBsf' scenario, while class C is locked
out from receiving any principal payments. Class C is unable to
pass the 'Bsf' scenario. Such a stress is likely to result in the
class A and B notes experiencing downgrades of up to one category,
while the class C notes could fall to distressed categories.
The pool includes three widebody aircraft that make up a
significant portion of the initial contracted cash flow from the
pool. Fitch ran a sensitivity scenario where all three of these
lessees were assumed to default on day one. Although cash flows
drop slightly in these runs due to the increased downtime and
expenses related to the assumed defaults, there was no impact on
the ratings.
TRANSACTION SUMMARY
CLAS 2019-1 used the note proceeds to acquire the aircraft-owning
entity (AOE) series A, B and C notes issued by CLSec Holdings 18S
DAC and CLSec Holdings 19S LLC (collectively, the AOE issuers).
Each AOE issuer used the note proceeds to acquire 28 midlife
aircraft and four promissory notes secured by one aircraft each
from funds affiliated with and managed by Castlelake, L.P.
(Castlelake) and certain third-party sellers.
The pool is serviced by Castlelake Aviation Holdings (Ireland)
Limited, which entered into a sub-servicing agreement with
Castlelake, with the notes secured by each aircraft's future lease
and residual cash flows and principal and interest owed on the
promissory notes. This is the second Fitch-rated aircraft ABS
serviced by Castlelake (NR) and Fitch last rated the CLAS 2018-1
transaction, which closed in June 2018. Castlelake has sponsored
and serviced five prior aircraft ABS since 2014.
Funds managed by Castlelake, the sellers of the aircraft to CLAS
2019-1, will initially retain a portion of the class C notes and
will also provide the equity to the transaction, consistent with
similar investments made by the funds in prior CLAS transactions.
Therefore, Castlelake will have a vested interest in performance
outside of merely collecting servicing fees. Fitch views this
positively since Castlelake will have a significant interest in
servicing the transaction adequately and generating positive cash
flows through management of the assets over the life of the
transaction.
As of March 27, 2019, Castlelake funds own 14 of the pool's 28
aircraft and all four promissory notes, with the remaining 14
aircraft owned and/or managed by four other lessors/airlines. The
14 aircraft are subject to executed purchase agreements or letters
of intent (LOIs) for sale to Castlelake funds. Castlelake funds
will acquire and transfer these remaining assets to the AOE issuers
and their subsidiaries during the contribution period. Fitch views
this negatively, since the pool will be exposed to counterparty
risks, particularly if any agreements or LOIs are not finalized
during the contribution period.
The contribution period will end 360 days from closing, longer than
periods in most prior aircraft ABS that have typically lasted 270
days. Fitch views this negatively, since initial cash flows may be
lower in the first year if certain aircraft are not novated in a
timely fashion. Additionally, the longer the contribution period
is, the longer the pool will be exposed to risks associated with a
bankruptcy of Castlelake and the counterparties that own aircraft
in the proposed pool. However, if any aircraft or replacements are
not transferred, the applicable debt amount will be prepaid to
noteholders from the acquisition account, offsetting this risk.
The senior amortization schedule is faster than in CLAS 2018-1,
with 12.5 year schedules for the majority of the assets, plus 10
year schedules for the two 777 aircraft and 6.5 year schedules for
the four promissory notes. This compares to, in the prior
transaction, 14 years for all assets for years one to three and
then 12 years thereafter. Additionally, unlike CLAS 2018-1, partial
cash sweeps are included in the waterfall, which are positive
additions to the structure and are consistently included in many
recent mid- to end-of-life aircraft ABS transactions.
CITIGROUP MORTGAGE 2019-RP1: Moody's Gives (P)C Rating to B-3 Notes
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Moody's Investors Service has assigned provisional ratings to seven
classes of notes issued by Citigroup Mortgage Loan Trust 2019-RP1,
which are backed by one pool of primarily re-performing residential
mortgage loans. As of the cut-off date of March 31, 2019, the
collateral pool is comprised of 1,330 first lien mortgage loans,
with a weighted average updated primary borrower FICO score of 662,
a WA current loan-to-value Ratio of 93.5% and a total unpaid
balance of $262,812,561. Total deal balance is $264,016,710 which
includes a pre-existing servicing advance of $1,204,150.
Approximately 11.3% of the pool balance is non-interest bearing,
which consists of both principal reduction alternative (PRA) and
non-PRA deferred principal balance.
Fay Servicing, LLC will be the primary servicer and will not
advance any principal or interest on the delinquent loans. However,
it will be required to advance costs and expenses incurred in
connection with a default, delinquency or other event in the
performance of its servicing obligations.
The complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2019-RP1
Class A-1, Assigned (P)Aaa (sf)
Class M-1, Assigned (P)Aa2 (sf)
Class M-2, Assigned (P)A3 (sf)
Class M-3, Assigned (P)Baa3 (sf)
Class B-1, Assigned (P)Ba3 (sf)
Class B-2, Assigned (P)B3 (sf)
Class B-3, Assigned (P)C (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected losses on CMLTI 2019-RP1's collateral pool average
13.0% in its base case scenario. Its loss estimates take into
account the historical performance of loans that have similar
collateral characteristics as the loans in the pool. The credit
opinion is the result of its analysis of a wide array of
quantitative and qualitative factors, a review of the third-party
review of the pool, servicing framework and the representations and
warranties framework.
The methodologies used in these ratings were "Moody's Approach to
Rating Securitizations Backed by Non-Performing and Re-Performing
Loans" published in Februay 2019 and "US RMBS Surveillance
Methodology" published in Februay 2019.
Collateral Description
CMLTI 2019-RP1's collateral pool is primarily comprised of
re-performing mortgage loans. About 88.8% of mortgage loans in the
pool have been previously modified.
Moody's based its expected losses on its estimates of 1) the
default rate on the remaining balance of the loans and 2) the
principal recovery rate on the defaulted balances. The two factors
that most strongly influence a re-performing mortgage loan's
likelihood of re-default are the length of time that the loan has
performed since a loan modification, and the amount of the
reduction in the monthly mortgage payment as a result of the
modification. The longer a borrower has been current on a
re-performing loan, the less likely the borrower is to re-default.
Approximately 49.7% of the borrowers have been current on their
payments for at least the past 24 months under the MBA method of
calculating delinquencies.
Moody's estimated expected losses for the pool using two approaches
-- (1) pool-level approach, and (2) re-performing loan level
analysis.
In the pool-level approach, Moody's estimates losses on the pool
using an approach similar to its surveillance approach whereby it
applies assumptions of future delinquencies, default rates, loss
severities and prepayments based on observed performance of similar
collateral. Moody's projects future annual delinquencies for eight
years by applying an initial annual default rate and delinquency
burnout factors. Based on the loan characteristics of the pool and
the demonstrated pay histories, Moody's expects an annual
delinquency rate of 11% on the collateral pool for year one.
Moody's then calculated future delinquencies on the pool using its
default burnout and voluntary conditional prepayment rate
assumptions. The delinquency burnout factors reflect its future
expectations of the economy and the U.S. housing market. Moody's
then aggregated the delinquencies and converted them to losses by
applying pool-specific lifetime default frequency and loss severity
assumptions. The loss severity assumptions are based off observed
severities on liquidated seasoned loans and reflect the lack of
principal and interest advancing on the loans.
Moody's collateral pool. It applied loan-level baseline lifetime
propensity to default assumptions, and considered the historical
performance of seasoned loans with similar collateral
characteristics and payment histories. It then adjusted this base
default propensity up for (1) adjustable-rate loans, (2) loans that
have the risk of coupon step-ups and (3) loans with high updated
loan to value ratios (LTVs). It applied a higher baseline lifetime
default propensity for interest-only loans, using the same
adjustments. To calculate the expected loss for the pool, it
applied a loan-level loss severity assumption based on the loans'
updated estimated LTVs. Moody's further adjusted the loss severity
assumption upwards for loans in states that give super-priority
status to homeowner association (HOA) liens, to account for
potential risk of HOA liens trumping a mortgage.
As of the cut-off date, approximately 11.3% of the pool balance is
non-interest bearing, which consists of both PRA and non-PRA
deferred principal balance. However, the PRA deferred amount of
$572,484 will be carved out as a separate Class PRA note.
For non-PRA forborne amounts, the deferred balance is the full
obligation of the borrower and must be paid in full upon (i) sale
of property (ii) voluntary payoff or (iii) final scheduled payment
date. Upon sale of the property, the servicer therefore could
potentially recover some of the deferred amount. For loans that
default in future or get modified after the closing date, the
servicer may opt for partial or full principal forgiveness to the
extent permitted under the servicing agreement. Based on
performance and information from servicers, Moody's applied a
slightly higher default rate than what it assumed for the overall
pool given that these borrowers have experienced past credit events
that required loan modification, as opposed to borrowers who have
been current and have never been modified. In addition, it assumed
approximately 95% severity as the servicer may recover a portion of
the deferred balance. Its expected loss does not consider the PRA
deferred amount.
Transaction Structure
The securitization has a simple sequential priority of payments
structure without any cash flow triggers. The servicer will not
advance any principal or interest on delinquent loans. However, the
servicer will be required to advance costs and expenses incurred in
connection with a default, delinquency or other event in the
performance of its servicing obligations. Credit enhancement in
this transaction is comprised of subordination provided by
mezzanine and junior tranches and loss allocation to the
subordinate bonds. To the extent excess cashflow is available, it
will be used to pay down additional principal of the bonds
sequentially, building overcollateralization.
Moody's ran 96 different loss and prepayment scenarios through its
cash flow model. The scenarios encompass six loss levels, four loss
timing curves, and four prepayment curves. The structure allows for
timely payment of interest and ultimate payment of principal with
respect to the notes by the legal final maturity.
Third Party Review
The sponsor engaged third party diligence providers to conduct the
following due diligence reviews: (i) a title/lien review to confirm
the appropriate lien was recorded and the position of the lien and
to review for other outstanding liens and the position of those
liens; (ii) a state and federal regulatory compliance review on the
loans; (iii) a payment history review for the three year period (to
the extent available) to confirm that the payment strings matched
the data supplied by or on behalf of the third-party sellers; and
(iv) a data comparison review on certain characteristics of the
loans.
Based on its analysis of the TPR reports, Moody's determined that a
portion of the loans with some cited violations are at enhanced
risk of having violated TILA through an under-disclosure of the
finance charges or other disclosure deficiencies. Although the TPR
report indicated that the statute of limitations for borrowers to
rescind their loans has already passed, borrowers can still raise
these 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 increased its base case losses for these loans to account
for such damages.
The seller will create a custodian exception report on the closing
date consisting of three major categories (i) mortgage notes
released to a bailee, (ii) missing mortgage and (iii) missing and
incomplete final assignments and note endorsements. The seller is
obligated to cure these exception or repurchase the loan within 24
months from the closing date. This is a change from the previously
rated CMLTI deals, in which the issuer will cure the exception
within 12 months from the closing date or will be obligated to
repurchase. Moody's is credit neutral about this change as it
anticipates lower percentage of loans to fall into serious
delinquency within the first 24 months. In addition, based on the
historical performance of three rated CMLTI transactions in 2018,
the seller has been actively clearing exceptions within the first
few months of closing.
The diligence provider noted 40 delinquent property tax exceptions.
Loans with these findings are not removed from the final pool,
however, the seller is obligated to cure the exception or
repurchase the loan within 12 months of the closing date. In
addition, the diligence provider noted 27 HOA lien exceptions and
71 municipal liens exceptions. If any of the mortgage loans with
these exceptions result in a Realized Loss to the trust then the
Seller will be obligated to make a "make whole" payment to the
trust which is the lower of (i) amount necessary to cure the
exception, and (ii) the amount of related realized loss. This is a
change from the previously rate CMLTI deals, in which the issuer
will be obligated to cure the exception or repurchase the loan
within 12 months from the closing date. Moody's considers this
change to be credit neutral as the total HOA and municipal lien
amount ($368,977) is a small percentage of the total pool balance
and if it is determined that a realized loss was caused by the HOA
or the municipal lien exception in existence on the Closing Date
and was not subsequently cured thereafter, the seller will be
obligated to make a "make whole" payment to the trust in amount
equal to the lesser of (i) the amount necessary to cure the
exception and (ii) the amount of the related realized loss.
The review also consisted of validating 42 data fields for each
loan in the pool which resulted in 740 loans having one or more
data variances. It was determined that such data variances were
attributable to missing or defective source documentation,
non-material variances within acceptable tolerances, allocation
between documented and undocumented deferred principal balances,
timing and data formatting differences. Moody's did not make any
adjustments for these findings.
Representations & Warranties (R&W)
The R&W framework for this transaction is adequate. The scope of
the R&Ws are somewhat weaker compared to prior CMLTI
securitizations rated by us owing mainly to items identified in the
TPR being excluded from the R&Ws. However, the overall framework is
still adequate as there are well-defined breach discovery and
enforcement mechanisms and provisions that obligate the R&W
provider despite lack of its knowledge (R&W knowledge clawback
provisions).
The R&W provider is Citigroup Global Markets Realty Corp. Although
it itself is unrated, it is affiliated with an investment grade
entity, Citigroup Inc., though Citigroup Inc. has no contractual
obligation with respect to R&W breaches.
There is a good chance that any R&W breaches will be discovered
because an independent party is obligated to review for R&W
breaches if:
(i) a loan was at least 120 days delinquent following a threshold
event, which is satisfied if the sum of cumulative realized loss
and unpaid principal balance of 120+ days delinquent loans (current
trigger amount) within the first three years exceeds 50% of
aggregate class B-3, class B-4 and class B-5 balance as of the
closing date or the current trigger amount exceeds 75% of aggregate
class B-3, class B-4 and class B-5 balance as of the closing date
thereafter.
(ii) a loan was liquidated at a loss if certain conditions
including but not limited to a reviewer waiver from controlling
holder or if the review fees and expenses were less than the loss
amount
(iii) the servicer has made a determination that it cannot
foreclose upon the loan
If the breach reviewer (an independent third party) identifies a
R&W breach, the R&W provider will be obligated to either cure the
breach, repurchase or substitute the loan, or pay for any loss if
the loan has been liquidated. The R&W provider will also cover
losses incurred due to a servicer's inability to foreclose on the
mortgage. If the R&W Provider disputes the findings, there is
binding arbitration to resolve the dispute. The loser of the
arbitration pays all the expenses.
There are a few weaknesses in the enforcement mechanisms. First,
the independent reviewer is not identified at closing and, if the
indenture trustee has difficulty engaging one on acceptable terms,
the controlling holder can direct the trustee not to engage one.
Furthermore, the review fees, which the trust pays, are not agreed
upon at closing and will be determined in the future. Second, the
remedies do not cover damages owing to TILA under-disclosures.
Moody's made adjustments to account for such damages in its
analysis. Finally, there will be no remedy for an insurance-related
R&W if there is an insurance policy rescission.
Trustee Indemnification
Moody's believes there is a very low likelihood that the rated
notes in CMLTI 2019-RP1 will incur any loss from extraordinary
expenses or indemnification payments owing to potential future
lawsuits against key deal parties. First, majority of the loans are
seasoned with demonstrated payment history, reducing the likelihood
of a lawsuit on the basis that the loans have underwriting defects.
Second, historical performance of loans aggregated by the sponsor
to date has been within expectation, with minimal losses on
previously issued CMLTI transactions. Third, the transaction has
reasonably well defined processes in place to identify loans with
defects on an ongoing basis. In this transaction a well-defined
breach discovery and enforcement mechanism reduces the likelihood
that parties will be sued for inaction.
Transaction Parties
Fay will be the primary servicer for all loans in the pool. Wells
Fargo Bank, N.A. and Deutsche Bank National Trust Company will act
as custodians. U.S. Bank National Association will be the trust
administrator, U.S. Bank Trust National Association will be the
owner trustee and Wilmington Savings Fund Society, FSB will be the
indenture trustee.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that would lead to an upgrade of the ratings
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 its 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.
Factors that would lead to a downgrade of the ratings
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligors defaulting or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
COMM 2010-C1: Fitch Affirms B- Rating on $12.9MM Class G Certs
--------------------------------------------------------------
Fitch Ratings has affirmed ten classes of Deustche Bank Securities
COMM 2010-C1 commercial mortgage pass-through certificates.
KEY RATING DRIVERS
High Retail Concentration; Potential for Outsized Losses: Loans
secured by retail properties comprise 78% of the current pool
balance, including the four largest loans (70%). Two loans (20%)
are currently on the master servicer's watchlist. Fitch designated
four loans (56%) as Fitch Loans of Concern (FLOCs), including the
largest loan, The Fashion Outlets of Niagara Falls (34.6%), the
third largest loan, Auburn Mall (11.9%), the fifth largest loan,
One Federal Place (8%), and a dark Walgreens in Lilburn, GA (1.1%).
The Fashion Outlets of Niagara Falls is an outlet center located in
Niagara, NY near the border between the United States and Canada.
The property has reported significantly lower sales since issuance,
as well as declining occupancy, coupled with upcoming lease
rollover concerns. Performance at this outlet property is heavily
reliant on tourism. The Auburn Mall, a regional mall in Auburn, MA
anchored by Sears and a non-collateral Macy's, has experienced
declining sales since issuance. The mall lost an anchor tenant,
Macy's Home, in 2015 and the space has been converted into a
two-story medical center occupied by Reliant Medical Group, which
opened in February 2019. Both loans mature in fourth-quarter 2020.
Sufficient Credit Enhancement to Offset Losses: Credit enhancement
has minimally improved since Fitch's last rating action due to
scheduled amortization. As of the April 2019 distribution date, the
pool's aggregate principal balance has paid down by 63.9% to $309.6
million from $857 million at issuance. Ten loans (95% of pool) are
currently amortizing. Five loans (5%) are full-term interest-only.
Alternative Loss Scenario: Due to refinance concerns of the Fashion
Outlets of Niagara Falls and Auburn Mall, a sensitivity test was
performed that assumed a 25% loss severity on both malls given
concerns with performance and upcoming maturities in 2020. In
addition, this scenario included expected paydown of the
transaction from loans maturing in 2020 that are not designated as
FLOCs. The ratings and Outlooks reflect this additional analysis.
Pool Concentrations: The pool is highly concentrated, with only 15
loans remaining. 78% of the pool is secured by retail properties
including the top three loans. There is refinance risk with all of
the remaining loans maturing in 2020.
RATING SENSITIVITIES
The Negative Outlooks on Classes C through G reflect the high
retail concentration and declining performance of the two largest
FLOCs. These classes could be subject to downgrades should the
performance of the Fashion Outlets of Niagara Falls and the Auburn
Mall further decline and or the loans fail to pay off at maturity.
Fitch's additional sensitivity scenario reflects an outsized loss
of 25% on The Fashion Outlets of Niagara Falls loan and the Auburn
Mall loan and factored in expected paydown of the transaction from
loans maturing in 2020 that are not designated as FLOCs. All of the
remaining loans mature in 2020.The Rating Outlooks on classes A-3
and B remain Stable due to sufficient credit enhancement resulting
from scheduled amortization.
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:
-- $160.7 million class A-3 at 'AAAsf', Outlook Stable;
-- Interest-only class XP-A at 'AAAsf', Outlook Stable;
-- Interest-only class XS-A at 'AAAsf', Outlook Stable;
-- Interest-only class XW-A at 'AAAsf', Outlook Stable;
-- $24.6 million class B at 'AAAsf', Outlook Stable;
-- $28.9 million class C at 'AAAsf', Outlook Negative;
-- $45 million class D at 'Asf', Outlook Negative;
-- $7.5 million class E at 'BBB-sf', Outlook Negative;
-- $12.8 million class F at 'BBsf', Outlook Negative;
-- $12.9 million class G at 'B-sf', Outlook Negative.
Classes A-1, A-1D and A-2 have paid in full. Fitch does not rate
the interest-only class XW-B or the $17.1 million class H.
CONN'S RECEIVABLES 2019-A: Fitch Rates $62.5MM Class C Notes 'Bsf'
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings to Conn's
Receivables Funding 2019-A, LLC, which consists of notes backed by
retail loans originated and serviced by Conn Appliances, Inc.:
-- $254,530,000 class A notes 'BBBsf'; Outlook Stable;
-- $64,750,000 class B notes 'BBsf'; Outlook Stable;
-- $62,510,000 class C notes 'Bsf'; Outlook Stable;
-- Class R notes 'NR'.
KEY RATING DRIVERS
Subprime Collateral Quality: Conn's has a weighted average FICO of
607, and 11.8% of the loans have scores below 550 or no score.
Fitch assigned a base case default rate of 25% and applied a 2.2x
stress at the 'BBBsf' level. The default multiple reflects the high
absolute value of the historical defaults, the variability of
default performance in recent years and the high geographical
concentration.
Rating Cap at 'BBBsf': Due to the subprime credit risk profile of
the customer base, higher loan defaults in recent years, management
changes at Conn's, the high concentration of receivables from Texas
and servicing continuity risk due to in-store payments, Fitch
placed a rating cap on this transaction at 'BBBsf'.
Stabilizing Asset Performance: Cumulative defaults increased with
each successive vintage from fiscal year 2012 through FY2017 as the
company aggressively expanded its originations. Early performance
indicators on the FY2018 vintage suggest some stabilization. Fitch
focused on the FY2017 and FY2018 periods for default assumption
derivation to project future portfolio performance.
Adequate Servicing Capabilities: Conn Appliances, Inc. has a long
track record as an originator, underwriter and servicer. The credit
risk profile of the entity is mitigated by the backup servicing
provided by Systems & Services Technologies, Inc., which has
committed to a servicing transition period of 30 days. Fitch
considers all parties to be adequate servicers for this pool based
on prior experience and capabilities.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults or write-offs
on customer accounts could produce loss levels higher than the base
case and would likely result in declines of credit enhancement and
remaining loss coverage levels available to the investments.
Decreased CE may make certain ratings on the investments
susceptible to potential negative rating actions, depending on the
extent of the decline in coverage.
Rating sensitivities provide greater insight into the model-implied
sensitivities the transaction faces when one or two risk factors
are stressed while holding others equal. The modeling process first
uses the estimation and stress of a base case loss assumption to
reflect asset performance in a stressed environment. Second,
structural protection was analyzed with Fitch's proprietary cash
flow model. The results below should only be considered as one
potential outcome as the transaction is exposed to multiple risk
factors that are all dynamic variables.
-- Default increase 10%: class A 'BBB-sf'; class B 'BBsf'; class
C below 'CCCsf';
-- Default increase 25%: class A 'BB+sf'; class B 'B+sf'; class C
below 'CCCsf';
-- Default increase 50%: class A 'BBsf'; class B below 'CCCsf';
class C below 'CCCsf';
-- Recoveries decrease to 0%: class A 'BBB-sf'; class B 'BBsf';
class C 'B-sf'.
DBCCRE 2014-ARCP: S&P Affirms BB- (sf) Rating on Class F Certs
--------------------------------------------------------------
S&P Global Ratings affirmed its ratings on seven classes of
commercial mortgage pass-through certificates from DBCCRE 2014-ARCP
Mortgage Trust, a U.S. commercial mortgage-backed securities (CMBS)
transaction.
S&P said, "The affirmations on the principal- and interest-paying
certificate classes follow our analysis of the deal, primarily
using our criteria for rating U.S. and Canadian CMBS transactions.
Our analysis included a review of the collateral securing the $620
million 10-year interest-only (IO) fixed-rate mortgage loan, which
consists of 82 single-tenant commercial properties totaling 7.18
million sq. ft. in 30 U.S. states and Puerto Rico. We also
considered the deal structure and liquidity available to the
trust.
"We affirmed our rating on the class X IO certificates based on our
criteria for rating IO securities, in which the rating on the IO
securities would not be higher than that of the lowest-rated
reference class. The notional balance on class X references classes
A and B.
"Our property-level analysis included a revaluation of the 82
single-tenant commercial properties that secure the mortgage loan
in the trust. We also considered the stable servicer-reported net
operating income (NOI) for the past three years, and that each of
the 82 properties is 100% net leased or tripled net leased to a
single tenant. Our expected case value, using a 7.86% S&P Global
Ratings weighted average capitalization rate, yielded an 84.3% S&P
Global Ratings loan-to-value ratio and a 1.85x S&P Global Ratings
debt service coverage (DSC) on the trust balance."
According to the April 11, 2019, trustee remittance report, the IO
mortgage loan has a trust and whole-loan balance of $620 million,
pays an annual fixed interest rate of 4.973%, and matures on Jan.
6, 2024. To date, the trust has not incurred any principal losses.
S&P said, "We based our analysis partly on a review of the
property's historical NOI for the nine months ended Sept. 30, 2018,
and years ended Dec. 31, 2017 and 2016, as well as the Sept. 30,
2018, rent rolls provided by the master servicer to determine our
opinion of a consolidated sustainable cash flow for the 82
single-tenant mixed-used properties that are special-purpose,
built-to-suit, and/or highly customized for the current tenant's
operations. The property type consists of nine office (35.6% by
allocated loan balance), 68 retail (bank branches, pharmacies,
restaurants, and others; 37.3%), and five industrial (warehouse,
distribution, and manufacturing; 27.1%) properties. The properties
are geographically diverse and collectively house 24 tenants from
various industries. The five largest tenants by allocated loan
balance are CVS Caremark (18.3%; 412,979 sq. ft.), Aon Corp.
(14.9%; 818,686 sq. ft.), Bi-Lo LLC (10.2%; 1.2 million sq. ft.),
Rolls-Royce Corp. (8.0%; 404,763 sq. ft.), and The Talbots Inc.
(7.4%; 868,695 sq. ft.). Based on the September 2018 rent rolls, no
leases expire through 2022, at which point 5.6% of the total sq.
ft. have leases that expire in 2022, 4.7% have leases that expire
in 2023, and 41.4% have leases that expire in 2024."
RATINGS AFFIRMED
DBCCRE 2014-ARCP Mortgage Trust
Commercial mortgage pass-through certificates
Class Rating
A AAA (sf)
B AA- (sf)
C A- (sf)
D BBB- (sf)
E BB (sf)
F BB- (sf)
X AA- (sf)
DEEPHAVEN RESIDENTIAL 2019-2: S&P Rates Class B-2 Notes 'B-(sf)'
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Deephaven Residential
Mortgage Trust 2019-2's mortgage-backed notes.
The note issuance is a residential mortgage-backed securities
(RBMS) transaction backed by first-lien, fixed- and
adjustable-rate, amortizing (with some interest-only and principal
balloon payments) residential mortgage loans secured by
single-family residences, planned-unit developments, two- to
four-family residences, and condominiums to both prime and nonprime
borrowers. The pool has 883 loans, which are primarily
non-qualified mortgage loans.
The ratings reflect:
-- The pool's collateral composition,
-- The credit enhancement provided for this transaction,
-- The transaction's associated structural mechanics,
-- The transaction's representation and warranty framework, and
-- The mortgage aggregator.
RATINGS ASSIGNED
Deephaven Residential Mortgage Trust 2019-2
Class Rating Amount ($)
A-1 AAA (sf) 230,156,000
A-2 AA (sf) 23,847,000
A-3 A (sf) 45,292,000
M-1 BBB (sf) 24,772,000
B-1 BB (sf) 19,411,000
B-2 B- (sf) 18,486,000
B-3 NR 7,765,217
XS NR Notional(i)
A-IO-S NR Notional(i)
R NR N/A
(i)Notional amount equals the loans' aggregate stated principal
balance.
NR--Not rated.
N/A--Not applicable.
EATON VANCE 2019-1: Moody's Assigns (P)Ba3 Rating on Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by Eaton Vance CLO 2019-1, Ltd.
Moody's rating action is as follows:
US$246,000,000 Class A-1 Senior Secured Floating Rate Notes
due 2032 (the "Class A-1 Notes"), Assigned (P)Aaa (sf)
US$14,000,000 Class A-2 Senior Secured Floating Rate Notes due
2032 (the "Class A-2 Notes"), Assigned (P)Aaa (sf)
US$44,000,000 Class B Senior Secured Floating Rate Notes due
2032 (the "Class B Notes"), Assigned (P)Aa2 (sf)
US$19,000,000 Class C Senior Secured Deferrable Floating Rate
Notes
due 2032 (the "Class C Notes"), Assigned (P)A2 (sf)
US$24,250,000 Class D Senior Secured Deferrable Floating Rate
Notes
due 2032 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$20,750,000 Class E Secured Deferrable Floating Rate Notes due
2032
(the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the
Class C Notes, the Class D Notes and the Class E Notes are referred
to herein, collectively, as the "Rated Notes."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
The rationale for the rating is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.
Eaton Vance CLO 2019-1 is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 92.5% of the portfolio must
consist of first lien senior secured loans and eligible
investments, and up to 7.5% of the portfolio may consist of second
lien loans and unsecured loans. Moody's expects the portfolio to be
approximately 70% ramped as of the closing date.
Eaton Vance Management 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, subject to
certain restrictions, the Manager may reinvest unscheduled
principal payments and proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in March 2019.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2750
Weighted Average Spread (WAS): 3.25%
Weighted Average Coupon (WAC): 7.00%
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
March 2019.
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.
EXETER AUTOMOBILE 2019-2: S&P Rates Class E Notes 'BB(sf)'
----------------------------------------------------------
S&P Global Ratings assigned its ratings to Exeter Automobile
Receivables Trust 2019-2's automobile receivables-backed notes.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of approximately 60.3%, 53.6%, 44.8%, 35.0%,
and 30.4% credit support for the class A, B, C, D, and E notes,
respectively, based on stressed cash flow scenarios (including
excess spread). This credit support provides coverage of
approximately 2.85x, 2.50x, 2.05x, 1.55x, and 1.27x S&P's
20.50%-21.50% expected cumulative net loss (CNL) range. These
break-even scenarios withstand cumulative gross losses of
approximately 92.8%, 82.7%, 72.5%, 58.3%, and 49.0%, respectively.
-- The timely interest and principal payments that S&P believes
will be made to the rated notes under stressed cash flow modeling
scenarios, which, in its view, are appropriate for the assigned
ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(1.55x S&P's expected loss level), all else being equal, S&P's
rating on the class A notes will remain at the assigned 'AAA (sf)'
rating; the ratings on the class B and C notes will remain within
one rating category of the assigned 'AA (sf)' and 'A (sf)' ratings,
respectively, for the deal's life; and the rating on the class D
notes will remain within two rating categories of the assigned 'BBB
(sf)' rating over the deal's life. S&P expects the class E notes to
remain within two rating categories of the assigned 'BB (sf)'
rating over the first year, but the rating agency expects them to
eventually default under this stress scenario. These rating
movements are within the limits specified by S&P's credit stability
criteria.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction.
-- The transaction's payment, credit enhancement, and legal
structures.
RATINGS ASSIGNED
Exeter Automobile Receivables Trust 2019-2
Class Rating Amount (mil. $)
A AAA (sf) 322.65
B AA (sf) 98.44
C A (sf) 105.73
D BBB (sf) 116.66
E BB (sf) 56.52
GLS AUTO 2019-2: S&P Assigns Prelim BB- (sf) Rating to Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GLS Auto
Receivables Issuer Trust 2019-2's automobile receivables-backed
notes series 2019-2.
The note issuance is an asset-backed securities (ABS) transaction
backed by subprime auto loan receivables.
The preliminary ratings are based on information as of April 24,
2019. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 49.8%, 40.4%, 31.9%, and
25.7% of credit support for the class A, B, C, and D notes,
respectively, based on stressed cash flow scenarios (including
excess spread). These credit support levels provide coverage of
approximately 2.50x, 2.00x, 1.55x, and 1.22x S&P's 19.25%-20.25%
expected cumulative net loss (ECNL) for the class A, B, C, and D
notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.55x S&P's expected loss level), all else being equal, S&P's
rating on the class A and B notes will remain within one rating
category of the assigned preliminary 'AA (sf)' and 'A (sf)' ratings
and its rating on the class C notes will remain within two rating
categories of the assigned preliminary 'BBB (sf)' rating. The class
D notes will remain within two rating categories of the assigned
preliminary 'BB- (sf)' rating during the first year but will
eventually default under the 'BBB' stress scenario. These rating
movements are within the limits specified by S&P's credit stability
criteria.
-- S&P's analysis of over four years of origination static pool
data and securitization performance data on Global Lending Services
LLC's (GLS') five Rule 144A securitizations.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction, including the representation in
the transaction documents that all contracts in the pool have made
a least one payment.
-- The notes' underlying credit enhancement in the form of
subordination, overcollateralization, a reserve account, and excess
spread for the class A, B, C, and D notes.
-- The timely interest and principal payments made to the notes
under S&P's stressed cash flow modeling scenarios, which it
believes are appropriate for the assigned preliminary ratings.
PRELIMINARY RATINGS ASSIGNED
GLS Auto Receivables Issuer Trust 2019-2
Class Rating Amount (mil. $)
A AA (sf) 213.81
B A (sf) 58.42
C BBB (sf) 44.20
D BB- (sf) 33.57
JP MORGAN 2019-3: Moody's Assigns (P)B3 Rating on Class B-5 Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 22
classes of residential mortgage-backed securities issued by J.P.
Morgan Mortgage Trust 2019-3. The ratings range from (P)Aaa (sf) to
(P)B3 (sf).
The certificates are backed by 591 30-year, fully-amortizing
fixed-rate mortgage loans with a total balance of $387,326,703 as
of the April 1, 2019 cut-off date. Similar to prior JPMMT
transactions, JPMMT 2019-3 includes conforming mortgage loans (39%
by loan balance) mostly originated by United Shore Financial
Services, LLC d/b/a United Wholesale Mortgage and Shore Mortgage,
JPMorgan Chase Bank, National Association, AmeriHome Mortgage
Company, LLC and LoanDepot.com, LLC underwritten to the government
sponsored enterprises guidelines in addition to prime jumbo
non-conforming mortgages purchased by J.P. Morgan Mortgage
Acquisition Corp., sponsor and mortgage loan seller, from various
originators and aggregators. United Shore, Chase, AmeriHome and
LoanDepot originated 24%, 22%, 16% and 10% of the mortgage pool,
respectively.
Chase, New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing,
USAA Federal Savings Bank and AmeriHome will be the servicers for
majority of the pool. Shellpoint will act as interim servicer for
these mortgage loans from April 30, 2019 until the servicing
transfer date, which is expected to occur on or about June 1, 2019.
After the servicing transfer date, these mortgage loans will be
serviced by Chase. With respect to the Mortgage Loans serviced by
AmeriHome, Cenlar FSB will be the subservicer and with respect to
the Mortgage Loans serviced by USAA, Nationstar Mortgage LLC will
be the subservicer.
The servicing fee for loans serviced by Chase and Shellpoint will
be based on a step-up incentive fee structure with a monthly base
fee of $20 per loan and additional fees for delinquent or defaulted
loans. All other servicers will be paid a monthly flat servicing
fee equal to one-twelfth of 0.25% of the remaining principal
balance of the mortgage loans. Nationstar will be the master
servicer and Citibank, National Association will be the securities
administrator and Delaware trustee. Pentalpha Surveillance LLC will
be the representations and warranties breach reviewer.
Distributions of principal and interest and loss allocations are
based on a typical shifting interest structure that benefits from
senior and subordination floors.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2019-3
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aa2 (sf)
Cl. A-15, Assigned (P)Aa2 (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)A1 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the aggregate pool is 0.40%
in a base scenario and reaches 6.10% at a stress level consistent
with the Aaa (sf) ratings.
Moody's calculated losses on the pool using its US Moody's
Individual Loan Analysis model based on the loan-level collateral
information as of the cut-off date. Loan-level adjustments to the
model results included adjustments to probability of default for
higher and lower borrower debt-to-income ratios, for borrowers with
multiple mortgaged properties, self-employed borrowers, and for the
default risk of Homeownership association properties in super lien
states. The final loss estimates also incorporate adjustments for
origination quality and the financial strength of representation &
warranty providers.
Moody's bases its provisional ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, the origination quality, the servicing
arrangement, the strength of the third party due diligence and the
R&W framework of the transaction.
Aggregation/Origination Quality
Moody's considers JPMMAC's aggregation platform to be adequate and
it did not apply a separate loss-level adjustment for aggregation
quality. In addition to reviewing JPMMAC as an aggregator, Moody's
has also reviewed the originators contributing a significant
percentage of the collateral pool. For these originators, it
reviewed their underwriting guidelines and their policies and
documentation (where available). Moody's increased its base case
and Aaa (sf) loss expectations for certain originators of
non-conforming loans, such as United Shore and AmeriHome, where it
does not have clear insight into the underwriting practices,
quality control and credit risk management. Moody's did not make an
adjustment for GSE-eligible loans, regardless of the originator,
since those loans were underwritten in accordance with GSE
guidelines.
Servicing arrangement
Moody's considers the overall servicing arrangement for this pool
to be adequate given the strong servicing arrangement of the
servicers, as well as the presence of a strong master servicer to
oversee the servicers. In this transaction, Nationstar Mortgage LLC
(Nationstar) will act as the master servicer. The servicers are
required to advance principal and interest on the mortgage loans.
To the extent that the servicers are unable to do so, the master
servicer will be obligated to make such advances. In the event that
the master servicer, Nationstar (rated B2), is unable to make such
advances, the securities administrator, Citibank (rated Aa3) will
be obligated to do so.
JPMorgan Chase Bank, National Association (servicer): Chase is a
seasoned servicer with over 20 years of experience servicing
residential mortgage loans and has demonstrated adequate servicing
ability as a primary servicer of prime residential mortgage loans.
As of June 30, 2018, Chase was servicing a portfolio of about $762
billion.
Shellpoint Mortgage Servicing (servicer): Shellpoint has
demonstrated adequate servicing ability as a primary servicer of
prime residential mortgage loans. Shellpoint has the necessary
processes, staff, technology and overall infrastructure in place to
effectively service the transaction.
Nationstar Mortgage LLC (master servicer): Nationstar is the master
servicer for the transaction and provides oversight of the
servicers. Moody's considers Nationstar's master servicing
operation to be above average compared to its peers. Nationstar has
strong reporting and remittance procedures and strong compliance
and monitoring capabilities. The company's senior management team
has on average more than 20 years of industry experience, which
provides a solid base of knowledge and leadership. Nationstar's
oversight encompasses loan administration, default administration,
compliance, and cash management. Nationstar is an indirectly held,
wholly owned subsidiary of Nationstar Mortgage Holdings Inc.
Moody's rates Nationstar at B2 stable.
Collateral Description
JPMMT 2019-3 is a securitization of a pool of 591 30-year,
fully-amortizing fixed-rate mortgage loans with a total balance of
$387,326,703 as of the cut-off date, with a weighted average (WA)
remaining term to maturity of 356 months, and a WA seasoning of 4
months. The borrowers in this transaction have high FICO scores and
sizeable equity in their properties. The WA current FICO score is
767 and the WA original combined loan-to-value ratio (CLTV) is
72.2%. The characteristics of the loans underlying the pool are
generally comparable to other JPMMT transactions backed by prime
mortgage loans that Moody's has rated.
In this transaction, about 39% of the pool by loan balance was
underwritten to Fannie Mae's and Freddie Mac's guidelines
(conforming loans). The conforming loans in this transaction have a
high average current loan balance at $575,141. The high conforming
loan balance of loans in JPMMT 2019-3 is attributable to the large
number of properties located in high-cost areas, such as the metro
areas of Los Angeles (18%), New York City (10%) and San Francisco
(10%). United Shore, Chase, AmeriHome and LoanDepot originated 24%,
22%, 16% and 10% of the mortgage pool, respectively. The remaining
originators each account for less than 10% of the principal balance
of the loans in the pool.
Servicing Fee Framework
The servicing fee for loans serviced by Chase and Shellpoint will
be based on a step-up incentive fee structure with a monthly base
fee of $20 per loan and additional fees for servicing delinquent
and defaulted loans. The other servicers, AmeriHome and USAA, will
be paid a monthly flat servicing fee equal to one-twelfth of 0.25%
of the remaining principal balance of the mortgage loans.
Shellpoint will act as interim servicer until the servicing
transfer date, June 1, 2019 or such later date as determined by the
issuing entity and Chase.
While this fee structure is common in non-performing mortgage
securitizations, it is relatively new to rated prime mortgage
securitizations which typically incorporate a flat 25 basis point
servicing fee rate structure. By establishing a base servicing fee
for performing loans that increases with the delinquency of loans,
the fee-for-service structure aligns monetary incentives to the
servicer with the costs of the servicer. The servicer receives
higher fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less
labor-intensive. The fee-for-service compensation is reasonable and
adequate for this transaction because it better aligns the
servicer's costs with the deal's performance. Furthermore, higher
fees for the more labor-intensive tasks make the transfer of these
loans to another servicer easier, should that become necessary. By
contrast, in typical RMBS transactions a servicer can take actions,
such as modifications and prolonged workouts, that increase the
value of its mortgage servicing rights.
The incentive structure includes an initial monthly base servicing
fee of $20 for all performing loans and increases according to a
pre-determined delinquent and incentive servicing fee schedule.
The delinquent and incentive servicing fees will be deducted from
the available distribution amount and Class B-6 net WAC. The
transaction does not have a servicing fee cap, so, in the event of
a servicer replacement, any increase in the base servicing fee
beyond the current fee will be paid out of the available
distribution amount.
Third-party Review and Reps & Warranties
Four third party review (TPR) firms verified the accuracy of the
loan-level information that Moody's received from the sponsor.
These firms conducted detailed credit, valuation, regulatory
compliance and data integrity reviews on 100% of the mortgage pool.
The TPR results indicated compliance with the originators'
underwriting guidelines for the vast majority of loans, no material
compliance issues, and no appraisal defects. The loans that had
exceptions to the originators' underwriting guidelines had strong
documented compensating factors such as low DTIs, low LTVs, high
reserves, high FICOs, or clean payment histories. The TPR firms
also identified minor compliance exceptions for reasons such as
inadequate RESPA disclosures (which do not have assignee liability)
and TILA/RESPA Integrated Disclosure (TRID) violations related to
fees that were out of variance but then were cured and disclosed.
Moody's did not make any adjustments to its expected or Aaa (sf)
loss levels due to the TPR results.
JPMMT 2019-3's R&W framework is in line with that of other JPMMT
transactions where an independent reviewer is named at closing, and
costs and manner of review are clearly outlined at issuance.
Moody's review of the R&W framework takes into account the
financial strength of the R&W providers, scope of R&Ws (including
qualifiers and sunsets) and enforcement mechanisms.
The R&W providers vary in financial strength. JPMorgan Chase Bank,
National Association (rated Aa2) is the R&W provider for
approximately 22% (by loan balance) of the pool. Moody's made no
adjustments to the loans for which Chase and USAA Federal Savings
Bank (a subsidiary of USAA Capital Corporation which is rated Aa1)
provided R&Ws since they are highly rated entities. In contrast,
the rest of the R&W providers are unrated and/or financially weaker
entities. Moody's applied an adjustment to the loans for which
these entities provided R&Ws. No party will backstop or be
responsible for backstopping any R&W providers who may become
financially incapable of repurchasing mortgage loans.
For loans that JPMMAC acquired via the MAXEX platform, MAXEX under
the assignment, assumption and recognition agreement with JPMMAC,
will make the R&Ws. The R&Ws provided by MAXEX to JPMMAC and
assigned to the trust are in line with the R&Ws found in the JPMMT
transactions. Five Oaks Acquisition Corp. will backstop the
obligations of MaxEx with respect to breaches of the mortgage loan
representations and warranties made by MaxEx.
Trustee and Master Servicer
The transaction Delaware trustee is Citibank. The custodian's
functions will be performed by Wells Fargo Bank, N.A. and Chase.
The paying agent and cash management functions will be performed by
Citibank. Nationstar Mortgage LLC, as master servicer, is
responsible for servicer oversight, and termination of servicers
and for the appointment of successor servicers. In addition,
Nationstar is committed to act as successor if no other successor
servicer can be found. The master servicer is required to advance
principal and interest if the servicer fails to do so. If the
master servicer fails to make the required advance, the securities
administrator is obligated to make such advance.
Tail Risk & Subordination Floor
This deal has a standard shifting-interest structure, with a
subordination floor to protect against losses that occur late in
the life of the pool when relatively few loans remain (tail risk).
When the total senior subordination is less than 1.70% of the
original pool balance, the subordinate bonds do not receive any
principal and all principal is then paid to the senior bonds. In
addition, if the subordinate percentage drops below 6.00% of
current pool balance, the senior distribution amount will include
all principal collections and the subordinate principal
distribution amount will be zero. The subordinate bonds themselves
benefit from a floor. When the total current balance of a given
subordinate tranche plus the aggregate balance of the subordinate
tranches that are junior to it amount to less than 1.20% of the
original pool balance, those tranches do not receive principal
distributions. The principal those tranches would have received is
directed to pay more senior subordinate bonds pro-rata.
Transaction Structure
The transaction uses the shifting interest structure in which the
senior bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the senior
bonds. Next, available distribution amounts are used to reimburse
realized losses and certificate write-down amounts for the senior
bonds (after subordinate bond have been reduced to zero i.e. the
credit support depletion date). Finally, interest and then
principal payments are paid to the subordinate bonds in sequential
order.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balance of the
subordinate bonds is written off, losses from the pool begin to
write off the principal balance of the senior support bond, and
finally losses are allocated to the super senior bonds.
In addition, the pass-through rate on the bonds (other than the
Class A-R Certificates) is based on the net WAC as reduced by the
sum of (i) the reviewer annual fee rate and (ii) the capped trust
expense rate. In the event that there is a small number of loans
remaining, the last outstanding bonds' rate can be reduced to
zero.
The Class A-11 Certificates will have a pass-through rate that will
vary directly with the rate of one-month LIBOR and the Class A-11-X
Certificates will have a pass-through rate that will vary inversely
with the rate of one-month LIBOR.
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 of the subordinate bonds 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.
LCM 29: S&P Assigns Prelim BB-(sf) Rating to $13.6MM Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to LCM 29
Ltd./LCM 29 LLC's floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by broadly syndicated speculative-grade (rated
'BB+' and lower) senior secured term loans that are governed by
collateral quality tests.
The preliminary ratings are based on information as of April 19,
2019. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's 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
LCM 29 Ltd./LCM 29 LLC
Class Rating Amount (mil. $)
X AAA (sf) 2.00
A-1 AAA (sf) 240.00
A-2 NR 20.00
B AA (sf) 44.00
C (deferrable) A (sf) 24.00
D (deferrable) BBB- (sf) 24.00
E (deferrable) BB- (sf) 13.60
Subordinated notes NR 36.60
NR--Not rated.
LCM 30: S&P Rates Class E Floating-Rate Notes 'BB-(sf)'
-------------------------------------------------------
S&P Global Ratings assigned its ratings to LCM 30 Ltd./LCM 30 LLC's
floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed by primarily broadly syndicated speculative-grade senior
secured term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversified collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
LCM 30 Ltd./LCM 30 LLC
Class Rating Amount (mil. $)
X AAA (sf) 2.00
A-1 AAA (sf) 242.00
A-2 NR 18.00
B AA (sf) 37.60
C (deferrable) A (sf) 30.00
D (deferrable) BBB- (sf) 20.40
E (deferrable) BB- (sf) 15.20
Subordinated notes NR 39.35
NR--Not rated.
LMRK ISSUER 2016-1: Fitch Affirms BB- on $25.1MM Class B Notes
--------------------------------------------------------------
Fitch Ratings has affirmed LMRK Issuer Co. LLC's landmark
infrastructure secured tenant site contract revenue notes, series
2016-1 as follows:
-- $85.7 million 2016-1 class A at 'A-sf'; Outlook Stable;
-- $25.1 million 2016-1 class B at 'BB-sf'; Outlook Stable.
The pool's aggregate principal balance has been reduced by 5.0% to
$110.8 million from $116.6 million at issuance. Fitch analyzed the
collateral data and site information provided by the issuer, LMRK
Issuer Co. As of April 2019, the issuer annualized net cash flow
increased 7.8% to $14.2 million since issuance.
The transaction is an issuance of notes backed by mortgages
representing not less than 95% of the annualized net cash flow
(ANCF) and a pledge and a perfected first-priority security
interest in 100% of the equity interest of the issuer and the asset
entities and is guaranteed by the direct parent of LMRK Issuer Co.
LLC (LMRK, or the issuer). The ownership interest in the sites
consists of perpetual easements, long-term easements, prepaid
leases, and fee interests in land, rooftops, or other structures on
which site space is allocated for placement and operation of
wireless tower and wireless communication equipment.
KEY RATING DRIVERS
Stable Performance: Overall performance of the collateral is stable
due to the expected cash flow growth from issuance. The Fitch
stressed DSCR increased to 1.34x from 1.22x at issuance as a result
of the increase in net cash flow.
Additional Notes: The transaction allows for the issuance of
additional notes. Such additional notes may rank senior, pari passu
with, or subordinate to the 2016-1 notes based on the alphabetical
class designation. Additional notes may be issued without the
benefit of additional collateral, provided the post-issuance actual
DSCR is not less than 2.0x. The possibility of upgrades may be
limited due to this provision.
Non-first Liens: In this transaction, approximately 15% of the
issuer revenue is from sites that have existing mortgages on the
related site that are therefore senior to the interests of the
trust asset. If the site owner fails to perform any obligations of
the existing senior mortgage, the holder of the existing senior
mortgage could foreclose on the fee interest and, following that
foreclosure, have a senior claim to the remaining rents payable
thus terminating the interests of the asset entities in such
wireless sites. The remaining 85% of the revenue is from sites for
which either a non-disturbance agreement (NDA) is not required or
the issuer has obtained NDAs from mortgage lenders holding a senior
security interest in a site.
Long-Term Easements: The ownership interests in the sites consist
of 91.3% easements, 6.7% assignment of rents, and 2.0% fee. The
weighted average remaining life of the ownership interest is 75
years (assumes 99 years for perpetual easements and fee sites).
Scheduled Amortization Paid Sequentially: The transaction is
structured with scheduled monthly principal payments that will
amortize down the principal balance 15.0% by the ARD in year five,
reducing the refinance risk.
RATING SENSITIVITIES
The Outlooks are expected to remain stable, and downgrades are
unlikely based on continued cash flow growth due to annual rent
escalations and automatic renewal clauses resulting in higher debt
service coverage ratios since issuance. Upgrades are limited based
on the provision to issue additional notes.
METLIFE SECURITIZATION 2019-1: Fitch to Rate Class B2 Notes 'Bsf'
-----------------------------------------------------------------
Fitch Ratings expects to rate MetLife Securitization Trust 2019-1
(MST 2019-1) as follows:
-- $403,057,000 class A1 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $324,546,000 class A1A notes 'AAAsf'; Outlook Stable;
-- $78,511,000 class A1B notes 'AAAsf'; Outlook Stable;
-- $16,943,000 class M1 notes 'AAsf'; Outlook Stable;
-- $12,409,000 class M2 notes 'Asf'; Outlook Stable;
-- $15,273,000 class M3 notes 'BBBsf'; Outlook Stable;
-- $11,455,000 class B1 notes 'BBsf'; Outlook Stable;
-- $7,397,000 class B2 notes 'Bsf'; Outlook Stable.
Fitch will not be rating the following classes:
-- $10,738,970 class B3 notes.
Fitch Ratings expects to rate MetLife Securitization Trust's 2019-1
(MST 2019-1) second residential re-performing loan transaction, as
indicated above. The notes and certificates are supported by 2,096
seasoned performing and re-performing mortgages with a total
balance of $477.3 million, which includes $28.5 million, or 6.0%,
of the aggregate pool balance in non-interest-bearing deferred
principal amounts, as of the cutoff date. Principal and interest
(P&I) and loss allocations are based on a traditional senior
subordinate, sequential structure. The transaction is expected to
close on April 30, 2019.
The 'AAAsf' rating on the class A1A notes reflects the 32.00%
subordination provided by the 16.45% class A1B, 3.55% class M1,
2.60% class M2, 3.20% class M3, 2.40% class B1, 1.55% class B2, and
2.25% class B3 notes and certificates.
Fitch's ratings on the notes and certificates reflect the credit
attributes of the underlying collateral, the quality of the
representation (rep) and warranty framework, minimal due diligence
findings and the sequential pay structure.
KEY RATING DRIVERS
High Credit Quality (Positive): The notes and certificates are
backed by a pool of high-quality RPL mortgage loans. The weighted
average primary borrower's most recent FICO score of 718 is higher
than most typical RPL RMBS rated by Fitch to date. In addition, the
pool has a current loan-to-value ratio of 75.9%, a sustainable LTV
of 79.6%. The positive attributes are reflected in Fitch's 'AAAsf'
loss expectation of 13.25%.
Clean Current Loans (Positive): Although 84.1% of the pool has been
modified, almost 100% has been clean for 36 months. Borrowers that
have been current for at least three years receive a 35% reduction
to Fitch's 'AAAsf' probability of default while those that have
been current between 24 and 36 months received a 26.25% reduction.
Low Operational Risk (Positive): Operational risk is well
controlled for in this transaction. MetLife Insurance Company is a
global insurance company that is assessed as an 'Average'
aggregator by Fitch based on its ability to meet industry standards
to effectively purchase RPLs. Select Portfolio Servicing, Inc. is
the named servicer for this transaction and is rated 'RPS1-' and
'RSS1' for primary and special servicing functions. MetLife's
retention of at least 5% of the bonds helps to ensure an alignment
of interest between the issuer and investors.
Tier 1 Representation and Warranty (R&W) Framework (Positive):
Fitch assessed the R&W construct for this transaction as a Tier 1.
The framework benefits from an automatic breach review after
certain performance triggers are met, as well as the ability for
over 50% of unaffiliated noteholders to initiate a review. Life of
loan representations and warranties are being provided by MetLife
Insurance Company (rated A+/Stable/F1+ by Fitch). Given the
financial rating and framework of MLIC, Fitch decreased its 'AAAsf'
loss expectations by approximately 55 bps.
Third-Party Due Diligence (Negative): Third-party due diligence was
conducted on 100% of loans in the pool by an 'Acceptable - Tier 1'
TPR firm. Approximately 8% of loans received a grade of 'C' or 'D'
for compliance exceptions; roughly half of these exceptions
received a loss adjustment due to an inability to test for
predatory lending. The remaining exceptions did not receive
adjustments primarily due to expired statute of limitations, or the
loans were not subject to predatory lending testing. Loss
expectations were increased by 19 bps at 'AAAsf' to account for the
findings.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $28.5 million (6.0%) of the unpaid
principal balance are outstanding on 847 loans. Fitch included the
deferred amounts when calculating the borrower's LTV and sLTV
despite the lower payment and amounts not being owed during the
term of the loan. The inclusion resulted in higher PDs and loss
severity (LS) than if there were no deferrals. Fitch believes that
borrower default behavior for these loans will resemble that of the
higher LTVs, as exit strategies (that is, sale or refinancing) will
be limited relative to those borrowers with more equity in the
property.
No Servicer P&I Advances (Neutral): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I. Structural provisions and
cash flow priorities, together with increased subordination,
provide for timely payments of interest to the 'AAAsf' and 'AAsf'
rated classes.
CRITERIA APPLICATION
Fitch analyzed the transaction in accordance with its criteria, as
described in its report, "U.S. RMBS Rating Criteria." This
incorporates a review of the aggregator's lending platforms, as
well as an assessment of the transaction's R&W and due diligence
results, which were found to be consistent with the ratings
assigned to the notes.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. The implied rating sensitivities are only an
indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to or be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 5.6% at the base case. The analysis indicates there
is some potential rating migration with higher MVDs, compared with
the model projection.
Fitch also conducted sensitivities to determine the stresses to
MVDs that would reduce a rating by one full category, to
non-investment grade, and to 'CCCsf'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC (AMC) who was engaged to perform a
regulatory compliance, data integrity, and pay history third-party
due diligence review on the loans. The third-party due diligence
described in Form 15E focused on the following: regulatory
compliance review, 24-month pay-history review, and data integrity
review on all of the loans. In addition, AMC was engaged to perform
an updated tax and title search and a review for recordation of the
mortgage note and subsequent assignments for the entire pool.
Approximately 8% of the loans reviewed were assigned a compliance
grade 'C' or 'D'. For roughly half of these loans, Fitch adjusted
its loss expectation at the 'AAAsf' by approximately 19bps to
reflect missing documents that prevented the testing for predatory
lending compliance. Inability to test for predatory lending may
expose the trust to potential assignee liability, which creates
added risk for bond investors. The remaining loans graded 'C' and
'D' include exceptions for loans that are not subject to predatory
lending, loans with missing disclosures and other compliance
defects which were considered non-material by the Fitch analyst.
Loss adjustments were not applied for these loans.
MMCF CLO 2019-2: S&P Assigns Prelim BB- (sf) Rating to Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to MMCF CLO
2019-2 LLC's floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by middle-market speculative-grade senior secured
term loans.
The preliminary ratings are based on information as of April 23,
2019. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified, static, collateral pool, which consists
primarily of middle market speculative-grade senior secured term
loans.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
MMCF CLO 2019-2 LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 233.00
A-2 AA (sf) 48.00
B (deferrable) A (sf) 23.00
C (deferrable) BBB- (sf) 27.00
D (deferrable) BB- (sf) 21.00
Subordinated notes NR 49.30
NR--Not rated.
NATIXIS COMMERCIAL 2019-LVL: S&P Rates Class E Certs 'BB-(sf)'
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Natixis Commercial
Mortgage Securities Trust 2019-LVL's commercial mortgage
pass-through certificates series 2019-LVL.
The certificates issuance is a commercial mortgage-backed
securities (CMBS) transaction backed primarily by a $106.6 million
senior portion and a $99.4 million subordinate portion (combined,
the "trust loan") of a $380.0 million, 120-month, fixed-rate
mortgage loan (the "whole loan"), which is secured by a fee simple
interest held by 2 North 6th Place Property Owner LLC, a Delaware
limited liability company (the "borrower"), in the 2 North 6th
Place building, a 554-unit, newly constructed class A, high-rise
residential tower located in Brooklyn, N.Y. (the "property"). The
senior trust portion is pari passu with two non-trust senior
companion notes totaling $54.0 million.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsors' and managers' experience, the
trustee-provided liquidity, the loan's terms, and the transaction's
structure.
RATINGS ASSIGNED
Natixis Commercial Mortgage Securities Trust 2019-LVL
Class Ratings(i) Amount ($)
A AAA (sf) 90,800,000
X-A AAA (sf) 90,800,000(ii)
X-B BBB- (sf) 83,120,000(ii)
B AA- (sf) 28,390,000
C A- (sf) 27,040,000
D BBB- (sf) 27,690,000
E BB- (sf) 32,080,000
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional balance. The notional amount of the class X-A
certificates will equal the balance of the class A certificates.
The notional amount of the class X-B certificates will equal the
aggregate balance of classes B, C, and D.
NXT CAPITAL 2015-1: Moody's Rates $31MM Class E-R Notes 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes issued by NXT Capital CLO 2015-1, LLC.
Moody's rating action is as follows:
US$39,000,000 Class C-R2 Secured Deferrable Floating
Rate Notes Due 2027 (the "Class C-R2 Notes"), Assigned
A1 (sf)
US$29,500,000 Class D-R2 Secured Deferrable Floating Rate
Notes Due 2027 (the "Class D-R2 Notes"), Assigned Baa2 (sf)
US$31,000,000 Class E-R Secured Deferrable Floating Rate
Notes Due 2027 (the "Class E-R Notes"), Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.
The Issuer is a managed cash flow collateralized loan obligation.
The issued notes are collateralized primarily by a portfolio of
small and medium enterprise loans. At least 95.0% of the portfolio
must consist of first lien senior secured loans, cash, and eligible
investments, and up to 5.0% of the portfolio may consist of second
liens loans and unsecured loans. The transaction's reinvestment
period has ended in April 2019.
The Issuer has issued the Refinancing Notes on April 22, 2019 in
connection with the refinancing of certain classes of secured notes
previously refinanced on January 22, 2018 and originally issued on
May 13, 2015. On the Refinancing Date, the Issuer used the proceeds
from the issuance of the Refinancing Notes to redeem in full the
Refinanced Original Notes. On the Original Closing Date, the issuer
also issued one class of subordinated notes that remains
outstanding.
NXT Capital Investment Advisers, LLC will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and 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: $393,358,626
Defaulted par: $9,461,578
Diversity Score: 39
Weighted Average Rating Factor (WARF): 4209 (corresponding to a
weighted average default probability of 26.82%)
Weighted Average Spread (WAS): 4.89%
Weighted Average Recovery Rate (WARR): 49.6%
Weighted Average Life (WAL): 3.43 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
March 2019.
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.
NXT CAPITAL 2017-1: S&P Rates Class E-R Notes 'BB (sf)'
-------------------------------------------------------
S&P Global Ratings assigned its ratings to the class B-R, C-R, D-R,
and E-R replacement notes from NXT Capital CLO 2017-1 LLC, a
collateralized loan obligation (CLO) originally issued in 2017 that
is managed by NXT Capital Investment Advisers LLC. S&P withdrew its
ratings on the original class B, C, D, and E notes following
payment in full on the April 22, 2019, refinancing date. At the
same time, S&P affirmed its ratings on the class A notes, which
were not affected by the refinancing.
On the April 22, 2019, refinancing date, the proceeds from the
class B-R, C-R, D-R, and E-R replacement note issuances were used
to redeem the original class B, C, D, and E notes as outlined in
the transaction document provisions. Therefore, S&P withdrew its
ratings on the original notes in line with their full redemption,
and it is assigning ratings to the replacement notes.
The replacement notes are being issued via a supplemental indenture
at the same spreads over three-month LIBOR as the original notes.
The non-call period for the transaction ends in April 2019. The
transaction is currently in its reinvestment period, which is
expected to end in April 2021. The replacement notes will have the
same stated maturity as the current class A notes, which is
expected to be April 2029.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the trustee
report, to estimate future performance. In line with its criteria,
S&P's 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, the rating agency's analysis considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis -- and other qualitative factors as applicable --
demonstrated, in S&P's view, that all of the rated outstanding
classes have adequate credit enhancement to support the respective
rating levels assigned.
"The assigned ratings also reflect our opinion that the credit
support available is commensurate with the associated rating
levels," S&P said.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as we deem
necessary," the rating agency said.
RATINGS ASSIGNED
NXT Capital CLO 2017-1 LLC
Replacement class Rating Amount (mil $)
B-R AA (sf) 39.70
C-R (deferrable) A (sf) 31.75
D-R (deferrable) BBB- (sf) 24.80
E-R (deferrable) BB (sf) 26.40
RATINGS AFFIRMED
Original class Rating
A AAA (sf)
RATINGS WITHDRAWN
Ratings
Original class To From
B NR AA (sf)
C NR A (sf)
D NR BBB- (sf)
E NR BB (sf)
NR--Not rated.
OAKTREE CLO 2019-1: S&P Assigns BB-(sf) Rating to Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Oaktree CLO 2019-1
Ltd./Oaktree CLO 2019-1 LLC's floating-rate notes.
The note issuance is collateralized loan obligation (CLO)
transaction backed by primarily broadly syndicated
speculative-grade senior secured term loans that are governed by
collateral quality tests.
The ratings reflect:
-- The diversified collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
Oaktree CLO 2019-1 Ltd./Oaktree CLO 2019-1 LLC
Class Rating Amount (mil. $)
A-1 AAA (sf) 442.500
A-2 AAA (sf) 37.500
B AA (sf) 86.250
C (deferrable) A (sf) 48.750
D (deferrable) BBB- (sf) 45.000
E (deferrable) BB- (sf) 28.125
Subordinated notes NR 56.650
NR--Not rated.
OBX TRUST 2019-EXP1: Fitch Rates $2.32MM Class B-5 Notes 'Bsf'
--------------------------------------------------------------
Fitch Ratings has assigned the following ratings to OBX 2019-EXP1
Trust (OBX 2019-EXP1):
-- $125,336,000 class 1-A-1 notes 'AAAsf'; Outlook Stable;
-- $31,334,000 class 1-A-2 notes 'AAAsf'; Outlook Stable;
-- $156,670,000 class 1-A-3 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $17,041,000 class 1-A-4 notes 'AAAsf'; Outlook Stable;
-- $173,711,000 class 1-A-5 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $125,336,000 class 1-A-6 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $31,334,000 class 1-A-7 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $156,670,000 class 1-A-8 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $17,041,000 class 1-A-9 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $173,711,000 class 1-A-10 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $125,336,000 class 1-A-IO1 notional notes 'AAAsf'; Outlook
Stable;
-- $31,334,000 class 1-A-IO2 notional notes 'AAAsf'; Outlook
Stable;
-- $156,670,000 class 1-A-IO3 notional exchangeable notes
'AAAsf'; Outlook Stable;
-- $17,041,000 class 1-A-IO4 notional notes 'AAAsf'; Outlook
Stable;
-- $173,711,000 class 1-A-IO5 notional exchangeable notes
'AAAsf'; Outlook Stable;
-- $173,711,000 class 1-A-IO6 notional notes 'AAAsf'; Outlook
Stable;
-- $123,079,000 class 2-A-1A notes 'AAAsf'; Outlook Stable;
-- $30,770,000 class 2-A-1B notes 'AAAsf'; Outlook Stable;
-- $153,849,000 class 2-A-1 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $16,734,000 class 2-A-2 notes 'AAAsf'; Outlook Stable;
-- $170,583,000 class 2-A-3 exchangeable notes 'AAAsf'; Outlook
Stable;
-- $170,583,000 class 2-A-IO notional notes 'AAAsf'; Outlook
Stable;
-- $1,358,000 class B-1 notes 'AAsf'; Outlook Stable;
-- $1,358,000 class B1-IO notional notes 'AAsf'; Outlook Stable;
-- $1,358,000 class B1-A exchangeable notes 'AAsf'; Outlook
Stable;
-- $21,155,000 class B-2 notes 'Asf'; Outlook Stable;
-- $21,155,000 class B2-IO notional notes 'Asf'; Outlook Stable;
-- $21,155,000 class B2-A exchangeable notes 'Asf'; Outlook
Stable;
-- $8,927,000 class B-3 notes 'BBBsf'; Outlook Stable;
-- $6,405,000 class B-4 notes 'BBsf'; Outlook Stable;
-- $2,329,000 class B-5 notes 'Bsf'; Outlook Stable.
The following class will not be rated by Fitch:
-- $3,687,948 class B-6 notes.
The notes are supported by 599 loans with a total unpaid principal
balance of approximately $388.2 million as of the cut-off date. The
pool consists of fixed-rate mortgages and adjustable-rate mortgages
acquired by Annaly Capital Management, Inc. from various
originators and aggregators. Distributions of principal and
interest and loss allocations are based on a traditional
senior-subordinate, shifting-interest Y-structure.
The 'AAAsf' rating on the class A notes reflects the 11.30%
subordination provided by the 0.35% class B-1, 5.45% class B-2,
2.30% class B-3, 1.65% class B-4, 0.60% class B-5 and 0.95% class
B-6 notes.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The pool consists primarily
of 30-year fixed-rate and adjustable-rate fully amortizing loans to
borrowers with strong credit profiles, relatively low leverage and
large liquid reserves. The loans are seasoned an average of 13
months.
The pool has a weighted average model FICO score of 750, high
average balance of $648,007 and a low sustainable loan-to-value
ratio of 66.9%. However, the pool also contains a meaningful amount
of investor properties (12%), non-qualified mortgage (non-QM) or
higher-priced qualified mortgage loans (82%), and non-full
documentation loans (63%). Fitch's loss expectations reflect the
higher default risk associated with these attributes as well as
loss severity adjustments for potential ability-to-repay
challenges.
Low Operational Risk (Positive): Operational risk is well
controlled in this transaction. Annaly employs an effective loan
aggregation process and has an 'Average' assessment from Fitch. The
majority of the loans (82%) are being serviced by Select Portfolio
Servicing, Inc., which is rated 'RPS1-', and the remainder is being
serviced by Specialized Loan Servicing, LLC, which is rated 'RPS2'
for this product. The issuer's retention of at least 5% of the
bonds helps ensure an alignment of interest between issuer and
investor.
Representation and Warranty Framework (Negative): Fitch considers
the transaction's representation, warranty and enforcement
mechanism framework to be consistent with Tier 2 quality. The RW&Es
are provided by Onslow Bay Financial, LLC, which does not have a
financial credit opinion or public rating from Fitch. While there
is an automatic review that can be triggered by loan delinquencies
and losses, the triggers can toggle on and off from period to
period. Additionally, a high threshold of investors is needed to
direct the trustee to initiate a review. The Tier 2 framework and
non-rated counterparty resulted in a loss penalty of 67 bps AAAsf.
Third-Party Due Diligence (Positive): A very low incidence of
material defects were found in the third-party credit, compliance
and valuation due diligence performed on 100% of the pool. AMC and
Clayton conducted this diligence; both are assessed by Fitch as
'Acceptable - Tier 1'. The due diligence results are in line with
industry averages and, based on loan count, 98% were graded 'A' or
'B'. Since loan exceptions either had strong mitigating factors or
were accounted for in Fitch's loan loss model no additional
adjustments were made. The model credit for the high percentage of
loan level due diligence combined with the adjustments for loan
exceptions reduced the 'AAAsf' loss expectation by 31 bps.
Servicing Advancing (Neutral): Advances of delinquent P&I will be
made on the mortgage loans for the first 120 days of delinquency to
the extent such advances are deemed recoverable. P&I advances will
be made from amounts on deposit for future distribution, the excess
servicing strip fee that would otherwise be allocable to the class
A-IO-S notes and the P&I advancing party fee. If such amounts are
insufficient, the P&I advancing party (Onslow Bay Financial LLC)
will be responsible for any remaining amounts. In the event the
underlying obligations are not fulfilled, Wells Fargo Bank, N.A.
(Wells Fargo), as master servicer, will be required to made
advances.
High California Concentration (Negative): Approximately 60% of the
pool is located in California, which is higher than other recent
Fitch-rated transactions. In addition, the metropolitan statistical
area concentration is large, as the top three MSAs (Los Angeles,
San Francisco and New York) account for 46.3% of the pool. As a
result, a geographic concentration penalty of 1.09x was applied to
the probability of default. In addition to the economic risk
associated with a high concentration in a select number of MSAs,
Fitch increased its expected losses by 25bps at all
investment-grade categories to protect against potential loss
caused by natural disasters that may be common in these areas.
Straightforward Deal Structure (Positive): The mortgage cash flow
and loss allocations are based on a traditional senior-subordinate,
shifting-interest Y-structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The applicable
credit support percentage feature redirects subordinate principal
to classes of higher seniority if specified credit enhancement
levels are not maintained.
CE Floor (Positive): To mitigate tail risk, which arises as the
pool seasons and fewer loans are outstanding, a subordination floor
of 2.25% of the original balance will be maintained for the notes.
Additionally, there is no early stepdown test that might allow
principal prepayments to subordinate bondholders earlier than the
five-year lockout schedule.
Extraordinary Expense Treatment (Neutral): The trust provides for
expenses, including indemnification amounts and costs of
arbitration, to be paid by the net WA coupon of the loans, which
does not affect the contractual interest due on the notes.
Furthermore, the expenses to be paid from the trust are capped at
$275,000 per annum, which can be carried over each year, subject to
the cap until paid in full.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the MSA and national levels. The implied
rating sensitivities are only an indication of some of the
potential outcomes and do not consider other risk factors that the
transaction may become exposed to or be considered in the
surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10.0%, 20.0%, and 30.0%, in addition to the
model-projected 6.1%. The analysis indicates there is some
potential rating migration with higher MVDs, compared with the
model projection.
Fitch also conducted sensitivities to determine the stresses to
MVDs that would reduce a rating by one full category, to
non-investment grade, and to 'CCCsf'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC and Clayton Services LLC. A
third-party diligence review was completed on 100% of the loans in
this transaction and the scope was consistent with Fitch's
criteria.
Loan-level adjustments were made on a small subset of the pool as a
result of the due diligence findings. For four loans, the lower
value of the original and secondary valuation was used as the
secondary valuation was outside of the 10% tolerance threshold.
OMI TRUST 2002-B: S&P Lowers Class A-2 Notes Rating to 'CC (sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its rating to 'CC (sf)' from 'CCC (sf)'
on the class A-2 notes from OMI Trust 2002-B, an asset-backed
securities (ABS) transaction backed by fixed-rate manufactured
housing loans.
The downgrade reflects S&P's view that it is a virtual certainty
that full principal repayment of the class A-2 notes will not occur
by the legal final maturity date of Sept. 15, 2019. The 'CC (sf)'
rating reflects S&P's view of the available liquidity based on the
amortization profile of the pool.
"Assuming an amortization rate in line with the rate observed over
the last three years, five months of collections will not be
sufficient, in our view, to fully repay principal on class A-2.
Therefore, we reflect this virtual certainty of non-payment of
principal by the legal final maturity date in the 'CC (sf)'
rating," S&P said.
RESIDENTIAL 2019: S&P Assigns Prelim B-(sf) Rating to Cl. 13 Notes
------------------------------------------------------------------
S&P Global Ratings said it has assigned a preliminary rating of
'B-(sf)' to the Series 2019-I Class 13 notes to be issued by
Residential Reinsurance 2019 Ltd. (Res Re 2019). The notes cover
losses in all 50 states and the District of Columbia from tropical
cyclone, earthquake (including fire following), severe
thunderstorm, winter storm, wildfire, volcanic eruption, meteorite
impact, and other perils (including, in each case, flood losses
from automobile policies and renters' policies) on an annual
aggregate basis.
The ratings are based on the lowest of the natural-catastrophe
(nat-cat) risk factor ('b-'), the rating on the assets in the
Regulation 114 trust account ('AAAm'), and the rating on the ceding
insurer, various operating companies in the USAA corporation (all
currently rated 'AA+/Stable/--').
The base-case one-year probability of attachment, expected loss,
and probability of exhaustion are 2.06%, 0.98%, and 0.44%
respectively. Using the warm sea surface temperature results, these
percentages are 2.45%, 1.16%, and 0.52%. Additionally, this
issuance has a variable reset. Beginning with the initial reset in
June 2020, the attachment probability and expected loss can be
reset to maximums of 2.56% and 1.23%, respectively. This maximum
attachment probability, using the WSST results, was used as the
baseline to determine the nat-cat risk factor for the remaining
risk periods.
Based on AIR's analysis, on a historical basis, there have not been
any years when the modeled losses exceeded the initial attachment
level of the notes.
Ratings List
New Rating
Residential Reinsurance 2019 Limited
Senior Secured Series 2019-I Class 13 Notes B- (sf) (Prelim)
TABERNA PREFERRED V: Moody's Hikes Class A-1LAD Notes Rating to Ba2
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Taberna Preferred Funding V, Ltd.:
US$100,000,000 Class A-1LA Floating Rate Notes Due August
2036 (current balance of $42,443,123), Upgraded to Ba2 (sf);
previously on February 23, 2016 Upgraded to B3 (sf)
US$250,000,000 Class A-1LAD Delayed Draw Floating Rate Notes
Due August 2036 (current balance of $106,107,807), Upgraded
to Ba2 (sf); previously on February 23, 2016 Upgraded to B3 (sf)
Taberna Preferred Funding V, Ltd., issued in March 2006, is a
collateralized debt obligation backed by a portfolio of REIT trust
preferred securities, CMBS, corporate debts and CRE CDO tranches.
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-1LA and Class A-1LAD notes and an increase in the
transaction's over-collateralization ratios and the improvement in
the credit quality of the underlying portfolio since April 2018.
The Class A-1LA and Class A-1LAD notes have collectively paid down
by approximately 21.2% or $40.0 million since April 2018 using
principal proceeds from the redemption of the underlying assets and
the diversion of excess interest proceeds. Based on Moody's
calculations, the OC ratio for the Class Class A-1LA and Class
A-1LAD notes have improved to 150.1% from the April 2018 level of
128.8%.
The deal has also benefited from improvement in the credit quality
of the underlying portfolio. According to Moody's calculations, the
weighted average rating factor (WARF) improved to 2864 from 3189 in
April 2018.
The action takes into consideration the Event of Default (EoD) and
subsequent acceleration that occurred in January 2011. The
transaction declared an EoD according to Section 5.1 (a) of the
indenture due to a default in the payment of interest due on the
Class A-1LA, Class A-1LAD, and Class A-1LB notes.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool as having a performing par and principal proceeds
balance of $223.0 million, defaulted/deferring par of $97.9
million, a weighted average default probability of 40.39% (implying
a WARF of 2864), and a weighted average recovery rate upon default
of 14.01%.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in March 2019.
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 portfolio consists primarily
of unrated assets whose default probability Moody's assesses
through credit scores derived using RiskCalc or credit assessments.
Because these are not public ratings, they are subject to
additional estimation uncertainty.
THL CREDIT I: Moody Rates $22M Class E Notes 'Ba3'
--------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by THL Credit Lake Shore MM CLO I Ltd.
Moody's rating action is as follows:
US$240,000,000 Class A Senior Secured Floating Rate Notes due 2030
(the "Class A Notes"), Definitive Rating Assigned Aaa (sf)
US$40,000,000 Class B Senior Secured Floating Rate Notes due 2030
(the "Class B Notes"), Definitive Rating Assigned Aa2 (sf)
US$28,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class C Notes"), Definitive Rating Assigned A2
(sf)
US$26,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class D Notes"), Definitive Rating Assigned
Baa3 (sf)
US$22,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2030 (the "Class E Notes"), Definitive Rating Assigned Ba3
(sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes, and the Class E Notes are referred to herein,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.
THL Credit Lake Shore MM is a managed cash flow CLO. The issued
notes will be collateralized primarily by small and medium
enterprise loans. At least 95% of the portfolio must consist of
senior secured loans and eligible investments, and up to 5% of the
portfolio may consist of second lien loans. The portfolio is
approximately 80% ramped as of the closing date.
THL Credit Advisors 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 not reinvest in new assets and all principal proceeds,
including sale proceeds and unscheduled principal payments, will be
used to amortize the notes in accordance with the priority of
payments.
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 March 2019.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 50
Weighted Average Rating Factor (WARF): 3331
Weighted Average Spread (WAS): 4.70%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 45.00%
Weighted Average Life (WAL): 7 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
March 2019.
The CLO permits the manager to determine RiskCalc-derived rating
factors, based on modifications to certain pre-qualifying
conditions applicable to the use of RiskCalc, for obligors
temporarily ineligible to receive Moody's credit estimates. Such
determinations are limited to a small portion of the portfolio. The
rating analysis included a stress scenario in which it assumed a
rating factor commensurate with a Caa2 rating for such obligors.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
TRINITAS CLO V: S&P Affirms BB (sf) Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-1-R,
B-2-R, C-R, and D-R replacement notes from Trinitas CLO V Ltd., a
collateralized loan obligation (CLO) that originally closed in
September 2016, and is managed by Trinitas Capital Management LLC.
S&P said, "We withdrew our ratings on the original class A, B-1,
B-2, C, and D notes following payment in full on the April 25,
2019, refinancing date. At the same time, we affirmed our ratings
on the class E notes, which were not affected by the refinancing."
On the April 25, 2019, refinancing date, the proceeds from the
class A-R, B-1-R, B-2-R, C-R, and D-R replacement note issuances
were used to redeem the original class A, B-1, B-2, C, and D notes
as outlined in the transaction document provisions. Therefore, S&P
withdrew its ratings on the original notes in line with their full
redemption, and S&P assigned ratings to the replacement notes.
The replacement notes are being issued via a supplemental indenture
at a lower spread over three-month LIBOR than the corresponding
original notes. The class B-2 note is being refinanced to a
floating-rate note from a fixed-rate note.
There is no change to the reinvestment period duration, which ends
in October 2020, or to the transaction's legal final maturity,
scheduled for October 2028.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement notes
Class Amount Interest
(mil. $) rate (%)
A-R 256.000 LIBOR + 1.39
B-1-R 42.000 LIBOR + 2.00
B-2-R 6.000 LIBOR + 2.00
C-R 24.000 LIBOR + 2.95
D-R 22.000 LIBOR + 4.10
Original notes
Class Amount Interest
(mil. $) rate (%)
A 256.000 LIBOR + 1.70
B-1 42.000 LIBOR + 2.15
B2 6.000 3.61
C 24.000 LIBOR + 3.15
D 22.000 LIBOR + 4.41
On a standalone basis, the results of the cash flow analysis
indicated a lower rating on the class E notes than its current
rating level. However, S&P believes that the transaction will
benefit from the drop in the weighted average cost of debt as a
result of this refinance. Also, as the transaction enters its
amortization period following the end of its reinvestment period,
the transaction may begin to pay down the rated notes sequentially,
which, all else remaining equal, will begin to increase the
overcollateralization levels.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction, to estimate
future performance. In line with our criteria, our cash flow
scenarios applied forward-looking assumptions on the expected
timing and pattern of defaults, and recoveries upon default, under
various interest rate and macroeconomic scenarios. In addition, our
analysis considered the transaction's ability to pay timely
interest or ultimate principal or both to each of the rated
tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as we deem
necessary."
RATINGS ASSIGNED
Trinitas CLO V Ltd.
Replacement class Ratings Amount (mil $)
A-R AAA (sf) 256.000
B-1R AA (sf) 42.000
B-2R AA (sf) 6.000
C-R A (sf) 24.000
D-R BBB (sf) 22.000
RATING AFFIRMED
Trinitas CLO V Ltd.
Class Rating
E BB (sf)
RATINGS WITHDRAWN
Trinitas CLO V Ltd.
Ratings
Original class To From
A NR AAA (sf)
B-1 NR AA (sf)
B-2 NR AA (sf)
C NR A (sf)
D NR BBB (sf)
NR--Not rated.
WELLS FARGO 2016-C34: Fitch Cuts Rating on $7.9MM F Certs to CCC
----------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 15 classes of
Wells Fargo Commercial Mortgage Trust 2016-C34 commercial mortgage
pass-through certificates issued by Wells Fargo Bank, N.A.
KEY RATING DRIVERS
Increasing Loss Expectations: The downgrade to class F reflects the
increase of deal-level loss expectations since Fitch's last rating
action. Since the last Fitch rating action, one loan has
transferred to special servicing, Shoppes at Alafaya (3%). In
addition, the largest Fitch Loan of Concern (FLOC), 200 Precision &
425 Privet Portfolio (4.1%), continues to underperform with
declining occupancy and significant additional vacancy expected by
YE 2019. In addition, 10 loans (20.7%) are on the servicer's
watchlist, and eight loans (12.9%) are considered FLOCs.
Specially Serviced Loans: The 10th-largest loan, Shoppes at Alafaya
(3%), is secured by a 120,639 sf retail property in Orlando, FL.
The loan was transferred to the special servicer in October 2018
for delinquent payments and the loan is currently 90+ days past
due. Occupancy at the property is 51% after the largest tenant,
Toys R' Us (49% of net rentable area and 44% of total annual rent)
vacated in June 2018. The property still has an anchor tenant with
Dick's Sporting Goods (42% of NRA) having a lease that expires in
January 2023. The property was built in two separate phases with
the vacant Toys R' Us outparcel on the opposite side of the parking
lot from Dick's Sporting Goods. There are also plans for a phase 3,
including multifamily and retail, that will connect both ends of
the shopping center but construction has not begun. According to
the servicer, a potential lease is under review to backfill the
Toys R' Us space. There have been reports that the vacant Toys R'
Us space may have a replacement tenant, but the servicer did not
confirm this information. Fitch's expected losses are based on a
discount to the appraisal value.
Loans of Concern: Fitch has designated eight loans (12.9% of pool)
as FLOCs, including three loans in the top 15 with one being a
specially serviced, Shoppes at Alafaya. The sixth-largest loan, 200
Precision & 425 Privet Portfolio (4.1%), is secured by two
properties totaling 246,790 sf located in Horsham, PA. 425 Privet
Road is an office property that is 100% occupied by Teva who
exercised a termination option and will vacate the property by
November 2019. The tenant is subject to a $1.25 million termination
fee and the loan is structured with a full cash flow sweep for 24
months. 200 Precision Drive is an industrial/office property that
is 50% vacant after Optium, who accounted for 59% of annual rental
income when they vacated in June 2018. The properties' combined
occupancy will be 25% after Teva vacates. According to Reis, the
current submarket vacancy is 20% and average asking rent is $22/sf.
Fitch's base case loss incorporates an additional stress on the
cash flow as well as a dark value analysis. These expected losses
contributed to the rating downgrade on class F.
Minimal Change to Credit Enhancement: As of the April 2019
remittance, the pool's aggregate principal balance has been reduced
by 2.2% to $687 million from $703 million at issuance. Interest
shortfalls are currently affecting class H. There are no defeased
loans. Four loans (14.7%) are set to mature in 2021 and all other
loans in 2025 and 2026.
The pool is scheduled to amortize by 12.3% of the initial pool
balance prior to maturity. Two loans (9.1%) are full-term interest
only, 15 loans (24.3%) have remaining partial interest only terms,
and 10 loans (7.2%) have amortization schedules of 25 years or
less.
Alternative Loss Considerations: In addition to modeling a base
case loss, Fitch applied a 75% loss severity on the 200 Precision &
425 Privet Portfolio loan to reflect the potential for outsized
losses given the expected significant vacancy, lack of replacement
tenants and high submarket vacancy. Fitch also assumed higher
losses on the specially serviced loan, Shoppes at Alafaya, which
reflect the potential for continued value decline due to extended
low occupancy if replacement tenants are not found.
ADDITIONAL CONSIDERATION
Pool Concentrations: Loans secured by retail properties represent
38.4% of the current pool balance and include five of the top 15
loans (20.7%). The pool has no regional mall exposure. Loans
secured by hotel properties comprise 15.8% of the current pool
balance, including three of the top 15 loans (13.8%).
RATING SENSITIVITIES
The Negative Rating Outlooks on classes D, E, and X-E reflect the
additional sensitivity analysis applied to 200 Precision & 425
Privet Portfolio and the Shoppes at Alfaya. Downgrades to these
classes are possible if performance does not improve. Future Rating
Outlook revisions to Stable from Negative may occur should
performance of these loans exhibit further stabilization through
re-tenanting. The Rating Outlooks for classes A-1 thru C and
classes X-A and X-B remain Stable due to relatively overall stable
performance of the pool and expected continued paydown. Rating
upgrades, while unlikely in the near term may occur with improved
pool performance and additional paydown or defeasance.
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.
Fitch has downgraded the following rating:
-- $7.9 million class F to 'CCCsf' from 'B-sf'; RE 65%.
Fitch has affirmed the following ratings and revised Outlooks as
indicated:
-- $17.2 million class A-1 at 'AAAsf'; Outlook Stable;
-- $100.6 million class A-2 at 'AAAsf'; Outlook Stable;
-- *$115 million class A-3 at 'AAAsf'; Outlook Stable;
-- *$25 million class A-3FL at 'AAAsf'; Outlook Stable;
-- *$0 million class A-3FX at 'AAAsf'; Outlook Stable;
-- $172.2 million class A-4 at 'AAAsf'; Outlook Stable;
-- $46 million class A-SB at 'AAAsf'; Outlook Stable;
-- $35.1 million class A-S at 'AAAsf'; Outlook Stable;
-- Interest-only class X-A at 'AAAsf'; Outlook Stable;
-- $36 million class B at 'AA-sf'; Outlook Stable;
-- Interest-only class X-B at 'AA-sf'; Outlook Stable;
-- $36.9 million class C at 'A-sf'; Outlook Stable;
-- $41.3 million class D at 'BBB-sf'; Outlook to Negative from
Stable;
-- $20.2 million class E at 'BB-sf'; Outlook Negative;
-- Interest-only class X-E at 'BB-sf'; Outlook Negative.
* The aggregate initial balance of class A-3, A-3FL and A-3FX
certificates will be $140 million. Holders of the class A-3FL
certificates may exchange all or a portion of their certificates
for a like principal amount of class A-3FX certificates having the
same pass-through rate as the class A-3FX regular interest.
Fitch does not rate classes G and H and the interest-only classes
X-FG and X-H.
[*] S&P Takes Various Actions on 107 Classes From 15 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 107 classes from 15 U.S.
residential mortgage-backed securities (RMBS) transactions issued
in 2004. The transactions are backed by subprime and
outside-the-guidelines collateral. The review yielded four
upgrades, 26 downgrades, and 77 affirmations.
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 or delinquency trends,
-- Historical missed interest payments,
-- Priority of principal payments,
-- Increases or erosion of credit support,
-- Loan modification criteria, and
-- Available subordination and/or overcollateralization.
RATING ACTIONS
The affirmed ratings reflect S&P's opinion that its projected
credit support and collateral performance on these classes have
remained relatively consistent with its prior projections.
A list of Affected Ratings can be viewed at:
https://bit.ly/2IUPlVi
[*] S&P Takes Various Actions on 112 Classes From 13 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 112 classes from 13 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2004 and 2005. The transactions are backed by prime jumbo
collateral. The review yielded 19 upgrades, 12 downgrades, 80
affirmations, 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 or delinquency trends,
-- Erosion of or increases in credit support,
-- Historical interest shortfalls or missed interest payments,
-- Priority of principal payments,
-- Available subordination and/or overcollateralization, and
Tail risk.
RATING ACTIONS
"The affirmed ratings reflect our opinion that our projected credit
support and collateral performance on these classes have remained
relatively consistent with our prior projections," S&P said.
"We raised our ratings on classes A-P and D-P from CSFB
Mortgage-Backed Trust Series 2004-8. The two principal-only strip
classes receive principal primarily from discount loans within the
related transaction. The upgrades reflect the credit risk of these
classes, which we believe is commensurate with the credit risk of
the lowest rated senior classes in their related structures," S&P
said.
A list of Affected Ratings can be viewed at:
https://bit.ly/2vmPNnk
[*] S&P Takes Various Actions on 78 Classes From 22 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 78 classes from 22 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2001 and 2007. All of these transactions are backed by
closed-end second lien, HELOC, subprime, re-performing,
document-deficient, and outside-the-guidelines collateral. The
review yielded 19 upgrades, 18 downgrades, and 41 affirmations.
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 may include:
-- Collateral performance/delinquency trends;
-- Historical interest shortfalls/missed interest payments;
-- Available subordination and/or overcollateralization;
-- Erosion of or increases in credit support; and
-- Expected short duration;
Rating Actions
"The rating changes reflect our opinion regarding the associated
transaction-specific collateral performance or structural
characteristics or both, and/or reflect the application of specific
criteria applicable to these classes. Please see the ratings list
below for the specific rationales associated with each of the
classes with rating transitions," S&P said.
"The ratings affirmations reflect our opinion that our projected
credit support and collateral performance on these classes has
remained relatively consistent with our prior projections," the
rating agency said.
The upgrade on class M1 from Bear Stearns Second Lien Trust
2007-SV1 reflects received funds related to a J.P. Morgan RMBS
trust settlement. Settlement proceeds for this transaction were
distributed in the January 2019 remittance period and were applied
as subsequent recoveries and unscheduled principal payments. As
such, S&P raised its rating on class M1 because its credit support
sufficiently increased to cover projected losses at a higher rating
level. S&P also anticipates this class to be paid down within the
next 12 months.
The downgrades on classes due to ultimate interest repayments not
being likely at higher rating levels are based on S&P's assessment
of missed interest payments to the affected classes during recent
remittance periods. The lowered ratings were derived by applying
S&P's interest shortfall criteria, which impose a maximum rating
threshold on classes that have incurred missed interest payments
resulting from credit or liquidity erosion.
"In applying the criteria, we looked to see if the applicable class
received additional compensation beyond the imputed interest due as
direct economic compensation for the delay in interest payment,
which these classes have. Additionally, these classes have delayed
reimbursement provisions. As such, we used our projections in
determining the likelihood that the shortfall would be reimbursed
under various scenarios," S&P said.
A list of Affected Ratings can be viewed at:
https://bit.ly/2J3sO9b
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman,
Editors.
Copyright 2019. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
*** End of Transmission ***