/raid1/www/Hosts/bankrupt/TCR_Public/200510.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, May 10, 2020, Vol. 24, No. 130
Headlines
245 PARK AVE 2017-245P: Fitch Affirms BB Rating on Class HRR Certs
BANK 2017-BNK5: Fitch Affirms Class F Certs at 'B-sf'
BANK OF AMERICA 2015-HAUL: Fitch Affirms BB at Class E Debt
BAYVIEW COMMERCIAL: Moody's Reviews 26 Tranches for Downgrade
BLADE ENGINE 2006-1: Moody's Cuts Class B Notes to 'C'
BX COMMERCIAL 2020-VIVA: Moody's Affirms (P)Ba2 on Class E Certs
CAN CAPITAL 2014-1: S&P Lowers Class B Notes Rating to 'D (sf)'
CFRCE COMMERCIAL 2017-C8: Fitch Cuts Ratings on 2 Tranches to CCC
COMM 2005-LP5: Moody's Cuts Class G Certs Rating to 'C'
COMM MORTGAGE 2015-CCRE24: Fitch Affirms B- Rating on Class F Debt
GS MORTGAGE 2020-GC47: Fitch Gives 'B-(EXP)' Rating to 2 Classes
HAWAIIAN AIRLINES 2013-1: Moody's Cuts Cl. A Debt Rating to 'Ba1'
JPMCC COMMERCIAL 2011-C5: Fitch Cuts Rating on 3 Tranches to 'CCsf'
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
LB-UBS COMMERCIAL 2006-C1: S&P Cuts Cl. D Certs Rating to D (sf)
MISSOURI HIGHER EDUCATION 2012-1: Fitch Affirms B on Class A Notes
MORGAN STANLEY 2013-C8: S&P Lowers Class G Certs Rating to B- (sf)
MORGAN STANLEY 2016-UBS11: Fitch Cuts Class X-F Certs to CCCsf
NEW RESIDENTIAL 2020-2: Moody's Gives B2 Rating on Class B-7 Notes
PREFERREDPLUS TRUST: Moody's Cuts $34MM Series CZN-1 Notes to Ca
RAAC TRUST 2006-SP2: Moody's Hikes Class M-1 Debt Rating to Ba2
SECURITIZED TERM 2019-CRT: Moody's Puts Class D Notes Under Review
SEQUOIA MORTGAGE: Moody's Puts 18 RMBS Classes on Review
SIERRA TIMESHARE 2019-1: Fitch Affirms BB Rating on Class D Notes
START II LTD: Fitch Cuts Class C Notes to 'Bsf', Outlook Negative
TOWD POINT 2020-2: Fitch Gives B(EXP) Rating to Class B2 Notes
[*] Fitch Alters Outlook on 95 Tranches From 37 CMBS Deals to Neg.
[*] S&P Cuts Ratings on 2 Classes From 2 U.S. CMBS Deals
[*] S&P Puts 48 U.S. BSL CLO Ratings on CreditWatch Negative
*********
245 PARK AVE 2017-245P: Fitch Affirms BB Rating on Class HRR Certs
------------------------------------------------------------------
Fitch Ratings affirms seven classes of 245 Park Avenue Trust
2017-245P Commercial Mortgage Trust Commercial Mortgage
Pass-Through Certificates.
245 Park Avenue
- Class A 90187LAA7; LT AAAsf; Affirmed
- Class B 90187LAG4; LT AA-sf; Affirmed
- Class C 90187LAJ8; LT A-sf; Affirmed
- Class D 90187LAL3; LT BBB-sf; Affirmed
- Class E 90187LAN9; LT BBsf; Affirmed
- Class HRR 90187LAQ2; LT BBsf; Affirmed
- Class X-A 90187LAC3; LT AAAsf; Affirmed
HRR represents the horizontal credit risk retention interest, which
comprised at least 5% of the fair market value of the non-residual
classes in the aggregate (at issuance).
Class X-A and X-B are interest only.
KEY RATING DRIVERS
Stable Cash Flow: The affirmations reflect the stable performance
of the collateral, which consists of the fee simple interest in a
1.7 million square floor office tower located at 245 Park Avenue in
Midtown Manhattan. The property continues to maintain a high
occupancy at 91.6% as of December 2019. Per the servicer, the YE
2019 net cash flow debt service coverage ratio was 2.38x compared
to 2.37x for YE 2018 for this interest only loan.
High-Quality Office Collateral in Prime Location: The loan is
secured by a 44-story class A office building located on an entire
block bound by Park Avenue, Lexington Avenue and 47th and 48th
Streets in the Grand Central office submarket of Midtown
Manhattan.
Historical Occupancy and High-Quality Tenancy: The property was
91.6% leased as of the December 2019 rent roll (compared to 90.2%
at January 2019 and 91.2% at issuance) and has recorded average
occupancy of over 90% since 2007. The property has served as a U.S.
headquarters for Societe Generale (rated 'A/F1'/Negative), Major
League Baseball, Angelo Gordon, and Rabobank (rated
'AA-/F1+'/Negative). Creditworthy tenants account for more than
half of the property's base rent.
The subject property is performing slightly below market levels.
Per Reis (4Q 2019), the Grand Central submarket had a class A
office vacancy rate of 7% and average asking rents of $91.98 psf.
The average in place rent at the subject was $83.50 psf, as of the
December 2019 rent roll.
Rollover Risk and Departure of MLB: In total, 29% of property NRA
expires in 2022 with an additional 21% of NRA expiring in 2026, one
year prior to loan maturity. Further, Major League Baseball (MLB)
is the second largest tenant at the property, leasing 12.8% of the
NRA. MLB's lease expires in October 2022, however, the league
announced its intention to vacate early and relocate to another
property. MLB currently subleases approximately 73,000 sf to three
tenants. Per recent news reporting, MLB began occupying its new
headquarters in January 2020; however, it has not vacated its space
at the subject property as it still maintains servers and
logistical equipment there. Further, any final move out has been
delayed by the ongoing coronavirus pandemic.
A leasing reserve currently has a balance of $8.7 million. A cash
flow sweep will be triggered should MLB vacate the majority of its
space, or not renew its lease at least one-year prior to
expiration.
Subleased Space: J.P. Morgan Chase Bank (rated 'AA-'/F1+/Negative)
currently leases about 788,000 sf at the property, approximately
560,000 sf of which is subleased to Societe Generale through
October 2022. In 2012, Societe Generale executed a direct lease
with the prior owner with a start date of November 2022 and an
initial lease term of 10 years, with two five-year extension
options. Societe Generale further subleases two of its floors.
J.P. Morgan also subleases an estimated 210,000 sf of space to
various other tenants. No other subtenants have reportedly executed
direct leases.
Coronavirus Impact: The transaction is secured by a single property
and is, therefore, more susceptible to single-event risks related
to the market, sponsor, or the largest tenants occupying the
property. The social and market disruption caused by the effects of
the coronavirus pandemic and related containment measures were not
a factor in this review.
Fitch Leverage: The $500 million mortgage loan has a Fitch DSCR and
loan-to-value (LTV) of 1.10x and 79.7%, respectively, and debt of
$694 psf based on the current NRA.
The total debt package includes mezzanine financing in the amount
of $568 million that is not included in the trust.
Sponsorship: The loan funded the acquisition of the subject
property for $2.21 billion by HNA Group. HNA, based in China, is a
global company with interests across an array of sectors. In 2018,
SL Green acquired a non-controlling indirect interest in the
borrower from HNA. SL Green, as the management company, has taken
control of the property's day to management and leasing activities,
but HNA still has the approval rights on the daily operation.
RATING SENSITIVITIES
The Rating Outlook for all classes remains Stable. No rating
actions are anticipated unless there are material changes in
property occupancy or cash flow. The property performance is
consistent with issuance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade to class B, C, D, E and HRR would occur with significant
improvement in performance of the underlying asset. Defeasance and
paydown would not play a role in contemplating an upgrade, given
the single-asset and non-amortizing nature of the securitized
loan.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Factors that lead to downgrades include a decline in performance of
the underlying asset or loan default. A downgrade to the senior
'AAAsf' or 'AA-sf' rated classes is not considered likely due to
the position in the capital structure, but may occur should
interest shortfalls occur. A downgrade to classes C, D, E and HRR
is possible should the loan experience material and sustained
performance decline, including a substantial decline in occupancy
and/or cash flow.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
BANK 2017-BNK5: Fitch Affirms Class F Certs at 'B-sf'
-----------------------------------------------------
Fitch Ratings has affirmed 15 classes of BANK 2017-BNK5 commercial
mortgage pass-through certificates and revised the Rating Outlook
on two classes to Negative from Stable.
BANK 2017-BNK5
- Class A-1 06541WAS1; LT AAAsf; Affirmed
- Class A-2 06541WAT9; LT AAAsf; Affirmed
- Class A-3 06541WAV4; LT AAAsf; Affirmed
- Class A-4 06541WAW2; LT AAAsf; Affirmed
- Class A-5 06541WAX0; LT AAAsf; Affirmed
- Class A-S 06541WBA9; LT AAAsf; Affirmed
- Class A-SB 06541WAU6; LT AAAsf; Affirmed
- Class B 06541WBB7; LT AA-sf; Affirmed
- Class C 06541WBC5; LT A-sf; Affirmed
- Class D 06541WAC6; LT BBB-sf; Affirmed
- Class E 06541WAE2; LT BB-sf; Affirmed
- Class F 06541WAG7; LT B-sf; Affirmed
- Class X-A 06541WAY8; LT AAAsf; Affirmed
- Class X-B 06541WAZ5; LT AA-sf; Affirmed
- Class X-D 06541WAA0; LT BBB-sf; Affirmed
KEY RATING DRIVERS
Coronavirus Exposure: The Negative Outlook to classes E and F can
be attributed to the social and market disruption caused by the
effects of the coronavirus pandemic and related containment
measures. Three loans in the Top 15 are backed by hotels, including
the second largest loan (6.0%), which is a Fitch Loan of Concern.
The Starwood Capital Group Hotel Portfolio loan is secured by a
portfolio of 65 hotels across 21 states. According to the servicer,
the borrower recently requested relief but has since placed the
request on hold. It is not known which, if any, of the hotels are
closed; however, performance is expected to decline in the near
term as travel has slowed to a halt. Overall, hotels represent
14.2% of the pool balance.
Retail is also expected to face cash flow challenges given the
closure of all but essential stores in most places. Loans backed by
retail properties represent 34.2% of the pool and include the Del
Amo Fashion Center (7.4%), which is the largest loan and Brendan
Theatres (1.0%) which is a FLOC. The loan is secured by a
single-tenant movie theater located in Vacaville, CA. At issuance,
Fitch noted that the property had above-market rents and high
occupancy costs. The theater is currently closed, per its website.
Fitch's analysis included an additional sensitivity on Brenden
Theatres, which assumed an outsized 100% loss.
Additional stresses were applied to six hotels and six retail
properties across the pool, in light of the recent coronavirus
outbreak. This treatment contributed to the Negative Outlook on
classes E and F.
Stable Performance Despite Increased Loss Expectations: Overall,
the underlying pool continues to perform in line with issuance
expectations. However, there is some concern regarding ongoing
performance for four Fitch Loans of Concern, representing 10.5% of
the pool. Two of the FLOCs that were flagged for concerns related
to the coronavirus pandemic were discussed above. The remaining two
FLOCs are discussed below.
The fifteenth largest loan is Capital Bank Plaza (1.9% of the pool)
and is secured by an office property in Raleigh, NC. The loan is
flagged as an FLOC for upcoming rollover. The largest tenant,
Capital Bank, accounts for 44.1% of the NRA and is not expected to
renew its lease, which will expire in March 2021. The loan is
structured with a cash flow sweep trigger, which will fund
approximately $900,000 in tenant reserves. There is an additional
$1.25 million letter of credit; combined with the cash flow sweep,
this will provide approximately $33 psf to release the space. Fitch
has reached out to the servicer to confirm that cash management has
been triggered.
The eighteenth largest loan is Crossgates Commons (1.6% of the
pool) and is secured by an anchored retail property in Albany, NY.
The loan is flagged as an FLOC after the sponsor, Pyramid, missed
the April 2020 debt service payment. The collateral is located
across the street from Crossgates Mall, which is also sponsored by
Pyramid. Anchor tenants include Home Depot (23.5% of the NRA, lease
expiring January 2025), At Home (18.9%, October 2026), Michaels
(7.2% NRA, August 2022), Ollie's Bargain Outlet (6.2% NRA, January
2021) and Sears Outlet (5.4% NRA, June 2023). Walmart acts as a
non-collateral shadow-anchor. The loan is scheduled to mature in
May 2022.
Fitch's analysis included an additional sensitivity on Crossgates
Commons, which assumed an outsized 25% loss.
Minimal Change to Credit Enhancement: The deal closed in June 2017.
Since issuance, the pool has paid down approximately 1.5% to $1.15
billion as of the April 2020 remittance from $1.17 billion at
issuance. At issuance, the pool was expected to paydown by only
8.2%, given the concentration of full-term IO loans (42.7%) and
partial IO loans (29.2%). No loans have paid off and one loan
(0.2%) has defeased.
RATING SENSITIVITIES
The Outlook on classes E and F was revised to Negative and the
Outlooks on all other classes remain Stable.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Factors that lead to upgrades would include stable to improved
performance coupled with pay down and/or defeasance. An upgrade to
class B would occur with continued paydown and would be limited as
concentrations increase. Upgrades of classes C and D would only
occur with significant improvement in credit enhancement and
stabilization of the FLOCs. Classes would not be upgraded above
'Asf' if there is likelihood for interest shortfalls. An upgrade to
classes E and F is not likely unless performance of the FLOCs
stabilizes and if the performance of the remaining pool is stable
and would not likely occur until later years in the transaction
assuming losses were minimal.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Factors that lead to downgrades include an increase in pool level
losses from underperforming or specially serviced loans. Downgrades
to the classes rated 'AAAsf' are not considered likely due to the
position in the capital structure, but may occur at 'AAAsf' or
'AA-sf' should interest shortfalls occur. Downgrades to classes C
and D are possible should additional defaults occur. Downgrades to
classes E and F are possible should the performance of FLOCs
decline further.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that a greater
percentage of classes may be assigned a Negative Rating Outlook or
those with Negative Outlooks will be downgraded one or more
categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
BANK OF AMERICA 2015-HAUL: Fitch Affirms BB at Class E Debt
-----------------------------------------------------------
Fitch Ratings has affirmed eight classes of Bank of America Merrill
Lynch BAMLL Commercial Mortgage Securities Trust 2015-HAUL.
BAMLL Trust 2015-HAUL
- Class A-1 05526WAA1; LT AAAsf; Affirmed
- Class A-2 05526WAC7; LT AAAsf; Affirmed
- Class B 05526WAJ2; LT AAAsf; Affirmed
- Class C 05526WAL7; LT AAsf; Affirmed
- Class D 05526WAN3; LT Asf; Affirmed
- Class E 05526WAQ6; LT BBsf; Affirmed
- Class X-A 05526WAE3; LT AAAsf; Affirmed
- Class X-B 05526WAG8; LT AAsf; Affirmed
KEY RATING DRIVERS
Stable Performance and Credit Metrics: The affirmations reflect
stable portfolio performance and loan amortization. The loan has a
Fitch-stressed debt service coverage ratio and loan-to-value of
1.44x and 66%, respectively, compared to 1.22x and 78.3% at
issuance, inclusive of an amortization factor of 75%.
Both portfolio occupancy and net cash flow have improved since
2010. Occupancy has increased to 85.8% at YE 2019 from 77.5% in
2010. Occupancy has declined yoy, but NCF increased slightly in
2019 (up 0.5% from YE 2018). NCF has experienced average yoy growth
of 3.6% over the 2010 to 2019 period, with the 2019 NCF 35.2% above
the 2010 level.
Fully Amortizing Loan: The loan is structured with a 20-year
amortization schedule providing full amortization over the term of
the loan, which matures in July 2035. The loan has amortized 15.3%
since issuance.
Collateral: The loan is secured by 60 cross-collateralized
self-storage properties located across six states. No single
property represents more than 3.5% of total outstanding balance.
Ground Leases: Fifty-six of the properties are owned fee simple and
four properties are held in leasehold. The four ground-leased
properties secure approximately 7% of the portfolio by loan
balance. The earliest fully extended ground lease maturity date is
Aug. 31, 2043, eight years beyond the loan's maturity date.
Experienced Sponsorship and Management: The loan is sponsored by
Private Mini Storage, L.P. The sponsor is indirectly wholly owned
and controlled by Blackwater Investments, Inc., which is controlled
by Mark V. Shoen, the son of the original founders of U-Haul and a
significant shareholder in AMERCO, the holding company of U-Haul.
The portfolio is managed by U-Haul through management agreements
with U-Haul subsidiaries in each of the states where the portfolio
properties are located. U-Haul owns and operates approximately over
1,200 self-storage locations in the U.S. with over 450,000 units
and 42 million sf of space.
Coronavirus Exposure: Fitch applied a haircut to the 'Other Income'
line item due to expected decline in ancillary revenue from the
coronavirus. 'Other Income' includes revenue from U-Box (shipping
containers used for moving and storage), packing supplies, vehicle
and trailer rental, Collegeboxes (ship to school service) and
additional services that could decline if people are moving less
due to the virus outbreak.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch rates the A-1 through B classes 'AAAsf'; therefore, upgrades
are not possible. While not likely in the near term, upgrades to
classes C through E are possible with continued paydown and
sustained cash flow improvement. The Stable Rating Outlooks for all
classes reflect the relatively stable performance that is
consistent with issuance and reduction in the loan balance due to
scheduled amortization.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A significant decline in portfolio occupancy;
-- A significant deterioration in property cash flow.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
BAYVIEW COMMERCIAL: Moody's Reviews 26 Tranches for Downgrade
-------------------------------------------------------------
Moody's Investors Service has placed 15 notes on review for
possible downgrade from 4 transactions issued by Bayview Commercial
Asset Trusts. In addition, Moody's has downgraded the ratings of 12
notes out of which 11 notes remain on review for further possible
downgrade from 2 transactions issued by Bayview Commercial Asset
Trusts. The loans are secured primarily by small commercial real
estate properties in the U.S. owned by small businesses and
investors.
The complete rating actions are as follow:
Issuer: Bayview Commercial Asset Trust 2006-1
Cl. A-1, Downgraded to Ba2 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba1
(sf)
Cl. A-2, Downgraded to Ba2 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba1
(sf)
Cl. M-1, Downgraded to Ba3 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba2
(sf)
Cl. M-2, Downgraded to B1 (sf) and Placed Under Review for Possible
Downgrade; previously on Jan 18, 2019 Downgraded to Ba3 (sf)
Cl. M-3, Downgraded to B2 (sf) and Placed Under Review for Possible
Downgrade; previously on Jan 18, 2019 Downgraded to B1 (sf)
Cl. M-4, Downgraded to B3 (sf) and Placed Under Review for Possible
Downgrade; previously on Jan 18, 2019 Downgraded to B2 (sf)
Cl. M-5, Downgraded to Caa1 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to B3
(sf)
Cl. M-6, Downgraded to Caa2 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to Caa1
(sf)
Cl. B-1, Downgraded to Caa3 (sf) and Placed Under Review for
Possible Downgrade; previously on Jan 18, 2019 Downgraded to Caa2
(sf)
Cl. B-2, Downgraded to C (sf); previously on Jan 18, 2019
Downgraded to Ca (sf)
Issuer: Bayview Commercial Asset Trust 2006-3
Cl. A-1, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on May 31, 2012 Downgraded to Ba3 (sf)
Cl. A-2, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on May 31, 2012 Downgraded to Ba3 (sf)
M-1, B3 (sf) Placed Under Review for Possible Downgrade; previously
on Jan 14, 2016 Downgraded to B3 (sf)
Cl. M-2, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 14, 2016 Downgraded to Caa2 (sf)
Cl. M-3, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 14, 2016 Downgraded to Caa3 (sf)
Issuer: Bayview Commercial Asset Trust 2006-4
Cl. A-1, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 22, 2016 Downgraded to Baa1 (sf)
Cl. A-2, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 22, 2016 Downgraded to B1 (sf)
Cl. M-1, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 14, 2016 Downgraded to B3 (sf)
Cl. M-2, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 14, 2016 Downgraded to Caa2 (sf)
Issuer: Bayview Commercial Asset Trust 2007-1
Cl. A-1, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 22, 2016 Downgraded to A3 (sf)
Cl. A-2, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 23, 2015 Downgraded to Ba2 (sf)
Cl. M-1, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 23, 2015 Downgraded to B2 (sf)
Cl. M-2, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 23, 2015 Downgraded to B3 (sf)
Cl. M-3, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 23, 2015 Downgraded to Caa1 (sf)
Issuer: Bayview Commercial Asset Trust 2007-2
Cl. A-1, Downgraded to Ba2 (sf) and Placed Under Review for
Possible Downgrade; previously on Jun 7, 2019 Downgraded to Ba1
(sf)
Cl. A-2, Downgraded to B3 (sf) and Placed Under Review for Possible
Downgrade; previously on Jan 14, 2016 Downgraded to B2 (sf)
Cl. M-1, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan 14, 2016 Downgraded to Caa2 (sf)
RATINGS RATIONALE
The rating actions take into account interest shortfalls, as well
as the existing pool and credit enhancement deterioration such as
increase in the delinquency pipeline and decline in
overcollateralization. Additionally, the rating actions also
reflect an increased likelihood of further deterioration in the
performance of the underlying small businesses and commercial real
estate as a result of a slowdown in US economic activity in 2020
due to the coronavirus outbreak. Moody's has considered up to a 20%
increase in its expected loss on the underlying pools to evaluate
the resiliency of the ratings amid the uncertainty surrounding the
pools' performance.
During the review period, Moody's will evaluate effects of ongoing
and projected macroeconomic conditions, as well as impact of
various parties including the government, servicers and issuers on
the performance of underlying pools to update its expected loss
projection on the pools and decide on the final rating action on
the notes. Rating actions on the notes, due to the revised expected
loss projections, will reflect individual transaction
considerations.
Its analysis has considered the effect of the coronavirus outbreak
on the US economy as well as the effects that the announced
government measures, put in place to contain the virus, will have
on the performance of small businesses and commercial real estate.
The contraction in economic activity in the second quarter will be
severe and the overall recovery in the second half of the year will
be gradual. However, there are significant downside risks to its
forecasts in the event that the pandemic is not contained and
lockdowns have to be reinstated. As a result, the degree of
uncertainty around its forecasts is unusually high. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating SME Balance Sheet Securitizations" published in
July 2019.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against expected losses could drive the ratings
up. Moody's expectation of pool losses could decline as a result of
a decrease in seriously delinquent loans or lower severities than
expected on liquidated loans. As a primary driver of performance,
positive changes in the US macro economy could also affect the
ratings, as can changes in servicing practices.
Down
Levels of credit protection that are insufficient to protect
investors against expected losses could drive the ratings down.
Moody's expectation of pool losses could increase as a result of an
increase in seriously delinquent loans and higher severities than
expected on liquidated loans. As a primary driver of performance,
negative changes in the US macro economy could also affect the
ratings. Other reasons for worse-than-expected performance include
poor servicing, error on the part of transaction parties,
inadequate transaction governance, and fraud.
BLADE ENGINE 2006-1: Moody's Cuts Class B Notes to 'C'
------------------------------------------------------
Moody's Investors Service has downgraded the ratings of four
securities issued by Blade Engine Securitization Ltd. Series
2006-1, an aircraft engine lease backed ABS.
The complete ratings actions are as follow:
Issuer: Blade Engine Securitization Ltd. Series 2006-1
2006-1 Class A-1, Downgraded to Caa2 (sf); previously on Feb 17,
2017 Downgraded to Caa1 (sf)
2006-1 Class A-2, Downgraded to Caa2 (sf); previously on Feb 17,
2017 Downgraded to Caa1 (sf)
2006-1 Class B, Downgraded to C (sf); previously on Feb 17, 2017
Downgraded to Ca (sf)
RATINGS RATIONALE
The rating actions on the notes reflect reduced expectations
regarding potential future income from the engine portfolio, driven
in large part by the severe disruption in the aviation sector
caused by the coronavirus pandemic, as well as the increased
likelihood that the 2006-1B notes will not receive any future
interest payments.
In its latest annual report, Blade disclosed that approximately
half of the lessees have requested some form of rent relief
following the global drop in flight demand [1], and it expects that
most, if not all, of the portfolio will eventually request some
form of relief. The annual report also indicated that Blade may not
be able to re-lease an increasing number of engines coming off
lease, or that are currently off-lease for the foreseeable future.
The combined loan-to-value ratio for Class A notes and Class B
notes is around 90% as of the April 2020 payment date, taking into
account liquidity reserves, and adjusting the December 2019
appraisal values down by 10% per annum depreciation. However, in a
review of Blade's engine sales over the last six years, most
received sale prices considerably lower than their most recent
appraisals. In its analysis Moody's focused on an adjusted LTV and
recovery analysis given that the realized prices for sale of
similar engines have been lower than indicated by valuations.
Additionally, the default of an interest payment to the 2006-1B in
June 2019 triggered an early amortization of the notes, depleting
cash reserves and diverting payments away from the 2006-1B notes,
which accrue interest, until the 2006-1A-1 and 2006-1A-2 notes are
paid in full. Given the high LTV for the Class A notes, there is a
possibility that the 2006-1B notes may not receive interest
payments in the future.
Its analysis has considered the effect of the coronavirus outbreak
on the US economy as well as the effects that the announced
government measures, put in place to contain the virus, will have
on the performance of corporate assets.
The contraction in economic activity in the second quarter will be
severe and the overall recovery in the second half of the year will
be gradual. However, there are significant downside risks to its
forecasts in the event that the pandemic is not contained and
lockdowns have to be reinstated. As a result, the degree of
uncertainty around its forecasts is unusually high. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Securities Backed by Aircraft and Associated
Leases" published in December 2019.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
A smaller decline in aircraft engine values than Moody's
expectations; higher likelihood of aircraft being sold at values
closer to market as well as servicer's ability to execute sales;
decline in the portion of portfolio currently off-lease or coming
off lease in the near future and their higher than expected
re-leasing or sale prospects, as well as improvement in lessees'
performance under the leases.
Down
A larger decline in aircraft engine values than Moody's
expectations; lower likelihood of aircraft being sold at values
closer to market as well as servicer's ability to execute sales;
increase in the portion of portfolio currently off-lease or coming
off lease in the near future and their lower than expected
re-leasing or sale prospects, as well as deterioration in lessees'
performance under the leases.
BX COMMERCIAL 2020-VIVA: Moody's Affirms (P)Ba2 on Class E Certs
----------------------------------------------------------------
Moody's Investors Service has affirmed provisional ratings on two
classes of CMBS securities, issued by BX Commercial Mortgage Trust
2020-VIVA, Commercial Mortgage Pass-Through Certificates, Series
2020-VIVA:
Cl. D, Affirmed (P)Baa3 (sf)
Cl. E, Affirmed (P)Ba2 (sf)
Note: Moody's previously assigned provisional ratings to Class A of
(P) Aaa (sf), Class B (P) Aa3 (sf), Class C (P) A3 (sf), and Class
X (P) A1 (sf), described in the prior press release, dated March 5,
2020. Subsequent to the release of those provisional ratings for
this transaction, the overall structure of the transaction was
modified. Class A, Class B, Class C, and Class X are no longer
being offered. Based on the current structure, Moody's has
withdrawn its provisional ratings for Class A, Class B, Class C,
and Class X.
RATINGS RATIONALE
Moody's originally published ratings along with a pre-sale report
for the BX Commercial Mortgage Trust 2020-VIVA transaction on March
5, 2020. Subsequent to that publication, the structure of the
transaction has significantly changed. In addition, the coronavirus
pandemic has escalated in the US and several government measures
were in place to combat varying heath and economic impacts stemming
from the virus. Moody's is publishing this revised press release
and an updated pre-sale report to disclose its opinion of the new
structure and its sustainable value for the subject properties.
The certificates are collateralized by a single loan backed by a
first lien commercial mortgage collateralized by the borrower's fee
simple interests in two properties, the MGM Grand Hotel and Casino
and Mandalay Bay Resort and Casino in Las Vegas, NV. Its ratings
are based on the credit quality of the loans and the strength of
the securitization structure.
The MGM Grand is a AAA Four-Diamond, full-service luxury resort and
casino property. It is the third largest hotel in the world,
situated on over 101.9 acres of land and consisting of 4,998
guestrooms. The guestroom mix includes 4,270 standard guestrooms,
554 suites, 88 luxury suites, 51 Skyloft Suites (excluding one
additional office unit), 30 Mansion Villas (lodging targeted for
high-end gamblers), and four entourage rooms associated with the
Mansion Villas. The hotel features approximately 177,268 SF of
casino space that houses 1,553 slot machines and 128 gaming tables,
numerous restaurants, approximately 748,325 SF of meeting space, an
approximately 23,000 SF spa, four swimming pools and approximately
41,800 SF of retail space featuring 31 retailers. The MGM Grand is
also home to multiple shows including Cirque du Soleil's "Ka", an
acrobatic theater production that has been in residence at the MGM
Grand since October 2004. The MGM Grand also has the David
Copperfield Theatre, Hakkasan Nightclub and the MGM Grand Garden
Arena, which has seating capacity of over 16,000 and hosts premier
concerts, award shows, sporting events including championship
boxing, and other special events.
The Mandalay Bay is a AAA Four-Diamond, full-service luxury resort
and casino property. It is the premier conference hotel in Las
Vegas with over 2.1 million SF of convention, ballroom, and meeting
space, making it the 5th largest event space in the United States.
Mandalay Bay is situated on over 124.1 acres of land and consists
of 4,750 guestrooms. Included in the Mandalay Bay are (i) a Four
Seasons Hotel with its own lobby, restaurants, pool, and spa, and
(ii) The Delano, which is an all-suite hotel tower within the
complex including its own spa, fitness center, lounge and
restaurants. Mandalay Bay features 152,159 SF of casino space that
houses over 1,232 slot machines and 71 gaming tables, numerous
restaurants, an approximately 30,000 SF spa, 10 swimming pools, and
approximately 54,000 SF of retail space featuring 41 retailers.
Mandalay Bay is home to Cirque du Solieil's Michael Jackson "One",
which has been in residence in a 1,805-seat showroom since 2013, a
12,000-seat special events arena, the House of Blues, and the Shark
Reef Aquarium. Additionally, Mandalay Bay's expansive pool and
beach area plays host to an array of evening open air concerts
during the pool season, a large wave pool, and Moorea, a
European-style "ultra" beach and Daylight Beach Club.
Moody's approach to rating this transaction involved the
application of its Large Loan and Single Asset/Single Borrower CMBS
methodology. The rating approach for securities backed by a single
loan compares the credit risk inherent in the underlying collateral
with the credit protection offered by the structure. The
structure's credit enhancement is quantified by the maximum
deterioration in property value that the securities are able to
withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, it also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of commercial real estate loans is determined
primarily by two factors: 1) the probability of default, which is
largely driven by the DSCR, and 2) and the severity of loss in the
event of default, which is largely driven by the LTV of the
underlying loan.
The whole loan first mortgage balance of $3,000,000,000 represents
a Moody's LTV of 79.6%. The Moody's First Mortgage Actual DSCR is
4.37X and Moody's First Mortgage Actual Stressed DSCR is 1.56X.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. Each property received
a property quality grade of 1.75, however, the Four Season's within
the Mandalay Bay received a property quality grade of 1.50.
Positive features of the transaction include the asset quality,
recent refurbishments, location and strong sponsorship. Offsetting
these strengths are property type volatility, lack of
diversification, new supply, dependence on tourism, and credit
negative legal features.
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from its
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
Its analysis has considered the effect of the coronavirus outbreak
on the US economy as well as the effects that the announced
government measures, put in place to contain the virus, will have
on the performance of commercial real estate.
The contraction in economic activity in the second quarter will be
severe and the overall recovery in the second half of the year will
be gradual. However, there are significant downside risks to its
forecasts in the event that the pandemic is not contained and
lockdowns have to be reinstated. As a result, the degree of
uncertainty around its forecasts is unusually high. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
Moody's also regards gaming as a social risk under its ESG
framework. High exposure to the gambling industry can subject some
CMBS to unfavorable ESG societal and governance trends, and this is
a material negative ratings consideration in combination with other
mitigating credit factors.
Younger generations spend less time playing casino-style games than
older generations, and gambling activities are increasingly
performed online. Additionally, while gambling remains a popular
expenditure, it is a highly discretionary segment of consumer
demand. A further risk relates to responsible marketing and
distribution, which can be a source of social responsibility
failings where companies continue to promote their products to
individuals already identified as problem gamblers.
While more prevalent outside the US, regulators have placed
restrictions on betting amounts and gambling locations in response
to pressure from lobby groups and local government desires to
promote social responsibility, which limits profitability and
increases compliance costs for gaming enterprises. Some US local
governments are increasing "sin" taxes related to the gaming
industry to compensate for reduced tax income.
CAN CAPITAL 2014-1: S&P Lowers Class B Notes Rating to 'D (sf)'
---------------------------------------------------------------
S&P Global Ratings reinstated its rating on class B from CAN
Capital Funding LLC's series 2014-1 before lowering the rating to
'D (sf)' from 'CC (sf)' and subsequently discontinuing it. The
rating was inadvertently discontinued on April 15, 2020. The
downgrade reflects the nonpayment of full principal on April 15,
2020, the legal final maturity date.
CAN Capital Funding LLC's series 2014-1 is an ABS transaction
backed by a pool of loans and merchant cash advances made to small
businesses to fund their working capital needs. According to the
March 2020 servicer report, the outstanding class B note balance
was $7,653,731.41, which had decreased from its initial amount of
$20,000,000.
CFRCE COMMERCIAL 2017-C8: Fitch Cuts Ratings on 2 Tranches to CCC
-----------------------------------------------------------------
Fitch Ratings has downgraded four classes and affirmed 13 classes
of CFCRE Commercial Mortgage Trust's 2017-C8 Commercial Mortgage
Pass-Through Certificates.
CFCRE 2017-C8
- Class A-1 12532CAW5; LT AAAsf; Affirmed
- Class A-2 12532CAX3; LT AAAsf; Affirmed
- Class A-3 12532CAZ8; LT AAAsf; Affirmed
- Class A-4 12532CBA2; LT AAAsf; Affirmed
- Class A-M 12532CBB0; LT AAAsf; Affirmed
- Class A-SB 12532CAY1; LT AAAsf; Affirmed
- Class B 12532CBC8; LT AA-sf; Affirmed
- Class C 12532CBD6; LT A-sf; Affirmed
- Class D 12532CAA3; LT BBB-sf; Affirmed
- Class E 12532CAC9; LT Bsf; Downgrade
- Class F 12532CAE5; LT CCCsf; Downgrade
- Class X-A 12532CBE4; LT AAAsf; Affirmed
- Class X-B 12532CBF1; LT AA-sf; Affirmed
- Class X-C 12532CBG9; LT A-sf; Affirmed
- Class X-D 12532CAJ4; LT BBB-sf; Affirmed
- Class X-E 12532CAL9; LT Bsf; Downgrade
- Class X-F 12532CAN5; LT CCCsf; Downgrade
KEY RATING DRIVERS
Increased Loss Expectations/Fitch Loans of Concern: While the
majority of the pool maintains stable performance, loss
expectations on the pool have increased primarily due to concerns
over the five Fitch Loans of Concern (FLOCs, 11.3% of the pool), as
well as the impact of the coronavirus pandemic on the pool. The
downgrades to classes E and F, along with the Negative Rating
Outlooks on classes C through E, primarily reflect the performance
decline of the five FLOCs, including three of the top 15 loans.
The largest FLOC is the Flats East Bank Phase I loan (3.7%), which
is secured by a 128,070 sf mixed-use property located in downtown
Cleveland, along the Lake Erie lakefront. The collateral includes
the 150 Key Aloft Cleveland Downtown, with 33,166 sf of ground
floor retail space and a 174-space surface parking lot. The
property was developed concurrently with a large 18-story office
property, which is not part of the collateral. Performance at the
property has declined substantially over the last two years after
the largest retail tenant, a gym, vacated at its lease expiration
at YE17. Further RevPAR at the hotel has declined as well. Per the
January 2019 STR report, RevPAR was $91 compared to $108 at
issuance. A more recent STR report was requested but not received.
Per the servicer, the TTM September 2019 NOI debt service coverage
ratio was 0.70x, compared to 1.14x at YE18 and 1.56x at YE17.
Further cash flow disruption is expected due to the coronavirus
pandemic, which has been significantly impacting hotel and retail
properties.
The second largest FLOC is the Art Van Portfolio loan (3.2%), which
is secured by a portfolio of five industrial/distribution and
retail properties in Michigan totaling 1,407,911 sf. All properties
are fully leased to Art Van Furniture, a furniture/mattress
retailer located in the Midwest. The properties, which were leased
through 2037, were considered mission critical to business
operations. However, in March 2020, Art Van Furniture Inc. filed
for bankruptcy protection and announced it will be closing and
liquidating all of its stores in Michigan, Illinois, Missouri and
Ohio. The loan reportedly transferred to special servicing in April
2020.
The next largest FLOC is the Courtyard Marriott Shadyside loan
(2.5%), which is secured by a 132-room select service hotel located
in Pittsburgh. Performance at the property had declined
substantially before the onset of the coronavirus pandemic due to
the slowdown in the local fracking industry in the Marcellus Shale
region. The servicer reported a NOI DSCR of 1.06x at YE19. Further
cash flow disruption to the hotel is expected due to the pandemic.
The remaining two FLOCs combine for approximately 2% of the pool
balance; they are secured by a community shopping center located in
Hickory, NC that recently returned from the special servicer and a
specially serviced Best Western Hotel located in Syracuse, NY.
While the loan remains current, the TTM June 2019 NOI DSCR was
reported at 0.35x.
Minimal Change to Credit Enhancement: As of the April 2020
distribution date, the pool's aggregate principal balance had been
reduced by 2.8% to $625.9 million from $644.7 million at issuance.
The transaction is expected to pay down by 10.8% of the scheduled
loan maturity balances. Seven loans (24.8%) are full-term
interest-only, while eight loans (22.3%) remain in their partial
interest-only periods. The majority of the pool matures in 2026 and
2027 (92.6%), with 7.5% of the pool scheduled to mature in 2022. No
loans are defeased.
Alternative Loss Considerations: Fitch performed an additional
sensitivity scenario that assumed a potential outsized loss of 50%
to the current balances of both the Flats East Bank Phase I loan
and the Art Van Portfolio loan. Both have shown a significant
decline in performance since issuance. This scenario contributed to
the Negative Outlooks on classes C through E.
Coronavirus Impact: Significant economic impacts to certain hotels
and retail and multifamily properties are expected from the
coronavirus pandemic due to the recent and sudden reductions in
travel and tourism, temporary property closures and lack of clarity
at this time on the potential duration of the impacts. The pandemic
has already prompted the closure of several hotel properties in
gateway cities, as well as malls, entertainment venues and
individual stores. Loans secured by retail and hotel properties
represent 26% and 14.9% of the pool, respectively. Business
disruption due to the pandemic partially contributes to the
Negative Rating Outlook on class C.
ADDITIONAL CONSIDERATIONS
Single-Tenant Properties: Five of the 20 largest loans in the pool
are collateralized by single-tenant properties (19.9% of the pool):
Yeshiva University Portfolio (5.6%), 380 Lafayette Street (5.2%),
Google Kirkland Campus Phase II (3.6%), Art Van Portfolio (3.2%)
and Brink's Office (2.3%).
RATING SENSITIVITIES
The Negative Outlooks on Class C, D, E and interest only X-C and
X-D reflect the potential for a downgrade should performance of the
FLOCs continue to deteriorate. The Stable Outlooks on Classes A-1
through B reflect the sufficient credit enhancement relative to
expected losses.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, coupled with additional
pay-down and/or defeasance. Upgrades to the 'A-sf' and 'AA-sf'
rated classes would likely occur with significant improvement in
credit enhancement and/or defeasance; however, adverse selection
and increased concentrations, or the underperformance of the FLOCs,
could cause this trend to reverse.
-- Upgrades to the 'BBB-sf' and below-rated classes are
considered unlikely and would be limited based on sensitivity to
concentrations or the potential for future concentrations. Classes
would not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls. An upgrade to the 'Bsf' and 'CCCsf' rated
classes is not likely until later years of the transaction and only
if the performance of the remaining pool is stable and/or if there
is sufficient credit enhancement, which would likely occur when the
non-rated class is not eroded and the senior classes pay off.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses due to underperforming or
specially serviced loans. Downgrades to the senior classes, rated
'AA-sf' through 'AAAsf', are not likely due to their position in
the capital structure and the high credit enhancement; however,
downgrades to these classes may occur should interest shortfalls
occur. Downgrades to the classes rated 'BBB-sf' and below would
occur if the performance of the FLOC continues to decline or fails
to stabilize.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that classes assigned
a Negative Rating Outlook will be downgraded in one or more
categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
COMM 2005-LP5: Moody's Cuts Class G Certs Rating to 'C'
-------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class and
downgraded the rating on one class in COMM 2005-LP5 Commercial
Mortgage Pass-Through Certificates.
Cl. F, Affirmed B3 (sf); previously on Nov 9, 2018 Downgraded to B3
(sf)
Cl. G, Downgraded to C (sf); previously on Nov 9, 2018 Downgraded
to Ca (sf)
RATINGS RATIONALE
The rating on Cl. F was affirmed due to the expected recovery of
principal and interest on the remaining loans based on the
transaction's key metrics, including Moody's loan-to-value ratio
and Moody's stressed debt service coverage ratio.
The rating on Cl. G was downgraded due to realized losses. The
Class has experienced 92% loss severity due to previously
liquidated loans.
Its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the US economy as well as
the effects that the announced government measures put in place to
contain the virus, will have on the performance of commercial real
estate. Moody's regards the coronavirus outbreak as a social risk
under its ESG framework, given the substantial implications for
public health and safety. It is a global health shock, which makes
it extremely difficult to provide an economic assessment. The
degree of uncertainty around its forecasts is unusually high.
Stress on commercial real estate properties will be most directly
stemming from declines in hotel occupancies (particularly related
to conference or other group attendance) and declines in foot
traffic and sales for non-essential items at retail properties.
Moody's base expected loss plus realized losses is now 5.2% of the
original pooled balance.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or an
improvement in loan performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the loan, an increase in realized and
expected losses from specially serviced loan or interest
shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
DEAL PERFORMANCE
As of the April 10, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by over 99% to $3.3
million from $1.70 billion at securitization. The certificates are
collateralized by four mortgage loans.
One loan, constituting 28.3% of the pool, is on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
There are currently no loans in special servicing. Twenty loans
have been liquidated from the pool with losses, resulting in an
aggregate realized loss of $88.1 million (for an average loss
severity of 30.5%).
The largest remaining loan is the Hunters Chase Apartments Loan
($1.4 million -- 41.3% of the pool), which is secured by a 112-unit
multifamily property located in Thomasville, Georgia. Property
performance has been stable and the loan has amortized 24% since
securitization. The loan matures in March 2023 and Moody's LTV and
stressed DSCR are 43% and 2.08X, respectively. Moody's stressed
DSCR is based on Moody's NCF and a 9.25% stress rate the agency
applied to the loan balance.
The second largest loan is the Williams Trace Apartment Community
Loan ($0.9 million -- 28.3% of the pool), which is secured by a
68-unit apartment complex located in Cameron, Texas. The loan is on
the servicer's watchlist due to low DSCR caused by low rents and
high repairs and maintenance expense. The loan has amortized 21%
since securitization and matures in December 2022. Moody's LTV and
stressed DSCR are 138% and 0.74X, respectively.
The third largest loan is the Rite Aid Chehalis Loan ($0.8 million
-- 23.5% of the pool), which is secured by a 13,000 SF single
tenant retail property leased to Rid Aid Corporation with a lease
expiration in March 2024, which is co-terminus with the loan's
expiration date. The loan is fully amortizing and has already
amortized 67% since securitization. Moody's LTV and stressed DSCR
are 23% and greater than 4.00X, respectively.
COMM MORTGAGE 2015-CCRE24: Fitch Affirms B- Rating on Class F Debt
------------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of Deutsche Bank Securities,
Inc.'s COMM 2015-CCRE24 Mortgage Trust.
COMM 2015-CCRE24
- Class A-3 12593JBD7; LT AAAsf; Affirmed
- Class A-4 12593JBE5; LT AAAsf; Affirmed
- Class A-5 12593JBF2; LT AAAsf; Affirmed
- Class A-M 12593JBH8; LT AAAsf; Affirmed
- Class A-SB 12593JBC9; LT AAAsf; Affirmed
- Class B 12593JBJ4; LT AA-sf; Affirmed
- Class C 12593JBK1; LT A-sf; Affirmed
- Class D 12593JBL9; LT BBB-sf; Affirmed
- Class E 12593JAL0; LT BB-sf; Affirmed
- Class F 12593JAN6; LT B-sf; Affirmed
- Class X-A 12593JBG0; LT AAAsf; Affirmed
- Class X-C 12593JAC0; LT BBB-sf; Affirmed
KEY RATING DRIVERS
Increased Loss Expectations: The Negative Outlooks on classes E and
F are attributable to increased loss projections since the last
rating action, which are driven by upcoming tenant rollover, lack
of stabilization or continued performance decline for four loans
(17.48% of the pool) designated as Fitch Loans of Concerns. Three
of the four FLOCs were flagged prior to the coronavirus pandemic.
The fourth largest loan in the pool, Palazzo Verdi (5.71%), secured
by a 302,245 square foot office building in Greenwood Village,
Colorado is a FLOC due to tenant rollover risk. The largest tenant,
which occupies 72% of net rentable area, has given notice that it
will vacate its space upon lease expiration in October 2020. A cash
trap has been triggered and the Servicer has begun trapping all
excess cash in the excess cash reserve.
The fifth largest loan, Equinox West LA (5.2%), is secured by a
108,550 square foot, single tenant retail building in Los Angeles,
CA. The property is leased to the health and fitness club tenant
Equinox and is closed due to the coronavirus. According to several
media outlets, the gym chain sent a letter to landlords indicating
they would not be paying rent in the month of April due to the
coronavirus-related closings.
The seventh largest loan in the pool, Westin Portland (4.20%),
secured by a 205-unit full-service hotel located in downtown
Portland, Oregon, has been flagged as a FLOC due to declining
performance. The hotel, which no longer operates under the Westin
flag, underwent an eight-month construction project and re-opened
in August 2017 under a new boutique name: The Dossier Hotel.
Occupancy decline as rooms were taken offline during construction,
but has not since rebounded to pre-renovation levels. Market
conditions in Portland remain soft as a wave of new supply has
recently entered the market. While this loan was a FLOC prior to
the coronavirus outbreak, current conditions will add to the
property's performance challenges. The year-end 2019 net operating
income (NOI) debt service coverage ratio was 0.81x with an
occupancy of 77.8%, a decrease from the YE 2018 NOI DSCR of 1.02x
and occupancy of 80%.
The eleventh largest loan in the pool, McMullen Portfolio (2.42%)
is secured by eight office properties totaling 274,919 square feet
located in Ann Arbor and Pittsfield Township, Michigan. The loan is
a FLOC due to upcoming tenant rollover. Two tenants, occupying
43.2% of NRA, have leases scheduled to expire in 2020. The
University of Michigan, occupying 100% of Atrium II (19.2%
portfolio NRA), has a lease scheduled to expire in November 2020;
and, Nexient, occupying 100% of Valley Ranch Business Park 3 and
Valley Ranch Business Park 4&5 (24.0% portfolio NRA), has leases
scheduled to expire in July 2020. The trailing twelve-month
September 2019 occupancy and NOI DSCR were 97% and 1.76x,
respectively.
Coronavirus Exposure: The hotel sector as a whole is expected to
experience significant declines in RevPAR in the near term due to
travel disruptions from the coronavirus pandemic. Additionally,
retail properties are expected to face cash flow disruption as
tenants may not be able to pay rent or as leases with upcoming
expiration dates are not renewed given that many retailers are
closed for business. Within the transaction, there are ten
non-defeased loans secured by hotel properties (20.6% of pool),
with a weighted average NOI DSCR of 2.00x. On average, these hotel
loans could withstand a 39.0% decline in NOI before the actual DSCR
would fall below 1.0x coverage. There are twenty-two non-defeased
loans secured by retail properties (22.3%), with a weighted average
NOI DSCR of 1.97x. On average, these retail loans could withstand a
44.7% decline in NOI before the actual DSCR would fall below 1.0x
coverage. Fitch's base case analysis included additional stresses
to eight hotel loans (18.6% of the pool), six retail loans (15.3%
of the pool), and one multifamily loan (0.8% of the pool) related
to ongoing performance concerns in light of the coronavirus
pandemic. This treatment contributed to the Negative Outlooks on
classes B through C.
Minimal Changes to Credit Enhancement: As of the April 2020
distribution date, the pool's aggregate principal balance has paid
down by 7.20% to $1.29 billion compared to $1.31 billion at the
last rating action and $1.39 billion at issuance. Four loans (1.52%
of the pool) are defeased compared to one loan (0.2% of the pool)
at the last rating action.
Additional Loss Considerations: Fitch's analysis included
additional sensitivities on Palazzo Verdi (25%) and McMullen
Portfolio (15%) to reflect potential for cash flow decline given
major tenant roll in the near term. The sensitivity analysis
contributed to the Negative Outlook on class D.
RATING SENSITIVITIES
- The Outlooks on classes A-SB through A-M and the IO class X-A
remain Stable.
- The Outlook on classes B through F and the IO class X-C was
revised to Negative from Stable.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Factors that lead to upgrades would include stable to improved
asset performance coupled with pay down and/or defeasance. Upgrades
of classes B and C would occur with continued paydown and/or
defeasance, and would be limited as concentrations increase. Class
D would only be upgraded with significant improvement in credit
enhancement and stabilization of the FLOCs. Classes would not be
upgraded above 'Asf' if there is likelihood for interest
shortfalls. Upgrades to classes E and F is not likely unless
performance of the FLOCs stabilize and if the performance of the
remaining pool is stable, and would not likely occur until later
years in the transaction assuming losses were minimal.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Factors that lead to downgrades include an increase in pool
level losses from underperforming loans. Downgrades to the classes
rated 'AAAsf' are not considered likely due to the position in the
capital structure, but may occur at 'AAAsf' or 'AA-sf' should
interest shortfalls occur. Downgrades to classes C and D are
possible should additional defaults occur or loss expectations
increase. Downgrades to classes E and F are possible should
performance of the FLOCs fail to stabilize or decline further.
- In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that a greater
percentage of classes may be assigned a Negative Rating Outlook or
those with Negative Rating Outlooks will be downgraded one or more
categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
No third-party due diligence was provided to or reviewed by Fitch
in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
GS MORTGAGE 2020-GC47: Fitch Gives 'B-(EXP)' Rating to 2 Classes
----------------------------------------------------------------
Fitch Ratings has issued a presale report on GS Mortgage Securities
Trust's 2020-GC47 Commercial Mortgage Pass-Through Certificates,
Series 2020-GC47.
GSMS 2020-GC47
-- Class A-1; LT AAA(EXP)sf Expected Rating
-- Class A-4; LT AAA(EXP)sf Expected Rating
-- Class A-5; LT AAA(EXP)sf Expected Rating
-- Class A-AB; LT AAA(EXP)sf Expected Rating
-- Class A-S; LT AAA(EXP)sf Expected Rating
-- Class B; LT AA-(EXP)sf Expected Rating
-- Class C; LT A-(EXP)sf Expected Rating
-- Class D; LT BBB(EXP)sf Expected Rating
-- Class E LT BBB-(EXP)sf Expected Rating
-- Class F; LT BB-(EXP)sf Expected Rating
-- Class G; LT B-(EXP)sf Expected Rating
-- Class H; LT NR(EXP)sf Expected Rating
-- Class RR; LT NR(EXP)sf Expected Rating
-- RR Interest; LT NR(EXP)sf Expected Rating
-- Class X-A; LT AAA(EXP)sf Expected Rating
-- Class X-B; LT A-(EXP)sf Expected Rating
-- Class X-D; LT BBB(EXP)sf Expected Rating
-- Class X-E; LT BBB-(EXP)sf Expected Rating
-- Class X-F; LT BB-(EXP)sf Expected Rating
-- Class X-G; LT B-(EXP)sf Expected Rating
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $3,688,000 class A-1 'AAAsf'; Outlook Stable;
-- $117,500,000a class A-4 'AAAsf'; Outlook Stable;
-- $383,194,000a class A-5 'AAAsf'; Outlook Stable;
-- $8,900,000 class A-AB 'AAAsf'; Outlook Stable;
-- $573,776,000b class X-A 'AAAsf'; Outlook Stable;
-- $68,743,000b class X-B'A-sf'; Outlook Stable;
-- $60,494,000 class A-S 'AAAsf'; Outlook Stable;
-- $35,746,000 class B 'AA-sf'; Outlook Stable;
-- $32,997,000 class C 'A-sf'; Outlook Stable;
-- $22,914,000c class D 'BBBsf'; Outlook Stable;
-- $22,914,000bc class X-D 'BBBsf'; Outlook Stable;
-- $17,415,000c class E 'BBB-sf'; Outlook Stable;
-- $17,415,000bc class X-E 'BBB-sf'; Outlook Stable;
-- $13,749,000c class F 'BB-sf'; Outlook Stable;
-- $13,749,000bc class X-F 'BB-sf'; Outlook Stable;
-- $7,332,000c class G 'B-sf'; Outlook Stable;
-- $7,332,000bc class X-G 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
-- $29,331,281c class H;
-- $25,565,001cd class RR Interest;
-- $13,027,646cd class RR.
(a) The initial certificate balances of classes A-4 and A-5 are
unknown and expected to be $500,694,000 in aggregate plus or minus
5%. The certificate balances will be determined based on the final
pricing of those classes of certificates. The expected class A-4
balance range is $0 to $235,000,000, and the expected class A-5
balance range is $265,694,000 to $500,694,000. Fitch's certificate
balances for classes A-4 and A-5 are assumed at the midpoint of the
range for each class.
(b) Notional amount and interest only.
(c) Privately placed and pursuant to Rule 144A.
(d) Vertical credit-risk retention interest.
TRANSACTION SUMMARY
The expected ratings are based on information provided by the
issuer as of May 1, 2020.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 29 loans secured by 60
commercial properties having an aggregate principal balance of
$771,852,928 as of the cutoff date. The loans were contributed to
the trust by Goldman Sachs Mortgage Securities and Citi Real Estate
Funding Inc.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections and/or sponsor and
management conference calls on 69.4% of the properties by balance,
cash flow analysis of 97.4% of the pool and asset summary reviews
on 100% of the pool.
Coronavirus Impact: The ongoing containment efforts related to the
coronavirus (which causes the COVID-19) pandemic may have an
adverse impact on near-term revenue (i.e. bad debt expense, rent
relief) and operating expenses (i.e. sanitation costs) for some
properties in the pool. Delinquencies may occur in the coming
months as forbearance programs are put in place, although the
ultimate impacts on credit losses will depend heavily on the
severity and duration of the pandemic's negative economic impacts
and to what degree fiscal interventions by the U.S. federal
government can mitigate the impacts on consumers. Per the offering
documents, all of the loans are current and not subject to any
forbearance or modification requests.
KEY RATING DRIVERS
Fitch Leverage Exceeds That of Recent Transactions: This pool has
slightly higher leverage than in other recent, Fitch-rated
multiborrower transactions. The pool's Fitch loan-to-value
percentage of 100.3% is higher than the YTD 2020 average of 97.9%
but lower than the 2019 average of 103.0%. The pool's Fitch debt
service coverage ratio of 1.20x is lower than the YTD 2020 average
of 1.33x and the 2019 average of 1.26x.
Favorable Property Type Concentrations: The pool includes only
three loans (4.2% of the pool) secured by retail properties and no
loans secured by hotel properties. Multifamily properties represent
the second largest concentration at 25.1%, which is higher than the
YTD 2020 and 2019 average multifamily concentrations of 20.4% and
16.9%, respectively. In Fitch's multiborrower model, multifamily
properties have a below-average likelihood of default, with all
else equal. Office properties, which represent the largest
concentration at 54.1% of the pool, have an average likelihood of
default in Fitch's multiborrower model, all else equal.
Credit Opinion Loans: Six loans, representing 37.8% of the pool,
received investment-grade credit opinions. This is significantly
above the YTD 2020 and 2019 averages of 28.4% and 14.2%,
respectively. 1633 Broadway (8.4% of the pool); Moffett Towers
Buildings A, B and C (8.4% of pool); 650 Madison Ave. (6.7% of
pool); 555 10th Ave. (6.5% of pool); and City National Plaza (6.5%
of pool) received stand-alone credit opinions of 'BBB-sf*'. 525
Market (1.3% of the pool) received a stand-alone credit opinion of
'A-sf*'.
Very Limited Amortization: Nineteen loans (86.0% of pool) are
full-term interest-only loans, and eight loans (11.2% of pool) are
partial IO. Based on the scheduled balance at maturity, the pool
will pay down by only 1.8%, which is well below the YTD 2020
average of 4.3% and the 2019 average of 5.9%.
Concentrated Pool: The top 10 loans constitute 68.2% of the pool,
which is greater than the YTD 2020 average of 51.3% and the 2019
average of 51.0%. Additionally, the loan concentration index of 555
is greater than the YTD 2020 and 2019 averages, both of which are
379.
RATING SENSITIVITIES
This section provides insight into the sensitivity of ratings when
one assumption is modified while holding others equal. For U.S.
CMBS, the sensitivity reflects the impacts of changes to property
net cash flow in up- and down-environments. The results below
should only be considered as one potential outcome, as the
transaction is exposed to multiple dynamic risk factors. It should
not be used as an indicator of possible future performance.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
debt service obligations. For this transaction, Fitch's NCF was
13.5% below the most recent year's NOI for properties for which a
full-year NOI was provided, excluding properties that were
stabilizing during this period. A further 20% decline in Fitch's
NCF indicates the following model-implied rating sensitivities:
class A-S from 'AAAsf' to 'Asf'; class B from 'AA-sf' to 'BBBsf';
class C from 'A-sf' to 'BB+sf'; class D from 'BBBsf' to 'B+sf';
class E from 'BBB-sf' to 'CCCsf'; class F from 'BB-sf' to 'CCCsf';
and class H from 'B-sf' to 'CCCsf'. The presale report includes a
detailed explanation of additional stresses and sensitivities on
page 9.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Similarly, improvement in cash flow increases property value and
capacity to meet debt service obligations. Class A-S is rated at
the highest rating level and cannot be upgraded further. A 20%
increase in Fitch's NCF indicates the following model-implied
rating sensitivities: class B from 'AA-sf' to 'AAAsf'; class C from
'A-sf' to 'AA+sf'; class D from 'BBBsf' to 'A+sf'; class E from
'BBB-sf' to 'BBB+sf'; class F from 'BB-sf' to 'BBBsf'; and class H
from 'B-sf' to 'BBB-sf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E as prepared by
Ernst & Young LLP. The third-party due diligence described in Form
15E focused on a comparison and re-computation of certain
characteristics with respect to each of the mortgage loans. Fitch
considered this information in its analysis, and the findings did
not have an impact on its analysis or conclusions.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms that are disclosed in the offering document
and which relate to the underlying asset pool is available by
clicking the link to the Appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
HAWAIIAN AIRLINES 2013-1: Moody's Cuts Cl. A Debt Rating to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service downgraded its ratings for one or more
classes across 41 different series of Enhanced Equipment Trust
Certificates following a review of 50 of the 57 separate EETC
series transactions Moody's rates. This debt has been issued over
many years (1999-2020), each transaction on behalf of one of nine
independently-rated airlines -- Air Canada, American Airlines,
Inc., British Airways, Plc, Delta Air Lines, Inc., Hawaiian
Airlines, Inc., JetBlue Airways, Latam Airlines Group S.A.;
Norwegian Air Shuttle ASA, or United Airlines, Inc.Its rating
actions do not affect any of Moody's other ratings for these
issuers. All of Moody's EETC ratings, and all other published
ratings assigned to these companies or other members in their
respective families, remain on review for downgrade, except the
outlooks on the Norwegian Air Shuttle EETCs are negative.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The spread of the coronavirus, the deteriorating global
economic outlook, extremely low and volatile oil prices, and asset
price declines are sustaining a severe and extensive credit shock
across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The passenger
airline industry is one of the sectors most significantly affected
by the shock given its exposure to travel restrictions and
sensitivity to consumer demand and sentiment. Passenger demand is
currently down by more than 90% across most of the world, excluding
a few countries in Asia where demand is also lower but by a lesser
degree. The global scope, duration and degree of the steepest
decline in passenger demand ever experienced in the history of
passenger air travel and the financial stress airlines around the
world are facing inform Moody's expectations of sustained weaker
demand for passenger aircraft for years to come; this, in turn,
will pressure values of all aircraft types, also for years to
come.
RATING RATIONALE
Moody's EETC ratings consider the credit quality of the airline
that issues the equipment notes in a mortgage type transaction or
is the lessee in a lease transaction, either of which funds each of
the pass-through trusts that are the structural foundation of an
EETC transaction. The ratings also consider the typical benefits of
EETCs, including i) the insolvency provisions of the legal
jurisdiction, such as the applicability of Section 1110 for US
airlines and either the Cape Town Convention or other local law for
transactions involving non-US airlines; ii) cross-default and
cross-collateralization of the equipment notes; iii) 18-month or
longer liquidity facilities that cover interest payments following
an airline's rejection of a transaction; and iv)
cross-subordination pursuant to intercreditor agreements, which
provide for claims of senior classes in a transaction to be paid in
full before the junior classes receive payments. Moody's opinion of
the importance (or essentiality) of specific aircraft models to an
airline's network and its estimates of equity cushion are key
factors in its rating analysis of EETCs. The focal point of the
legal jurisdiction analysis is an assessment of whether the trustee
for a transaction will have a speedy repossession of aircraft for a
rejected transaction.
The downgrades follow Moody's lowering its estimates of aircraft
current market values to reflect the impact of the coronavirus. The
downgrades reflect higher loan-to-value ratios and the ensuing
smaller equity cushions that result from Moody's lowered valuation
assumptions. Moody's currently believes aircraft values of all
types and ages will suffer significant declines amounting to at
least 10% and as much as 35% or more, depending on aircraft type
(narrow-body vs. wide-body), age, market attractiveness, potential
for early retirement, and subdued demand for aircraft and spare
parts. More than half of the global passenger aircraft fleet of
more than 27,000 is currently parked, with the potential for
significant numbers of aircraft near or beyond 20 years of age to
be retired up to five years earlier than pre-coronavirus plans
because of airlines' expectations for meaningfully lower passenger
demand, which will lead to smaller aircraft fleets than prior
plans. Wide-body models such as Boeing's 767 and 777-200ER families
are examples of aged, long out-of-production models. Airbus' A330
and A340 models are also in operators' cross-hairs. In the
narrow-body fleet, there are many A320ceo family and Boeing 737NG
family aircraft at least 20 years old; the same is true for the
Boeing 757. Pronouncements by many airlines that they will have
materially smaller operations in upcoming years will also adversely
affect aircraft values.
Almost 880 aircraft comprise the collateral across the 57 EETC
transactions that Moody's rates for a total of 13 different
airlines, including six in the US. The Airbus A321-200ceo is the
most prevalent aircraft type, accounting for about 18% (160
aircraft) of the population in Moody's rated universe. Boeing's
737-800 is a close second at about 17%, followed by the 737-900ER
at 11%. The Boeing 777-300ER, 777-200ER and 787-9 are the most
prevalent wide-bodies in the collateral for these transactions,
with 49, 42 and 42 aircraft, respectively. Each of these models are
in transactions that are being downgraded in this bulk rating
action.
Moody's is downgrading 67 separate EETC tranches inits rating
action; twenty-nine others face no action, and two Class Cs are
being upgraded. All remain on review for further downgrade. Of the
21 Class AA tranches Moody's rates, 11 were downgraded one notch,
nine were downgraded 2 notches and one was downgraded three
notches. Of the 49 Class A tranches Moody's reviewed in this
action, six were downgraded one notch, 14 were downgraded two
notches, 14 were downgraded three notches and two were downgraded
four notches. No action was taken on the remaining 13 tranches. Of
the 25 Class B tranches considered in this action, six were
downgraded one notch, one was downgraded 2 notches and two were
downgraded three notches. Moody's is not taking action on the
remaining 16 tranches in this class. Ratings of the three class Cs
still outstanding are also being changed, with two upgraded two
notches and one downgraded two notches.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Changes in EETC ratings can result from any combination of changes
in Moody's estimates of aircraft market values, which will affect
estimates of loan-to-value; the underlying credit quality or
ratings of the airline issuer or lessee; and Moody's opinion of the
importance of particular aircraft models to an airline's network.
The ratings of the eight airlines with published corporate ratings
in this rating action remain on review for downgrade, as do all of
the EETC ratings. The ratings on the EETCs could be downgraded when
Moody's resolves the ongoing reviews of the underlying airline
companies.
The methodologies used in these ratings were Enhanced Equipment
Trust and Equipment Trust Certificates published in July 2018.
The following rating actions were taken:
Downgrades:
Issuer: Air Canada 2013-1 Pass Through Trusts
Senior Secured Enhanced Equipment Trust Ser. 2013-1 Class A,
Downgraded to Baa2 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2013-1 Class B,
Downgraded to Ba2 from Baa2; Placed Under Review for further
Downgrade
Issuer: Air Canada Series 2015-2 Pass Through Trusts
Senior Secured Enhanced Equipment Trust Ser. 2015-2 Class A,
Downgraded to A3 from A1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-2 Class AA,
Downgraded to A1 from Aa2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-2 Class B,
Downgraded to Baa2 from Baa1; Placed Under Review for further
Downgrade
Issuer: Air Canada Series 2017-1 Pass Through Trusts
Senior Secured Enhanced Equipment Trust Ser. 2017-1 Class A,
Downgraded to A3 from A1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-1 Class AA,
Downgraded to A1 from Aa2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-1 Class B,
Downgraded to Baa2 from Baa1; Placed Under Review for further
Downgrade
Issuer: British Airways Pass Through Trust 2018-1AA
Senior Secured Enhanced Equipment Trust, Downgraded to Aa3 from
Aa2; Placed Under Review for further Downgrade
Issuer: British Airways Pass Through Trust 2019-1AA
Senior Secured Enhanced Equipment Trust, Downgraded to Aa3 from
Aa2; Placed Under Review for further Downgrade
Issuer: Hawaiian Airlines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2013-1 Class A,
Downgraded to Ba1 from Baa1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2013-1 Class B,
Downgraded to Ba3 from Ba2; Placed Under Review for further
Downgrade
Issuer: JetBlue Airways Corp.
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class A,
Downgraded to A3 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Issuer: LATAM Pass Through Trust 2015-1A
Senior Secured Enhanced Equipment Trust, Downgraded to Baa2 from
Baa1; Placed Under Review for further Downgrade
Issuer: Speedbird 2013 Limited
Senior Secured Enhanced Equipment Trust Ser. 2013 Class A,
Downgraded to A3 from A1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2013 Class B,
Downgraded to Baa1 from A3; Placed Under Review for further
Downgrade
Issuer: American Airlines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2011-1 Class A,
Downgraded to Baa3 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-2 Class C,
Downgraded to B2 from Ba3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-2 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-2 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-1 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-1 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-2 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-2 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-3 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-3 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-1 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-1 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-2 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2017-2 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class A,
Downgraded to Baa2 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class AA,
Downgraded to A2 from Aa3; Placed Under Review for further
Downgrade
Issuer: Delta Air Lines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2007-1 Class A,
Downgraded to Baa2 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2007-1 Class B,
Downgraded to Ba1 from Baa2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-1 Class A,
Downgraded to A3 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-1 Class A,
Downgraded to Baa1 from A1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-1 Class AA,
Downgraded to A2 from Aa2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-1 Class B,
Downgraded to Baa2 from Baa1; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2020-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Issuer: United Airlines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2001-A1 Class A,
Downgraded to Baa1 from A3; Placed Under Review for further
Downgrade
Senior Secured Equipment Trust Ser. 2007-1 Class A, Downgraded to
Baa3 from Baa1; Placed Under Review for further Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2010-1 Class A,
Downgraded to Baa3 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-1 Class A,
Downgraded to Baa2 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-2 Class A,
Downgraded to Baa2 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-2 Class B,
Downgraded to Baa3 from Baa2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-1 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2015-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-1 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-2 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2016-2 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2018-1 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2018-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-1 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-2 Class A,
Downgraded to Baa1 from A2; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2019-2 Class AA,
Downgraded to A1 from Aa3; Placed Under Review for further
Downgrade
Issuer: US Airways, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2001-1 Class G,
Downgraded to Baa2 from Baa1; Placed Under Review for further
Downgrade
Underlying Senior Secured Enhanced Equipment Trust Ser. 2001-1
Class G, Downgraded to Baa2 from Baa1; Placed Under Review for
further Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2010-1 Class A,
Downgraded to Baa3 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2011 Class A,
Downgraded to Baa3 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-1 Class A,
Downgraded to Baa1 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2012-2 Class A,
Downgraded to Baa3 from A3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2013-1 Class A,
Downgraded to Baa3 from A3; Placed Under Review for further
Downgrade
Issuer: NAS Enhanced Pass Through Certificate 2016-1A
Senior Secured Enhanced Equipment Trust, Downgraded to B2 from Ba1
Issuer: NAS Enhanced Pass Through Certificate 2016-1B
Senior Secured Enhanced Equipment Trust, Downgraded to Caa2 from
B2
Upgrades:
Issuer: US Airways, Inc.
Senior Secured Enhanced Equipment Trust Ser. 2000-3 Class C,
Upgraded to Ba1 from Ba3; Placed Under Review for further
Downgrade
Senior Secured Enhanced Equipment Trust Ser. 2001 Class C, Upgraded
to Ba1 from Ba3; Placed Under Review for further Downgrade
Outlook Actions:
Issuer: NAS Enhanced Pass Through Certificate 2016-1A
Outlook, Changed to Negative from Stable
Issuer: NAS Enhanced Pass Through Certificate 2016-1B
Outlook, Changed to Negative from Stable
JPMCC COMMERCIAL 2011-C5: Fitch Cuts Rating on 3 Tranches to 'CCsf'
-------------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed six classes of JPMCC
Commercial Mortgage Securities Trust 2011-C5 and assigned Negative
Outlooks on three classes.
JPMCC 2011-C5
- Class A-3 46636VAC0; LT AAAsf; Affirmed
- Class A-S 46636VAK2; LT AAAsf; Affirmed
- Class A-SB 46636VAD8; LT AAAsf; Affirmed
- Class B 46636VAM8; LT AAsf; Affirmed
- Class C 46636VAP1; LT Asf; Affirmed
- Class D 46636VAR7; LT Bsf; Downgrade
- Class E 46636VAT3; LT CCCsf; Downgrade
- Class F 46636VAV8; LT CCCsf; Downgrade
- Class G 46636VAX4; LT CCsf; Downgrade
- Class X-A 46636VAE6; LT AAAsf; Affirmed
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades reflect increased loss
expectations for the remaining pool since Fitch's prior rating
action, driven primarily by continued performance deterioration of
the real-estate owned LaSalle Select Portfolio asset and the
Asheville Mall loan. Fitch has designated four loans (61.8% of
pool) as Fitch Loans of Concern, including one REO asset (7.4%).
The largest FLOC, InterContinental Hotel Chicago (34.7%), is
secured by a 792-room full-service hotel located in Chicago, IL.
The property has been experiencing declining performance prior to
the coronavirus pandemic due to superior competition and new market
supply. Net operating income declined 18.8% between 2018 and 2019
due to lower revenues and higher real estate taxes. As a result, YE
2019 NOI DSCR declined to 1.46x from 1.80x at YE 2018. Per the
servicer, the borrower has requested COVID-19 relief.
The Asheville Mall loan (16.8%), which is secured by a 323,380-sf
portion of a 973,367-sf enclosed regional mall located in
Asheville, NC, has experienced continuing downward trending
occupancy, in-line and anchor tenant sales. The loan is sponsored
by CBL. Net operating income declined 14.9% between YE 2018 and TTM
September 2019 due to declining revenue and increasing operating
expenses. The most recent servicer-reported NOI DSCR as of TTM
September 2019 was 1.38x. The non-collateral anchor tenants at the
property include Belk, J.C. Penney and Dillard's. A non-collateral
Sears store closed in July 2018. Collateral anchor tenants include
Barnes & Noble (11.1% of NRA) and H&M (6.8%).
The REO LaSalle Select Portfolio asset (7.4%) consists of three
class B suburban office properties located in Norcross, GA, which
is part of the Atlanta metro. The original portfolio consisted of
four office properties, one of which was disposed in August 2019.
The remaining properties have had limited positive leasing
momentum. Significant losses upon liquidation are expected.
The 114. W. Illinois loan (2.9%), which is secured by two mixed-use
retail/office properties located in Chicago, IL, was flagged for
declining occupancy and upcoming lease rollover concerns. Occupancy
at the underlying 500 N. Clark property, which represents 37.1% of
the allocated loan balance, declined to 69.7% as of March 2020 from
86.6% in February 2019 due to Nahabedian Restaurant Group (16.9% of
property NRA) vacating prior to November 2020 lease expiration.
Upcoming lease rollover includes 17.3% of the property NRA in 2020
and 7.1% in 2021. Real estate taxes at this property increased 72%
between 2017 and 2018. Performance of the other underlying 114 W.
Illinois property (62.9% of allocated loan balance) has remained
stable, with 100% occupancy. The servicer-reported NOI DSCR for the
loan was 1.53x at TTM 2019, compared to 1.52x at YE 2018.
Increased Credit Enhancement: Credit enhancement has increased
since Fitch's last rating action from the prepayment of nine loans
with yield maintenance, the disposition of the REO Fairview Heights
Plaza asset at better than expected recoveries and continued
scheduled amortization. As of the April 2020 distribution date, the
pool's aggregate principal balance has been reduced by 63.4% to
$377.2 million from $1.03 billion at issuance. Realized losses to
date total 0.6% of the original pool balance. Interest shortfalls
currently impact the non-rated class. All of the non-specially
serviced loans mature between May and September 2021.
Concentrated Pool: The pool is highly concentrated with 14
loans/assets remaining. Due to the concentrated nature of the pool,
Fitch performed a sensitivity analysis that grouped the remaining
loans based on the likelihood of repayment and expected losses from
the liquidation of specially serviced and/or underperforming loans.
The ratings reflect this analysis.
Coronavirus Exposure: The largest loan (34.7% of pool) is secured
by a hotel property, with a YE 2019 NOI DSCR of 1.46x. Ten loans
(53.5%) are secured by retail properties, including one regional
mall (16.8%). Fitch's base case analysis applied additional
stresses to the hotel and regional mall loans due to their
vulnerability to the coronavirus pandemic. These additional
stresses contributed to the Negative Rating Outlooks on classes B
through D.
Per the servicer, coronavirus relief has been requested by the
borrowers of the InterContinental Hotel Chicago and Inman Grove
Shopping Center (3% of pool; Edison, NJ) loans.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The Negative Rating Outlooks on classes B, C and D reflect
refinance concerns of the FLOCs, particularly the InterContinental
Hotel Chicago and Asheville Mall loans, the impact of the
coronavirus pandemic and the potential for a prolonged workout
given the lack of liquidity in the market for hotels and malls.
Factors that lead to additional downgrades include further
occupancy, cash flow, sales or RevPAR deterioration for the FLOCs.
Downgrades of one category or more to classes B, C and D are
possible. Classes E, F, G could be downgraded to 'CCsf', 'Csf' or
'Dsf' if losses are considered probable, imminent or are realized.
Downgrades to the senior classes A-3, A-SB and A-S are not likely
due to the position in the capital structure but are possible if
the FLOCs and/or non-FLOCs fail to refinance at maturity.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Upgrades are currently not expected given the high concentration of
FLOCs and expectation that the FLOCs will not pay off at their
upcoming maturities. In addition, the outlook for hotel and
regional mall performance is expected to further decline due to the
impact of coronavirus and may lead to a prolonged workout strategy.
Factors that lead to upgrades of classes B, C and D would include
payoff of the FLOCs and/or modifications or loan workouts that
result in scenarios better than currently expected. Classes E, F
and G would only be upgraded if losses were no longer considered
possible. Classes would not be upgraded above 'Asf' if there is
likelihood for interest shortfalls, which could occur with a
significant reduction in servicing advancing if appraisal values
decline.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
---------------------------------------------------------------
Fitch Ratings has affirmed 17 classes of JPMDB Commercial Mortgage
Securities Trust 2018-C8 commercial mortgage pass-through
certificates.
JPMDB 2018-C8
- Class A-1 46591AAW5; LT AAAsf; Affirmed
- Class A-2 46591AAX3; LT AAAsf; Affirmed
- Class A-3 46591AAZ8; LT AAAsf; Affirmed
- Class A-4 46591ABA2; LT AAAsf; Affirmed
- Class A-S 46591ABE4; LT AAAsf; Affirmed
- Class A-SB 46591ABB0; LT AAAsf; Affirmed
- Class B 46591ABF1; LT AA-sf; Affirmed
- Class C 46591ABG9; LT A-sf; Affirmed
- Class D 46591AAG0; LT BBB-sf; Affirmed
- Class E 46591AAJ4; LT BB+sf; Affirmed
- Class F 46591AAL9; LT BB-sf; Affirmed
- Class G 46591AAN5; LT B-sf; Affirmed
- Class X-A 46591ABC8; LT AAAsf; Affirmed
- Class X-B 46591ABD6; LT AA-sf; Affirmed
- Class X-D 46591AAA3; LT BBB-sf; Affirmed
- Class X-EF 46591AAC9; LT BB-sf; Affirmed
- Class X-G 46591AAE5; LT B-sf; Affirmed
KEY RATING DRIVERS
Stable Performance: Overall pool performance and loss expectations
have remained stable since issuance. There have been no specially
serviced loans since issuance. Three loans are on the servicer's
watchlist, one (0.9%) of which was designated as a Fitch Loan of
Concern. The Mezz 42 loan, which is secured by an 83,269-sf
mixed-use property with 50 residential units, was flagged due to
occupancy declining to 80% at YE 2019 from 91% at YE 2018; the
servicer-reported NOI debt service coverage ratio declined to 0.89x
at YE 2019 from 1.03x at YE 2018.
Minimal Change to Credit Enhancement: As of the April 2020
distribution date, the pool's aggregate principal balance has paid
down by 0.9% to $707 million from $713.1 million at issuance. Ten
loans (37.7% of pool) are full-term, interest-only. An additional
17 loans (31.1%) remain in their partial interest-only period. The
remaining 14 loans (31.2%) are amortizing. Based on the scheduled
balance at maturity, the pool will pay down by 8.5%. Scheduled loan
maturities include one loan (4.2%) in 2022, three loans (14.4%) in
2023, one loan (2.0%) in 2027 and 36 loans (79.4%) in 2028.
Coronavirus Exposure: Five loans (16.4% of pool), which have a
weighted average NOI DSCR of 2.18x, are secured by hotel
properties. Ten loans (22.2%), which have a weighted average NOI
DSCR of 2.30x, are secured by retail properties. Fitch's base case
analysis applied additional stresses to five hotel loans and four
retail loans, including two regional mall loans, due to their
vulnerability to the coronavirus pandemic. These additional
stresses contributed to the Outlook revision on class E, F, G, X-EF
and X-G to Negative from Stable.
Regional Mall Exposure: Two loans outside of the top 15 (4.3%) are
secured by regional malls. The Twelve Oaks Mall loan (2.3%), which
is secured by a 716,771-sf portion of a 1.5 million-sf super
regional mall located in Novi, MI, has non-collateral anchor
tenants, including Macy's, J.C. Penney, Lord & Taylor and
Nordstrom. The non-collateral Sears store closed in March 2019.
Nordstrom, which owns its improvements, ground leases the land from
the sponsor. The ground lease recently expired in February 2020;
however, Nordstrom has eight separate options to renew and extend
the lease for successive renewal periods of 10 years. Fitch's
inquiry to the servicer for an update on Nordstrom's ground lease
remains outstanding. Other major collateral anchor tenants include
H&M, XXI Forever, Victoria's Secret and Pottery Barn. In-line
tenant sales, excluding Apple, were $455 psf in 2019 and $479 psf
in 2018. Including Apple, inline tenant sales were $573 in 2019 and
$590 psf in 2018. The servicer-reported NOI DSCR was 2.54x at YE
2019 compared to 2.52x at YE 2018. The property's competitive set
includes The Somerset Collection, an upscale 1.8 million-sf
superregional mall located 20 miles northeast, and is anchored by
Nordstrom, Saks Fifth Avenue, Neiman Marcus, and Macy's.
The Lehigh Valley Mall loan (2%), which is secured by a 545,233-sf
portion of a 1.2 million-sf regional mall located in Whitehall, PA,
has non-collateral anchor tenants, including Boscov's, J.C. Penney,
and Macy's (ground leased). In-line tenant sales were $461 psf in
2019, compared to $451 psf at issuance. Bob's Discount Furniture
(5.5% of NRA) and Barnes & Noble (5.5%) are the largest collateral
anchor tenants. The servicer-reported NOI DSCR was 2.07x as of YTD
September 2019, compared to 2.24x at YE 2018.
RATING SENSITIVITIES
The Negative Outlooks on classes E, F, G, X-EF and X-G reflect
performance concerns with hotel and retail properties due to the
slowdown in economic activity related to the coronavirus pandemic.
The Stable Outlooks on classes A-1 through D reflect the stable
pool performance and expected continued paydowns.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of one category to the 'Asf' and 'AAsf' categories would
likely occur with significant improvement in CE and/or defeasance;
however, adverse selection and increased concentrations and further
underperformance of the FLOC or loans expected to be negatively
impacted by the coronavirus pandemic could cause this trend to
reverse. An upgrade of the 'BBBsf' category is considered unlikely
and would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if there is likelihood for interest shortfalls.
Upgrades of one category to the 'Bsf' and 'BBsf' categories are not
likely until the later years of the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the coronavirus return to pre-pandemic levels, and
there is sufficient CE to the class.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool level losses from underperforming or specially serviced loans.
Downgrades to the 'Asf', 'AAsf' and 'AAAsf' categories are not
likely due to the position in the capital structure, but may occur
at the 'AAsf' and 'AAAsf' categories should interest shortfalls
occur. A downgrade of one category or more to the 'BBBsf' category
would occur if a high proportion of the pool defaults and expected
losses increase significantly. Downgrades of one category or more
to the 'Bsf' and 'BBsf' categories would occur should loss
expectations increase and/or properties vulnerable to the
coronavirus fail to return to pre-pandemic levels. The Rating
Outlook on classes E, F, G, X-EF and X-G may be revised back to
Stable if pool performance and/or properties vulnerable to the
coronavirus stabilize once the pandemic is over.
In addition to its baseline scenario related to the coronavirus,
Fitch also envisions a downside scenario where the health crisis is
prolonged beyond 2021; should this scenario play out, Fitch expects
that a greater percentage of classes may be assigned a Negative
Rating Outlook or those with Negative Rating Outlooks will be
downgraded one or more categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
LB-UBS COMMERCIAL 2006-C1: S&P Cuts Cl. D Certs Rating to D (sf)
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from LB-UBS
Commercial Mortgage Trust 2006-C1, a U.S. CMBS transaction.
"The downgrades reflect credit support erosion that we anticipate
will occur upon the eventual resolution of the two specially
serviced assets ($76.0 million, 97.0%), as well as a reduction in
the liquidity support available to these classes due to ongoing
interest shortfalls. Specifically, we lowered our ratings on
classes C and D to 'D (sf)' because we expect the accumulated
interest shortfalls to remain outstanding for the foreseeable
future," S&P said.
Classes C and D have accumulated interest shortfalls outstanding
for five and seven consecutive months, respectively.
According to the April 17, 2020, trustee remittance report, the
current monthly interest shortfalls totaled $245,777 and resulted
primarily from appraisal subordinate entitlement reduction amounts
totaling $201,799 and special servicing fees totaling $43,978.
The current monthly interest shortfalls affected all classes
subordinate to and including class C.
TRANSACTION SUMMARY
As of the April 17, 2020, trustee remittance report, the collateral
pool balance was $78.4 million, which is 3.2% of the pool balance
at issuance. The pool currently includes one loan, which is on the
master servicer's watchlist, and two real estate owned (REO) assets
with the special servicer, down from 145 loans at issuance.
The rating agency calculated a 1.07x S&P Global Ratings debt
service coverage (DSC) and 101.8% S&P Global Ratings loan-to-value
ratio using a 9.25% S&P Global Ratings capitalization rate for the
Park City Shopping Center loan.
To date, the pool transaction has experienced $189.0 million in
principal losses, or 7.7% of the original pool trust balance. S&P
expects losses to reach approximately 9.8% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses it expects upon the eventual resolution of
the two specially serviced assets.
CREDIT CONSIDERATIONS
As of the April 17, 2020, trustee remittance report, two assets in
the pool were with the special servicer, LNR Partners LLC (LNR).
Details of the specially serviced asset are below.
The Triangle Town Center REO asset ($74.6 million, 95.2%) is the
largest asset in the pool and has a total reported exposure of
$80.5 million. The asset consists of 473,000 sq. ft. of a 1.44
million sq.-ft. regional mall and lifestyle center in Raleigh, N.C.
The loan was transferred to the special servicer on Aug. 30, 2018,
because the borrower indicated that it was not able to pay off the
loan upon its Dec. 5, 2018, maturity and will not exercise its
contractual extension option. The property became REO on July 25,
2019. Updated performance data was not available. An appraisal
reduction amount (ARA) of $40.9 million is in effect against the
asset and S&P expects a significant loss (greater than 60%) upon
its eventual resolution. The Northfield Plaza REO asset ($1.4
million, 1.8%) is the third-largest asset in the pool and has a
total reported exposure of $1.8 million. The asset is a 15,950
sq.-ft. retail property in North Randall, Ohio. The loan was
transferred to the special servicer on June 25, 2015, due to
imminent default. The property became REO on Aug. 15, 2016. The
reported DSC as of Dec. 31, 2019, was insufficient to cover debt
service and occupancy was 10.0% as of February 2020. An ARA of $1.4
million is in effect against this asset and S&P expects a
significant loss upon its eventual resolution.
S&P estimated losses for the specially serviced assets, arriving at
a weighted-average loss severity of 67.6%.
S&P acknowledges a high degree of uncertainty about the rate of
spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly," S&P said.
RATINGS LOWERED
LB-UBS Commercial Mortgage Trust 2006-C1
Commercial mortgage pass-through certificates
Rating
Class To From
B CCC (sf) B- (sf)
C D (sf) CCC (sf)
D D (sf) CCC- (sf)
MISSOURI HIGHER EDUCATION 2012-1: Fitch Affirms B on Class A Notes
------------------------------------------------------------------
Fitch affirms one rating and downgrades three ratings assigned to
FFELP student loan trusts from the Higher Education Loan Authority
of the State of Missouri.
The downgrades on the 2010-1, 2010-3, and 2013-1 notes are mainly
driven by the deterioration of the transactions' maturity profile
due to increasing weighted average loan term for all three trusts.
The action also follows MOHELA's upward revision of the percentage
of borrowers in income-based repayment across the three trusts.
Together, these factors have changed Fitch's view of the maturity
risk profile of the outstanding bonds, and Fitch has revised its
sustainable constant prepayment rates to reflect the view that
payment rates will slow due to coronavirus containment measures
driven by an increase forbearance and income-based repayment. As a
result, Fitch lowered the sustainable constant payment rates used
for cashflow modeling for these trusts.
For all transactions, the notes fail Fitch's 'Bsf' maturity stress
scenario due to missing the legal final maturity date. However,
because the legal final maturity of the class A notes is at least
five years away and MOHELA is the sponsor and has the ability to
call the notes upon reaching 10% pool factor, Fitch believes there
is a limited margin of safety that supports the 'Bsf' rating.
Higher Education Loan Authority of the State of Missouri Series
2013-1
- Class A 606072LB0; LT Bsf; Downgrade
Higher Education Loan Authority of the State of Missouri Series
2010-1
- Class A-1 606072KP0; LT Bsf; Downgrade
Higher Education Loan Authority of the State of Missouri Series
2010-3
- Class A-1 606072KV7; LT Bsf; Downgrade
Higher Education Loan Authority of the State of Missouri Series
2012-1
- Class A 606072LA2 LT Bsf; Affirmed
KEY RATING DRIVERS
U.S. Sovereign Risk: The trusts' collateral comprises 100% Federal
Family Education Loan Program loans with guaranties provided by
eligible guarantors and reinsurance provided by the U.S. Department
of Education for at least 97% of principal and accrued interest.
The U.S. sovereign rating is currently 'AAA'/Outlook Stable.
Collateral Performance:
MOHELA 2010-1: As of January 2020, the weighted average remaining
term to maturity was 165 months, which increased seven months over
the preceding 12 months. This is driven, in part, by a high level
of IBR, which was 39.81% of the portfolio as of the same date.
Fitch assumed a base case default rate of 48.75% and 100% under the
'AAA' credit stress scenario and a constant default rate of 6.0%.
Fitch applies the standard default timing curve in its credit
stress cash flow analysis. The claim-reject rate is assumed to be
0.50% in the base case and 3.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 5.8%, 8.4%, and 39.5% respectively, and are used as the
starting point in cash flow modelling. The sustainable constant
prepayment rate (voluntary and involuntary) is assumed to be 8.0%.
Subsequent declines or increases are modelled as per criteria. The
borrower benefit is assumed to be approximately 0.1%, based on
information provided by the sponsor.
MOHELA 2010-3: As of January 2020, the weighted average remaining
term to maturity was 168 months, which increased eight months over
the preceding 12 months. This is driven, in part, by high level of
IBR, which was 43.78% of the portfolio as of the same date. Fitch
assumes a base case default rate of 52.8% and 100% under the 'AAA'
credit stress scenario and a constant default rate of 6.0%. Fitch
applies the standard default timing curve in its credit stress cash
flow analysis. The claim-reject rate is assumed to be 0.50% in the
base case and 3.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 7.1%, 8.9%, and 43.6% respectively, and are used as the
starting point in cash flow modelling. The sustainable constant
prepayment rate (voluntary and involuntary) is assumed to be 8.0%.
Subsequent declines or increases are modelled as per criteria. The
borrower benefit is assumed to be approximately 0.1%, based on
information provided by the sponsor.
MOHELA 2012-1: As of March 2020, the weighted average remaining
term to maturity was 163, which increased 13 months over the
preceding 12 months. This is driven, in part, by high level of IBR,
which was 45.31% of the portfolio as of the same date. Fitch
assumes a base case default rate of 45.0% and 100% under the 'AAA'
credit stress scenario and a constant default rate of 6.0%. Fitch
applies the standard default timing curve in its credit stress cash
flow analysis. The claim-reject rate is assumed to be 0.50% in the
base case and 3.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 7.7%, 11.2%, and 45.1% respectively, and are used as the
starting point in cash flow modelling. The sustainable constant
prepayment rate (voluntary and involuntary) is assumed to be 11.0%.
Subsequent declines or increases are modelled as per criteria. The
borrower benefit is assumed to be approximately 0.1%, based on
information provided by the sponsor.
MOHELA 2013-1: As of March 2020, the weighted average remaining
term to maturity was 165, which increased six months over the
preceding 12 months. This is driven, in part, by high level of IBR,
which was 40.53% of the portfolio as of the same date. Fitch
assumes a base case default rate of 49.5% and 100% under the 'AAA'
credit stress scenario and a constant default rate of 6.0%. Fitch
applies the standard default timing curve in its credit stress cash
flow analysis. The claim-reject rate is assumed to be 0.50% in the
base case and 3.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 6.0%, 9.2%, and 40.0% respectively, and are used as the
starting point in cash flow modelling. The sustainable constant
prepayment rate (voluntary and involuntary) is assumed to be 8.0%.
Subsequent declines or increases are modelled as per criteria. The
borrower benefit is assumed to be approximately 0.1%, based on
information provided by the sponsor.
Basis and Interest Rate Risk:
MOHELA 2010-1: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments and the securities. As of January 2020,
94.57% of the principal balance is indexed to one-month LIBOR with
the rest indexed to 91-day Treasury bills. All notes are indexed to
three-month LIBOR.
MOHELA 2010-3: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments and the securities. As of January 2019,
96.93% of the principal balance is indexed to one-month LIBOR with
the rest indexed to 91-day Treasury bills. All notes are indexed to
three-month LIBOR.
MOHELA 2012-1: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments and the securities. As of March 2020,
98.59% of the principal balance is indexed to one-month LIBOR with
the rest indexed to 91-day Treasury bills. All notes are indexed to
one-month LIBOR.
MOHELA 2013-1: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments and the securities. As of March 2020,
95.58% of the principal balance is indexed to one-month LIBOR with
the rest indexed to 91-day Treasury bills. All notes are indexed to
one-month LIBOR.
Payment Structure:
MOHELA 2010-1: Credit enhancement is provided by
overcollateralization and excess spread. As of January 2020, parity
was at 110.0%. Liquidity support is provided by a specified reserve
account sized at the greater of 0.25% of the pool balance or
$1,191,568. The reserve account is currently at its floor of
$1,191,568. The transaction is currently releasing cash and will
continue to do so as long as it maintains its target parity of
110%.
MOHELA 2010-3: Credit enhancement is provided by
overcollateralization and excess spread. As of January 2020, parity
was at 122.4%. Liquidity support is provided by a specified reserve
account sized at the greater of 0.25% of the pool balance or
$765,485. The reserve account is currently at its floor of
$765,485. The transaction will not release cash until all bonds pay
in full.
MOHELA 2012-1: Credit enhancement is provided by
overcollateralization and excess spread. As of March 2020, parity
was at 117.9%. Liquidity support is provided by a specified reserve
account sized at the greater of 0.25% of the pool balance or
$383,468. The reserve account is currently at its floor of
$383,468. The transaction will not release cash until all bonds pay
in full.
MOHELA 2013-1: Credit enhancement is provided by
overcollateralization and excess spread. As of March 2020, parity
was at 110.0%. Liquidity support is provided by a specified reserve
account sized at the greater of 0.25% of the pool balance or
$1,449,864. The reserve account is currently at its floor of
$1,449,864. The transaction is currently releasing cash and will
continue to do so as long as it maintains its target
overcollateralization of 9.09%.
Operational Capabilities: Day-to-day servicing is provided by
Missouri Higher Education Loan Authority with PHEAA acting as the
backup servicer. Fitch believes both entities to be acceptable
servicers, due to their extensive track record of servicing FFELP
loans.
Coronavirus Impact: Fitch has made assumptions about the spread of
coronavirus and the economic impact of the related containment
measures. Under the baseline coronavirus scenario, Fitch assumes a
global recession in 1H20 driven by sharp economic contractions in
major economies with a rapid spike in unemployment, followed by a
recovery that begins in 3Q20 as the health crisis subsides. The
impact to these trusts will be lower payment rates due to higher
levels of forbearance and Income Based Repayment usage, and
increased defaults. Fitch revised the sCPR for each transaction
reflecting this scenario; however, the recommended changes to the
ratings are driven by the revised IBR information provided by the
servicer. Additional downside sensitivity analysis under Fitch's
downside coronavirus scenario was not performed because of the
'Bsf' current ratings.
RATING SENSITIVITIES
Factors that could lead to rating changes include default
performance, basis spreads and loan payment speed. Fitch conducted
sensitivity analysis for two sets of cash flow assumptions. The
credit scenarios are designed to stress the transaction from a
credit perspective and the maturity scenarios are designed to
stress the transaction from a liquidity perspective, with an
emphasis on assessing the possibility of bonds being paid in full
on or before their maturity dates.
This section provides insight into the model-implied rating
sensitivities when one assumption is modified, while holding others
equal. The results should only be considered as one potential
outcome, as the transaction is exposed to multiple dynamic risk
factors. It should not be used as an indicator of possible future
performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
2010-1
Credit Stress Rating Sensitivity
-- Defaults decrease 25%: class A 'CCCsf';
-- Basis spread decrease 0.25%: class A 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR increase 25%: class A 'CCCsf'.
-- IBR usage decrease 25%: Class A 'CCCsf'
-- Remaining term decrease 25%: Class A 'CCCsf'
2010-3
Credit Stress Rating Sensitivity
-- Defaults decrease 25%: class A 'CCCsf';
-- Basis spreads decrease 0.25%: class A 'AAAsf'.
Maturity Stress Rating Sensitivity
-- CPR increases 25%: class A 'Bsf'.
-- IBR usage decreases 25%: Class A 'CCCsf'
-- Remaining term decreases 25%: Class A 'BBsf'
2012-1
Credit Stress Rating Sensitivity
-- Defaults decrease 25%: class A 'CCCsf';
-- Basis spreads decrease 0.25%: class A 'CCCsf'.
Maturity Stress Rating Sensitivity decrease.
-- CPR increases 25%: class A 'CCCsf'.
-- IBR usage decreases 25%: Class A 'CCCsf'
-- Remaining term decreases 25%: Class A 'CCCsf'
2013-1
Credit Stress Rating Sensitivity
-- Defaults decrease 25%: class A 'CCCsf';
-- Basis spreads decrease 0.25%: class A 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR increases 25%: class A 'CCCsf'.
-- IBR usage decreases 25%: Class A 'CCCsf'
-- Remaining term decreases 25%: Class A 'Bsf'
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
With all transactions at current ratings of 'Bsf', Fitch did not
perform additional model-implied downside sensitivities. The
transactions currently do not pass Fitch's base case stresses and
so the model results are 'CCCsf'. A downgrade to 'CCCsf' would
occur if there continues to be material loan term extension and the
maturity date of the bonds are within two years.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
MORGAN STANLEY 2013-C8: S&P Lowers Class G Certs Rating to B- (sf)
------------------------------------------------------------------
S&P Global Ratings lowered its rating on the class G commercial
mortgage pass-through certificates from Morgan Stanley Bank of
America Merrill Lynch Trust 2013-C8, a U.S. CMBS transaction. At
the same time, S&P affirmed its ratings on 12 other classes from
the same transaction.
The downgrade on the class G certificates reflect credit support
erosion that S&P anticipates will occur upon the eventual
resolution of the two assets ($18.1 million, 2.1%) with the special
servicer, as well as its revised credit view on some of the
performing loans in the transaction. Those loans include the Fair
Lakes Center ($31.1 million, 3.6%), 11451 Katy Freeway ($20.2
million, 2.4%), and Anderson Mall ($17.1 million, 2.0%) loans
(details below).
For the affirmations on the principal- and interest-paying classes,
the current ratings are relatively in line with the model indicated
ratings, which accounted for deal amortization and volume of
defeased loans.
"We affirmed our ratings on the class X-A and X-B interest-only
(IO) certificates based on our criteria for rating IO securities,
in which the ratings on the IO securities would not be higher than
that of the lowest rated reference class. The notional balance on
class X-A references classes A-1, A-2, A-SB, A-3, A-4, and A-S,
while the notional balance on class X-B references class B," S&P
said.
"Finally, we affirmed our rating on the class PST certificates
reflecting the rating on the class C certificates. The class PST
certificates are exchangeable for the class A-S, B, and C
certificates," the rating agency said.
S&P acknowledges a high degree of uncertainty about the rate of
spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak around
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly," S&P said.
TRANSACTION SUMMARY
As of the April 2020 trustee remittance report, the collateral pool
balance was $862.5 million, which is 75.8% of the pool balance at
issuance. The pool currently includes 48 loans and one real
estate-owned (REO) asset, down from 54 loans at issuance. Two of
these assets are with the special servicer, nine loans are defeased
($191.4 million, 22.2%) and four ($47.6 million, 5.5%) are on the
master servicer's watchlist.
S&P calculated a 2.02x S&P Global Ratings' weighted average debt
service coverage (DSC) and 74.1% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using a 7.88% S&P Global Ratings'
weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the specially serviced
assets and defeased loans. The top 10 nondefeased loans have an
aggregate outstanding pool trust balance of $461.4 million (53.5%).
Using adjusted servicer-reported numbers, S&P calculated an S&P
Global Ratings weighted average DSC and LTV of 2.15x and 72.0%,
respectively.
Following are details on select loans with material revised S&P
Global Ratings' net cash flow (NCF) and valuation:
The Fair Lakes Center loan (3.6%) is secured by a 116,427-sq.-ft.
retail property in Fairfax, Va. The reported occupancy at the
property has trended downward in recent years to 86.0% as of
year-end 2019, from 95.0% at securitization. The former largest
tenant at the property, Modell's, at about 15,000 sq. ft., vacated
in 2019 and their space was temporary occupied by Spirit Halloween,
which has since vacated also. S&P revised itz sustainable cash flow
to $2.7 million, reflecting the increased vacancy at the property,
yielding an S&P Global Ratings' value of $36.2 million or an 85.9%
S&P Global Ratings LTV. The 11451 Katy Freeway (2.4%) loan is
secured by a 117,261-sq.-ft. office property in Houston, Texas. The
loan is on the master servicer's watchlist due to a low reported
DSC of 0.46x as of year-end 2019. The reported occupancy and NCF at
the property has declined since securitization due to decreased
occupancy at the property, which was 81.0% as of year-end 2019. S&P
revised its sustainable cash flow to $1.4 million to reflect the
increased vacancy at the property, resulting in an S&P Global
Ratings value of $18.4 million or a 109.9% S&P Global Ratings LTV.
The Anderson Mall (2.0%) loan is secured by a 671,000-sq.-ft.
regional mall in Anderson, S.C., of which 316,561-sq.-ft. serves as
collateral for the mortgage loan. The loan is on the master
servicer's watchlist due to a low reported DSC of 0.62x, while the
collateral occupancy was reported to be 92.7% as of year-end 2019.
The anchors include Dillard's, J.C. Penney, and Belk, with the J.C.
Penney anchor as collateral for the loan. There is also a vacant
non-collateral anchor that was once occupied by Sears. The reported
NCF at the property has trended downward since securitization due
to tenants renegotiating their leases at lower rents, as well as
new tenants signing at lower rents. S&P revised its sustainable
cash flow to $1.1 million to reflect the declining cash flow at the
property, resulting in an S&P Global Ratings value of $12.0 million
or an S&P Global Ratings LTV of 142.2%. To date, the transaction
has not experienced any principal losses. S&P expects losses to
reach approximately 0.3% of the original pool trust balance in the
near term, based on losses that it expects when the two specially
serviced assets are eventually resolved.
CREDIT CONSIDERATIONS
As of the April 2020 trustee remittance report, two assets in the
pool were with the special servicer, Colony Capital AMC OPCO LLC.
Details of the specially serviced assets are as follows:
The One Concourse REO asset ($13.5 million, 1.6%) is the largest
asset with the special servicer and has a total reported exposure
of $14.8 million. The asset is a 110,167-sq.-ft. office property
located in Fishers, Ind. The loan transferred to the special
servicer in December 2018 due to imminent default and the property
became REO in February 2020.
"It is our understanding that a new property manager has been
retained to handle leasing activities at the property prior to
resolution. An appraisal reduction amount of $2.6 million is in
effect against this asset," S&P said.
S&P expects a minimal loss (less than 25%) upon this asset's
eventual resolution. The Flats at Wick loan ($4.6 million, 0.5%) is
the smallest loan with the special servicer and has a total
reported exposure of $4.9 million. The loan is secured by a
113-unit multifamily property located in Youngstown, Ohio. The loan
was transferred to the special servicer in April 2018 due to
payment default. The property was under contract to be sold for
$7.0 million that would have resulted in the full repayment of the
loan. However, the sale did not materialized. The special servicer
and the borrower are discussing workout strategies, including
foreclosure or a short-term loan modification.
"We expect a minimal loss upon this loan's eventual resolution.
Based on our analysis, we estimated losses for the specially
serviced assets and calculated a weighted average loss severity of
20.4%," S&P said.
RATINGS LOWERED
Morgan Stanley Bank of America Merrill Lynch Trust 2013-C8
Commercial mortgage pass-through certificates series 2013-C8
Rating
Class To From
G B- (sf) B (sf)
RATINGS AFFIRMED
Morgan Stanley Bank of America Merrill Lynch Trust 2013-C8
Commercial mortgage pass-through certificates series 2013-C8
Class Rating
A-SB AAA (sf)
A-3 AAA (sf)
A-4 AAA (sf)
A-S AAA (sf)
B AA+ (sf)
C AA- (sf)
D BBB+ (sf)
E BB+ (sf)
F BB- (sf)
X-A AAA (sf)
X-B AA+ (sf)
PST AA- (sf)
MORGAN STANLEY 2016-UBS11: Fitch Cuts Class X-F Certs to CCCsf
--------------------------------------------------------------
Fitch Ratings downgrades four and affirms 12 classes of Morgan
Stanley Capital I Trust 2016-UBS11 commercial mortgage pass-through
certificates.
MSC 2016-UBS11
- Class A-1 61767FAW1; LT AAAsf; Affirmed
- Class A-2 61767FAX9; LT AAAsf; Affirmed
- Class A-3 61767FAZ4; LT AAAsf; Affirmed
- Class A-4 61767FBA8; LT AAAsf; Affirmed
- Class A-S 61767FBD2; LT AAAsf; Affirmed
- Class A-SB 61767FAY7; LT AAAsf; Affirmed
- Class B 61767FBE0; LT AA-sf; Affirmed
- Class C 61767FBF7; LT A-sf; Affirmed
- Class D 61767FAJ0; LT BBB-sf; Affirmed
- Class E 61767FAL5; LT Bsf; Downgrade
- Class F 61767FAN1; LT CCCsf; Downgrade
- Class X-A 61767FBB6; LT AAAsf; Affirmed
- Class X-B 61767FBC4; LT A-sf; Affirmed
- Class X-D 61767FAA9; LT BBB-sf; Affirmed
- Class X-E 61767FAC5; LT Bsf; Downgrade
- Class X-F 61767FAE1; LT CCCsf; Downgrade
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades to classes E, X-E, F,
and X-F are due to the increase in loss expectations for the pool
since Fitch's prior rating action, mainly due to the transfer of
two loans (3.6% of the current pool balance) to special servicing.
Eight loans (28.0%) have been designated as Fitch Loans of Concern,
including the specially serviced loans.
Specially Serviced Loans/Assets: The largest specially serviced
asset is Nameoki Plaza (2.2%), a shopping center in Granite City,
IL that was previously anchored by a Shop N Save. Shop N Save went
dark in November 2018 and ceased paying rent in May 2019. The loan
transferred to special servicing for imminent monetary default in
June 2019 and went REO in January 2020. The special servicer is
working to lease up the vacant anchor space and renew leases with
existing tenants in order to stabilize the asset.
The other specially serviced loan is Fred's Portfolio (1.4%), an
eight-property single-tenant retail portfolio located in Louisiana,
Georgia, Mississippi, and Arkansas that was 100% occupied by Fred's
Pharmacy. Fred's filed chapter 11 bankruptcy in September 2019 and
by YE 2019, the entire portfolio was 100% vacant. A receiver was
installed in during 1Q20 and the special servicer is planning a
note sale in 2020.
Fitch Loans of Concern: The largest FLOC is 132 West 27th Street
(9.3%), which is collateralized by the net lessor position of a
hotel in the Chelsea neighborhood of New York City. The property is
leased to an affiliate of Melia Hotels International, S.A., on a
triple-net basis through March 2031, and has one, five-year renewal
option. The property is operated as a 313-room hotel under the
INNSIDE by Melia flag, Melia's upscale, urban lifestyle brand
catering to business and leisure travelers. As of 3Q19, the
property is performing at a 1.68x NOI DSCR based on the net-lease
payments. As a part of Fitch's coronavirus stress testing,
additional stress was applied to the loan's cash flow. This risk is
mitigated somewhat by a $10 million irrevocable letter of credit
from Banco Bilbao Vizcaya Argentaria in the event of a default on
the lease.
The second largest FLOC is Irish Hills Plaza & Broadway Plaza
(7.7%), a two-property retail portfolio located in San Luis Obispo
and Santa Maria, CA. As of 3Q19, the property is 100% occupied and
performing at a 1.48x NOI DSCR. Major tenants include Santa Barbara
County, Vallarta Supermarkets, and In Shape Health Club. As a part
of Fitch's coronavirus stress testing, additional stress was
applied to the loan's cash flow.
The third largest FLOC is Gateway Plaza (2.3%), a power center
located in Visalia, CA where major tenants include Dick's Sporting
Goods, Home Goods, and Staples. As of 3Q19, the property is 100%
occupied and performing at a 1.78x NOI DSCR compared to 1.61x at YE
2018. As a part of Fitch's coronavirus stress testing, additional
stress was applied to the loan's cash flow.
Smaller FLOCs include Residence Inn - Downtown Clearwater (2.2%), a
115-key extended stay hotel in Clearwater, FL; Kansas IHG Portfolio
(1.5%), a two-property, 149-key hotel portfolio in Maize and
Hutchinson, KS; and Martin Resorts - Paso Robles Inn (1.3%), a
98-key full service hotel in Paso Robles, CA, all of which are
being stress tested due to coronavirus.
Exposure to Coronavirus: Fitch's base case analysis applied an
additional NOI stress to nine hotel and two retail loans, which had
an impact on revising six Rating Outlooks to Negative. Twelve
non-defeased loans collateralized by hotel properties account for
34.8% of the pool, including five loans (24.7%) in the top 15. Two
of these hotel properties include a net leased hotel (9.3%) and the
leased fee interest of a ground leased hotel property (7.1%).
Excluding these loans, hotel concentration is 18.4%. Two loans
collateralized by multifamily properties account for 1.4% of the
pool. Further, retail properties and mixed-use properties with a
retail component comprise 27.3% of the pool, including three loans
(21.1%) in the top 15. Several of the state's most significantly
impacted by the coronavirus pandemic have the largest concentration
of loans in the transaction, with California at 25.7% followed by
New York at 18.2%.
Minimal Change to Credit Enhancement: As of the March 2020
distribution date, the pool's aggregate principal balance has been
reduced by 4.4% to $688.5 million from $719.8 million at issuance.
Four loans (25%) are full-term interest-only and six loans (16.8%)
are partial-term interest-only loans, five (6.6%) of which have
begun amortizing and one (10.2%) which will begin amortizing in
September 2021. Only three loans mature in 20201 (8.4%), and all
remaining loans mature in 2026.
RATING SENSITIVITIES
The Negative Outlooks on classes A-S, B, C, X-B, D, X-D, E, and X-E
reflect the potential for a near term rating change should the
performance of specially serviced or FLOCs deteriorate. They also
reflect concerns with hotel and retail properties due to decline in
travel and commerce as a result of the coronavirus pandemic. The
Stable Outlooks on classes A-1 through A-4 and class X-A reflect
the overall stable performance of the pool and expected continued
amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Factors that lead to upgrades would include stable to improved
asset performance coupled with paydown and/or defeasance. Upgrades
of classes B, X-B, and C may occur with significant improvement in
credit enhancement or defeasance but would be limited should the
deal be susceptible to a concentration whereby the underperformance
of FLOCs could cause this trend to reverse. An upgrade to classes D
and X-D would also consider these factors, but would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is a likelihood for interest shortfalls. An upgrade to classes E,
X-E, F, and X-F is not likely until the later years in a
transaction, and only if there are better than expected recoveries
on specially serviced loans and the performance of the remaining
pool is stable, and if there is sufficient credit enhancement,
which would likely occur when the non-rated class is not eroded and
the senior classes payoff. While coronavirus related stresses
continue to impact the pool, upgrades are extremely unlikely.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Factors that lead to downgrades include an increase in pool level
losses from underperforming or specially serviced loans. Downgrades
to the super-senior classes, A-1 through 4 and X-A, are not likely
due to the position in the capital structure and the high credit
enhancement but could occur if interest shortfalls occur or if a
high proportion of the pool defaults and expected losses increase
significantly. Downgrades to classes A-S, B, C, D, X-B and X-D with
a Negative Outlook may occur and be one category or more should
overall pool losses increase or if several large loans have an
outsized loss, properties vulnerable to the coronavirus fail to
stabilize to pre-pandemic levels and/or losses on the specially
serviced loans are higher than expected. Further downgrades to
classes E and X-E would occur should loss expectations increase due
to an increase in specially serviced loans, the disposition of a
specially serviced loan/asset at a high loss, or a decline in the
FLOCs' performance. Further downgrades to the 'CCCsf' rated class F
and X-F will occur if losses are considered probable or inevitable
or if losses are realized. The Negative Rating Outlooks on classes
A-S, B, C, D, E, X-D, and X-E may be revised back to Stable if
performance of the FLOCs improves and/or properties vulnerable to
the coronavirus stabilize once the pandemic is over.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that a greater
percentage of classes may be assigned a Negative Rating Outlook or
those with Negative Rating Outlooks will be downgraded one or more
categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
NEW RESIDENTIAL 2020-2: Moody's Gives B2 Rating on Class B-7 Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 57
classes of notes issued by New Residential Mortgage Loan Trust
2020-2. Its loss expectations for the collateral pool increased
from the provisional ratings, that it assigned on March 4, 2020,
due to the economic impact of the coronavirus. Its revised losses
for the collateral pool are 2.39% in an expected scenario and
14.10% at a stress level consistent with the Aaa ratings, compared
to 2.00% and 12.00% respectively at the time of provisional
ratings. As a result of its increased loss expectations, the
definitive ratings assigned to the tranches were lower by one to
three notches than the provisional ratings it assigned, except for
Class A-1, Class A-1A, Class A-1B, Class A-1C, Class A-2, Class
A-3, and Class A-5.
New Residential Mortgage Loan Trust 2020-2 is a securitization of
seasoned performing and re-performing adjustable-rate residential
mortgage loans which the seller has previously purchased or will
purchase on the closing date. Most of the collateral was purchased
in connection with the termination of various securitization
trusts. The collateral pool is comprised of 4,090 mortgage loans
with an aggregate outstanding balance of $449,189,815 (excluding
deferred portion of $235,952) as of April 1, 2020 cut-off date.
There is no principal reduction alternative deferred balance in
this pool. As in other New Residential deals, the collateral is
highly seasoned with a significant history of loan performance.
Weighted average loan seasoning is 187 months, the weighted average
updated FICO score is 703 and the weighted average current loan to
value ratio is 48.6%.
The complete rating action is as follows:
Issuer: New Residential Mortgage Loan Trust 2020-2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Definitive Rating Assigned Aaa (sf)
Cl. A-1B, Definitive Rating Assigned Aaa (sf)
Cl. A-1C, Definitive Rating Assigned Aaa (sf)
Cl. A-1D, Definitive Rating Assigned Aaa (sf)
Cl. A-1E, Definitive Rating Assigned Aaa (sf)
Cl. A-1F, Definitive Rating Assigned Aaa (sf)
Cl. A-1G, Definitive Rating Assigned Aaa (sf)
Cl. A-1M, Definitive Rating Assigned Aaa (sf)
Cl. A-1S, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Definitive Rating Assigned A1 (sf)
Cl. A-5, Definitive Rating Assigned Aa1 (sf)
Cl. A-6, Definitive Rating Assigned A1 (sf)
Cl. B-1, Definitive Rating Assigned Aa2 (sf)
Cl. B-1A, Definitive Rating Assigned Aa2 (sf)
Cl. B-1B, Definitive Rating Assigned Aa2 (sf)
Cl. B-1C, Definitive Rating Assigned Aa2 (sf)
Cl. B-1D, Definitive Rating Assigned Aa2 (sf)
Cl. B-1E, Definitive Rating Assigned Aa2 (sf)
Cl. B-1F, Definitive Rating Assigned Aa2 (sf)
Cl. B-1G, Definitive Rating Assigned Aa2 (sf)
Cl. B-1H, Definitive Rating Assigned Aa2 (sf)
Cl. B-2, Definitive Rating Assigned A1 (sf)
Cl. B-2A, Definitive Rating Assigned A1 (sf)
Cl. B-2B, Definitive Rating Assigned A1 (sf)
Cl. B-2C, Definitive Rating Assigned A1 (sf)
Cl. B-2D, Definitive Rating Assigned A1 (sf)
Cl. B-2E, Definitive Rating Assigned A1 (sf)
Cl. B-2F, Definitive Rating Assigned A1 (sf)
Cl. B-2G, Definitive Rating Assigned A1 (sf)
Cl. B-2H, Definitive Rating Assigned A1 (sf)
Cl. B-3, Definitive Rating Assigned Baa1 (sf)
Cl. B-3A, Definitive Rating Assigned Baa1 (sf)
Cl. B-3B, Definitive Rating Assigned Baa1 (sf)
Cl. B-3C, Definitive Rating Assigned Baa1 (sf)
Cl. B-3D, Definitive Rating Assigned Baa1 (sf)
Cl. B-3E, Definitive Rating Assigned Baa1 (sf)
Cl. B-3F, Definitive Rating Assigned Baa1 (sf)
Cl. B-3G, Definitive Rating Assigned Baa1 (sf)
Cl. B-3H, Definitive Rating Assigned Baa1 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-4A, Definitive Rating Assigned Ba2 (sf)
Cl. B-4B, Definitive Rating Assigned Ba2 (sf)
Cl. B-4C, Definitive Rating Assigned Ba2 (sf)
Cl. B-4D, Definitive Rating Assigned Ba2 (sf)
Cl. B-4E, Definitive Rating Assigned Ba2 (sf)
Cl. B-4F, Definitive Rating Assigned Ba2 (sf)
Cl. B-4G, Definitive Rating Assigned Ba2 (sf)
Cl. B-4H, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
Cl. B-5A, Definitive Rating Assigned B3 (sf)
Cl. B-5B, Definitive Rating Assigned B3 (sf)
Cl. B-5C, Definitive Rating Assigned B3 (sf)
Cl. B-5D, Definitive Rating Assigned B3 (sf)
Cl. B-7, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
Its losses on the collateral pool equal 2.39% in an expected
scenario and reach 14.10% at a stress level consistent with the Aaa
ratings on the senior classes, from 2.00% and 12.00% at the time of
provisional rating. The increase in its loss expectations reflects
an increased likelihood of deterioration in the performance of the
underlying mortgage loans as a result of a slowdown in US economic
activity in 2020 due to the coronavirus outbreak. The increase in
its loss expectations also reflects the current forbearance and
potential deferrals in this pool.
As of the cut-off date, approximately 8.97% of the pool by
principal balance was identified as coronavirus forbearance loans.
Moody's expects to see a material increase in coronavirus
forbearance loans in the coming months, and a material portion of
those loans will likely be granted deferrals or be modified. In
this transaction structure, the deferred amounts will be recorded
as upfront losses to the trust. In its analysis, Moody's assumed a
substantial percentage of these deferred amounts will be later
recovered when the loans either liquidate or prepay.
It based its expected losses for the pool 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 final
expected losses for the pool reflect the third-party review (TPR)
findings, conflict of interest adjustment due to mortgage loan sale
provision, and its assessment of the representations and warranties
(R&Ws) framework for this transaction.
Its analysis has considered the effect of the coronavirus outbreak
on the US economy as well as the effects that the announced
government measures, put in place to contain the virus, will have
on the performance of consumer assets. Specifically, for US RMBS,
loan performance will weaken due to the unprecedented spike in the
unemployment rate, which may limit borrowers' income and their
ability to service debt. The softening of the housing market will
reduce recoveries on defaulted loans, also a credit negative.
Furthermore, borrower assistance programs, such as forbearance, may
adversely impact scheduled cash flows to bondholders.
The contraction in economic activity in the second quarter will be
severe and the overall recovery in the second half of the year will
be gradual. However, there are significant downside risks to its
forecasts in the event that the pandemic is not contained and
lockdowns have to be reinstated. As a result, the degree of
uncertainty around its forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
To estimate the losses on the pool, it used an approach similar to
its surveillance approach. Under this approach, it applies expected
annual delinquency rates, conditional prepayment rates, loss
severity rates and other variables to estimate future losses on the
pool. Its assumptions on these variables are based on the observed
performance of seasoned modified and non-modified loans, the
collateral attributes of the pool including the percentage of loans
that were delinquent in the past 36 months. For this pool, it used
default burnout assumptions similar to those detailed in its "US
RMBS Surveillance Methodology" for Alt-A loans originated pre-2005.
It then aggregated the delinquencies and converted them to losses
by applying pool-specific lifetime default frequency and loss
severity assumptions.
Collateral Description
NRMLT 2020-2 is a securitization of 4,090 seasoned performing and
re-performing floating residential mortgage loans which the seller,
NRZ Sponsor IX LLC, has purchased in connection with the
termination of various securitization trusts. Similar to prior
NRMLT transactions it has rated, nearly all of the collateral was
sourced from terminated securitizations. Approximately 4.95% of the
loans had previously been modified and approximately 8.97% of the
loans is currently in forbearance. In addition, approximately 6.72%
of the pool is 30 days MBA delinquent as of April 1, 2020.
The updated value of properties in this pool were provided by a
third-party firm using a home data index and/or an updated broker
price opinion. BPOs were provided for a sample of 649 out of the
4,090 properties contained within the securitization. HDI values
were provided for all properties contained within the
securitization. The weighted average updated LTV ratio on the
collateral is 48.6% (weighted average updated LTV ratio is
calculated using the issuer provided updated BPOs or hair-cut HDI),
implying an average of 51.6% borrower equity in the properties.
Third-Party Review ("TPR") and Representations & Warranties
("R&W")
Two third-party due diligence providers, AMC and Recovco, conducted
a regulatory compliance review on a sample of 1,258 and 657
seasoned mortgage loans respectively for the initial due diligence
pool. The regulatory compliance review consisted of a review of
compliance with the federal Truth in Lending Act as implemented by
Regulation Z, the federal Real Estate Settlement Procedures Act as
implemented by Regulation X, the disclosure requirements and
prohibitions of Section 50(a)(6), Article XVI of the Texas
Constitution, federal, state and local anti-predatory regulations,
federal and state specific late charge and prepayment penalty
regulations, and document review.
AMC found that 374 out of 1,258 loans had compliance exceptions
with rating agency grade C or D. Recovco reviewed 657 loans and 108
loans have ratings of C or D. Based on its analysis of the TPR
reports, it 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
include up to $4,000 in statutory damages, borrowers' legal fees
and other actual damages. Moody's increased its losses for these
loans to account for such damages.
AMC and Recovco reviewed the findings of various title search
reports covering 436 and 293 mortgage loans respectively in the
preliminary sample population in order to confirm the first lien
position of the related mortgages. Overall, AMC's review confirmed
that 434 mortgages were in first lien position. For the two
remaining loans reviewed by AMC supplemental searches and the final
title policy at loan origination was accepted to be proof of a
first lien position. Recovco reported that the 293 out of 293
mortgage loans it reviewed were in first-lien position.
The seller, NRZ Sponsor IX LLC, is providing a representation and
warranty for missing mortgage files. To the extent that the master
servicer, related servicer or depositor has actual knowledge, or a
responsible officer of the Indenture Trustee has received written
notice, of a defective or missing mortgage loan document or a
breach of a representation or warranty regarding the completeness
of the mortgage file or the accuracy of the mortgage loan
documents, and such missing document, defect or breach is
preventing or materially delaying the (a) realization against the
related mortgaged property through foreclosure or similar loss
mitigation activity or (b) processing of any title claim under the
related title insurance policy, the party with such actual
knowledge will give written notice of such breach, defect or
missing document, as applicable, to the seller, indenture trustee,
depositor, master servicer and related servicer. Upon notification
of a missing or defective mortgage loan file, the seller will have
120 days from the date it receives such notification to deliver the
missing document or otherwise cure the defect or breach. If it is
unable to do so, the seller will be obligated to replace or
repurchase the mortgage loan.
Trustee, Custodians, Paying Agent, Servicers, Master Servicer,
Successor Servicer and Special Servicer
The transaction indenture trustee is Wilmington Trust, National
Association. The custodian functions will be performed by Wells
Fargo Bank, N.A. and U.S. Bank National Association. The paying
agent and cash management functions will be performed by Citibank,
N.A. In addition, Nationstar Mortgage LLC, as master servicer, is
responsible for servicer oversight, termination of servicers, and
the appointment of successor servicers. Having Nationstar as a
master servicer mitigates servicing-related risk due to the
performance oversight that it will provide. Shellpoint will serve
as the special servicer and, as such, will be responsible for
servicing mortgage loans that become 60 or more days delinquent.
Nationstar will serve as the designated successor servicer.
Mr. Cooper Group, Inc, PHH Mortgage Corporation FKA OCWEN,
Shellpoint Mortgage Servicing, Wells Fargo, and Select Portfolio
Servicing, Inc. are the top five servicers who will service
approximately 49.4%, 37.5%, 6.9%, 4.0% and 2.1% of the loans (by
scheduled balance), respectively. Nationstar will act as master
servicer and successor servicer and Shellpoint will act as the
special servicer. Moody's considers the overall servicing
arrangement to be adequate.
Transaction Structure
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to increasingly receive principal
prepayments after an initial lock-out period of five years,
provided two performance tests are met. To pass the first test, the
delinquent and recently modified loan balance cannot exceed 50% of
the subordinate bonds outstanding. To pass the second test,
cumulative losses cannot exceed certain thresholds that gradually
increase over time.
Because a shifting interest structure allows subordinated bonds to
pay down over time as the loan pool shrinks, senior bonds are
exposed to tail risk, i.e., risk of back-ended losses when fewer
loans remain in the pool. The transaction provides for a senior and
subordination floor that helps to reduce this tail risk.
Specifically, the subordination floor prevents subordinate bonds
from receiving any principal if the amount of subordinate bonds
outstanding falls below 2.75% of the cut-off date principal
balance. There is also a provision that prevents subordinate bonds
from receiving principal if the credit enhancement for the Class
A-1 note falls below its percentage at closing, 16.70%. In
addition, there are provisions that "lock out" certain subordinate
bonds and allocate principal to more senior subordinate bonds if,
for a given class, credit enhancement levels decline below their
initial percentages or below 2.75% of the cut-off date principal
balance. These provisions have been incorporated into its cash flow
model and are reflected in its ratings.
Other Considerations
The transaction contains a mortgage loan sale provision, the
exercise of which is subject to potential conflicts of interest.
The servicers in the transaction may sell mortgage loans that
become 60 or more days delinquent according to the MBA methodology
to any party in the secondary market in an arms-length transaction
and at a fair market value. For such sale to take place, the
related servicer must determine, in its reasonable commercial
judgment, that such sale would maximize proceeds on a present value
basis. If the sponsor or any of its subsidiaries is the purchaser,
the related servicer must obtain at least two additional
independent bids. The transaction documents provide little detail
on the method of receipt of bids and there is no set minimum sale
price. Such lack of detail creates a risk that the independent bids
could be weak bids from purchasers that do not actively participate
in the market. Furthermore, the transaction documents provide
little detail regarding how servicers should conduct present value
calculations when determining if a note sale should be pursued. The
special servicer, Shellpoint, is an affiliate of the sponsor. The
servicers in the transaction may have a commercial relationship
with the sponsor outside of the transaction. These business
arrangements could lead to conflicts of interest. Moody's took this
into account and adjusted its losses accordingly.
When analyzing the transaction, Moody's reviewed the transaction's
exposure to large potential indemnification payments owed to
transaction parties due to potential lawsuits. In particular, it
assessed the risk that the indenture trustee would be subject to
lawsuits from investors for a failure to adequately enforce the
R&Ws against the seller. Moody's believes that NRMLT 2020-2 is
adequately protected against such risk primarily because the loans
in this transaction are highly seasoned with a weighted average
seasoning of approximately 187 months. Although some loans in the
pool were previously delinquent and modified, the loans all have a
substantial history of payment performance. This includes payment
performance during the last recession. As such, if loans in the
pool were materially defective, such issues would likely have been
discovered prior to the securitization. Furthermore, third party
due diligence was conducted on a significant random sample of the
loans for issues such as data integrity, compliance, and title. As
such, Moody's did not apply adjustments in this transaction to
account for indemnification payment risk.
In addition, prior to closing, the collateral pool has
approximately $991,766 of unreimbursed servicing advances such as
taxes and insurance. The mortgage borrower is responsible for
reimbursing the related servicer for the pre-existing servicing
advances. The related servicer may choose to set the pre-existing
advances as escrow to be repaid by the borrower as part of monthly
mortgage payments. However, in the event the borrower defaults on
the mortgage prior to fully repaying the pre-existing servicing
advances, the related servicer will recoup the outstanding number
of pre-existing advances from the loan liquidation proceeds. The
amount of pre-existing servicing advances only represents
approximately 22 basis points of total pool balance. As borrowers
make monthly mortgage payments, this amount would likely decrease.
Moreover, its loan loss severity assumption incorporates
reimbursement of servicing advances from liquidation proceeds.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from 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.
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 its 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.
The methodologies used in these ratings were "Non-Performing and
Re-Performing Loans Securitizations Methodology" published in April
2020.
PREFERREDPLUS TRUST: Moody's Cuts $34MM Series CZN-1 Notes to Ca
----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of certificates
issued by PREFERREDPLUS Trust Series CZN-1 as follows:
US$34,500,000 PREFERREDPLUS Trust Series CZN-1 Certificates,
Downgraded to Ca; previously on August 15, 2019 Downgraded
to Caa3
Moody's will withdraw the rating for lack of sufficient information
the following business day.
RATINGS RATIONALE
The downgrade to Ca reflects the fact that the rating of the
underlying securities, the 7.05% Debentures due October 01, 2046
issued by Frontier Communications Corporation, was downgraded to Ca
on April 16, 2020 and subsequently withdrawn following Frontier's
announcement that the company filed a petition for relief under
Chapter 11 of the US Bankruptcy Code.
Subsequently, Moody's will withdraw the rating of the PREFERREDPLUS
Trust Series CZN-1 certificates because it believes it has
insufficient or otherwise inadequate information to support the
maintenance of the rating.
RAAC TRUST 2006-SP2: Moody's Hikes Class M-1 Debt Rating to Ba2
---------------------------------------------------------------
Moody's Investors Service has upgraded the rating of Cl. M-1 from
RAAC 2006-SP2 Trust transaction backed by S&D loans.
The complete rating actions are as follows:
Issuer: RAAC 2006-SP2 Trust
Cl. M-1, Upgraded to Ba2 (sf); previously on Jan 30, 2018 Upgraded
to B1 (sf)
RATINGS RATIONALE
Its rating action results from the correction of a prior error. In
the prior rating action in 2018, the structural mechanism for the
Class M-1 bond to recoup unpaid interest was incorrectly assessed
as being weak, with such interest recoverable only from excess
cashflows if available. As a result, the 2018 action on this bond
reflected the incorrect assumption that potential future interest
shortfalls would not be recouped. The rating has now been corrected
to reflect the strong structural mechanism that allows for unpaid
interest to be reimbursed at the same seniority as monthly accrued
interest. The action also reflects the recent performance of the
transaction as well as Moody's updated loss expectations on the
underlying pool.
Its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the US economy as well as
the effects of the announced government measures which were put in
place to contain the virus. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the
substantial implications for public health and safety. It is a
global health shock, which makes it extremely difficult to provide
an economic assessment. On March 25th, Moody's revised its baseline
growth forecast and now expect real GDP in the US to contract by
2.0% in 2020. The degree of uncertainty around its forecasts is
unusually high.
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in February 2019.
Factors that would lead to an upgrade or downgrade of the rating:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
Moody's expects unemployment rate to peak in the second quarter and
to average anywhere between 8.8% and 16.2%, and decline thereafter
with a slow pace of rehiring, resulting in an unemployment rate of
around 6.5% by the end of 2020. However, there is significant
uncertainty around this forecast and risks are firmly to the
downside. House prices are another key driver of US RMBS
performance. Lower increases than Moody's expects or decreases
could lead to negative rating actions. Finally, performance of RMBS
continues to remain highly dependent on servicer procedures. Any
change resulting from servicing transfers or other policy or
regulatory change can impact the performance of these transactions.
SECURITIZED TERM 2019-CRT: Moody's Puts Class D Notes Under Review
------------------------------------------------------------------
Moody's Investors Service has placed five tranches from five
asset-backed securitizations backed by auto loans on review for
possible downgrade. The bonds are backed by pools of prime retail
automobile loan contracts originated and serviced by multiple
parties.
The complete rating actions are as follows:
Issuer: Juniper Receivables 2019-1 DAC
Class A Asset Backed Notes, Baa3 (sf) Placed Under Review for
Possible Downgrade; previously on Aug 7, 2019 Definitive Rating
Assigned Baa3 (sf)
Issuer: Juniper Receivables 2019-2 DAC
Class A Asset Backed Notes, Baa3 (sf) Placed Under Review for
Possible Downgrade; previously on Nov 8, 2019 Definitive Rating
Assigned Baa3 (sf)
Issuer: Juniper Receivables 2020-1 DAC
Class A Asset Backed Notes, Baa3 (sf) Placed Under Review for
Possible Downgrade; previously on Mar 6, 2020 Definitive Rating
Assigned Baa3 (sf)
Issuer: Juniper Receivables DAC
Class A Asset Backed Notes, A3 (sf) Placed Under Review for
Possible Downgrade; previously on Jun 3, 2019 Upgraded to A3 (sf)
Issuer: Securitized Term Auto Receivables Trust 2019-CRT
Class D Notes, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 26, 2019 Definitive Rating Assigned Ba1 (sf)
RATINGS RATIONALE
The rating action reflects an increased likelihood of deterioration
in the performance of the underlying prime auto loans as a result
of a slowdown in economic activity due to the coronavirus
outbreak.
Juniper transactions are sponsored and serviced by Ally Bank.
Approximately 17% of borrowers received a payment extension in
these collateral pools during March. High extension rates combined
with relatively low excess spread in these transactions increase
the likelihood that the trusts will use principal collections to
cover fees and interest payments to the notes, potentially eroding
credit enhancement to the notes. Securitized Term Auto Receivables
Trust 2019-CRT is a Canadian auto loan transaction sponsored and
serviced by the Bank of Nova Scotia. This transaction features a
pro-rata structure that reverts to sequential pay if cumulative net
losses breach trigger levels, providing some protection for senior
notes.
In its analysis, Moody's considered up to a 50% increase in
remaining expected losses on the underlying pools to evaluate the
resiliency of the ratings amid the uncertainty surrounding the
pools' performance. Moody's factored individual transaction
specifics such as overcollateralization, reserve fund targets, and
availability of excess spread. The potential increase in expected
loss reflects the increased volatility caused by the coronavirus
outbreak, which negatively affects the macroeconomic conditions
that influence consumer credit performance. In estimating the
higher loss, Moody's considered the increase in losses on prime
auto pools during the 2007 to 2009 economic downturn as well as
sponsors' portfolio performance data through the downturn, where
available.
During the review period, Moody's will evaluate effects of ongoing
and projected macroeconomic conditions, as well as impact of
various parties including the government, servicers and issuers on
the performance of underlying pools to update its cumulative net
loss projection on the pools and final rating action on the bonds.
Unemployment and used vehicle values are key indicators of
performance for auto ABS. Weaknesses in these factors are likely to
have a negative impact on the future performance of prime loans.
Rating actions on the bonds, due to the revised loss projections,
will vary for the different shelves and reflect individual
transaction considerations.
Its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the US and Canadian
economies as well as the effects of the announced government
measures put in place to contain the virus. Moody's regards the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety. It
is a global health shock, which makes it extremely difficult to
provide an economic assessment. On April 28, Moody's revised its
baseline growth forecast and now expect real GDP in the US to
contract by 5.7% and in Canada to contract by 6.1% in 2020. The
degree of uncertainty around its forecasts is unusually high.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" 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 its expectations of
portfolio losses, levels of credit enhancement are consistent with
higher ratings. 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 vehicles securing an obligor's promise of payment.
Portfolio losses also depend greatly on the US and Canadian job
markets, the market for used vehicles, and changes in servicing
practices.
Down
Moody's could downgrade the notes if, given its expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US and Canadian job markets, the market
for used vehicles, and poor servicing. Other reasons for
worse-than-expected performance include error on the part of
transaction parties, inadequate transaction governance, and fraud.
SEQUOIA MORTGAGE: Moody's Puts 18 RMBS Classes on Review
--------------------------------------------------------
Moody's Investors Service has placed the ratings of 18 junior
tranches from 12 Sequoia Mortgage Trust transactions on review for
possible downgrade. These transactions have a particular type of
stop-advance feature, which can lead to a reduction in interest
payments to the affected junior tranches. This reduction is more
likely to occur if delinquencies in the underlying collateral
increase in light of the coronavirus outbreak.
Rating actions:
Issuer: Sequoia Mortgage Trust 2015-2
Cl. B-4, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jul 12, 2018 Upgraded to Baa3 (sf)
Issuer: Sequoia Mortgage Trust 2015-3
Cl. B-4, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec 14, 2017 Upgraded to Baa3 (sf)
Issuer: Sequoia Mortgage Trust 2015-4
Cl. B-4, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 12, 2018 Upgraded to Baa1 (sf)
Issuer: Sequoia Mortgage Trust 2016-1
Cl. B-3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug 31, 2018 Upgraded to Baa2 (sf)
Cl. B-4, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 8, 2017 Upgraded to Ba3 (sf)
Issuer: Sequoia Mortgage Trust 2016-2
Cl. B-3, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 3, 2018 Upgraded to Baa1 (sf)
Cl. B-4, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 3, 2018 Upgraded to Ba1 (sf)
Issuer: SEQUOIA MORTGAGE TRUST 2016-3
Cl. B-3, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Baa1 (sf)
Cl. B-4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-1
Cl. B-3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Baa2 (sf)
Cl. B-4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-2
Cl. B-3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Baa2 (sf)
Cl. B-4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 28, 2019 Upgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-3
Cl. B-3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 4, 2019 Upgraded to Baa2 (sf)
Cl. B-4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 4, 2019 Upgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-4
Cl. B4, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 8, 2019 Upgraded to Ba1 (sf)
Issuer: Sequoia Mortgage Trust 2017-5
Cl. B-4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 4, 2019 Upgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-6
Cl. B-4, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 8, 2019 Upgraded to Ba1 (sf)
RATINGS RATIONALE
The rating action reflects possible reductions in interest payments
(which it treats as interest shortfalls) to the affected bonds due
to an increased likelihood of deterioration in the performance of
the underlying mortgage loans, and specifically an increase in
delinquencies, as a result of a slowdown in US economic activity in
2020 due to the coronavirus outbreak. While the collateral backing
these transactions is prime quality residential mortgage loans with
strong credit characteristics, the ratings of these bonds showed
sensitivities to an increase in delinquencies and loss
expectations.
In its analysis, Moody's considered an increase in the baseline
loss of up to a 10% to evaluate the resiliency of the ratings amid
the uncertainty surrounding the pools' performance. Higher losses
also imply higher modeled delinquencies. The sensitivity scenarios
Moody's considered reflect the increased volatility caused by the
coronavirus outbreak, which negatively affects the macroeconomic
conditions that influence consumer credit performance.
The affected tranches are junior notes in transactions with a
stop-advance feature, whereby the servicer, or securities
administrator, does not advance principal and interest to loans
that are 120 days or more delinquent. While stop-advance features
may lessen potential cash flow disruptions upon advance recoupment
and offer greater transparency on actual collections, in these
transactions principal collections or liquidation proceeds cannot
be used to pay interest on the bonds and there is no alternative
source of liquidity to pay interest. As a result, in an environment
where delinquencies and forbearance activities are expected to
rise, this particular stop-advance feature can lead to a reduction
in interest payment to these junior tranches. In addition,
prepayments, which are a key source of build-up in credit
enhancement in the transactions, are expected to slow materially in
the next few months, exacerbating the sensitivity of the tranches
to interest reductions.
According to the deal structure, after the servicer stops advancing
principal and interest on delinquent loans, at the end of the 120
days delinquency period, the balance and the interest accrued on
these "Stop Advance Mortgage Loans (SAML)" will be removed from the
calculation of the principal and interest distribution amounts with
respect to the seniors and subordinate bonds. The interest
distribution amount will be reduced by the interest accrued on the
SAML loans. This reduction will be allocated first to the class of
certificates with the lowest payment priority and then to the class
of certificates with the next lowest payment priority, and so on.
Once a SAML is liquidated, the net recovery from that loan's
liquidation is allocated first to pay down the loan's outstanding
principal amount and then to repay its accrued interest. The
recovered accrued interest on the loan is used to repay the
interest reduction incurred by the bonds that resulted from that
SAML.
During the review period, Moody's will evaluate the performance of
the loans in delinquency and forbearance; some of the loans could
cure or be modified prior to the end of the 120 day stop-advance
period. Moody's will also continue to evaluate the effects of
ongoing and projected macroeconomic conditions, as well as impact
of the actions that the government and private organizations,
including servicers and issuers, have enacted and will implement to
try and curb the negative effects of the virus, on the performance
of underlying pools to update its losses and take a final rating
action on the bonds for these 12 RMBS transactions. Rating actions
on the bonds, due to the revised loss and delinquency projections,
will vary for the different pools.
Its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the US economy as well as
the effects of the announced government measures which were put in
place to contain the virus. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the
substantial implications for public health and safety. It is a
global health shock, which makes it extremely difficult to provide
an economic assessment.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2020.
In addition, Moody's publishes a weekly summary of structured
finance credit ratings and methodologies.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings 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.
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.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
SIERRA TIMESHARE 2019-1: Fitch Affirms BB Rating on Class D Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed the ratings of Sierra Timeshare
Receivables Funding Trust series 2015-3, 2016-1, 2016-2, 2016-3,
2017-1, 2018-2, 2018-3, 2019-1, 2019-2, and 2019-3 and maintained
Stable Outlooks on all classes.
The social and market disruption caused by the coronavirus pandemic
and related containment measures has negatively impacted the U.S.
economy. To account for the potential impact on the outstanding
Sierra Timeshare ABS trusts, Fitch incorporated conservative
assumptions in deriving a base case CGD proxy for each trust. The
analysis focused on peak extrapolations as a starting point and
making adjustments based on amortization levels and more recent CGD
performance.
Sierra Timeshare 2015-3 Receivables
- Class A 82652JAA5; LT Asf; Affirmed
- Class B 82652JAB3; LT BBBsf; Affirmed
Sierra Timeshare 2016-1 Receivables
- Class A 82652XAA4; LT Asf; Affirmed
- Class B 82652XAB2; LT BBBsf; Affirmed
Sierra Timeshare 2016-2 Receivables Funding LLC
- Class A 82652WAA6; LT Asf; Affirmed
- Class B 82652WAB4; LT BBBsf; Affirmed
Sierra Timeshare 2016-3 Receivables Funding LLC
- Class A 82652YAA2; LT Asf; Affirmed
- Class B 82652YAB0; LT BBBsf; Affirmed
Sierra Timeshare 2017-1 Receivables Funding LLC
- Class A 82652KAA2; LT Asf; Affirmed
- Class B 82652KAB0; LT BBBsf; Affirmed
Sierra Timeshare 2018-2 Receivables Funding LLC
- Class A 82653DAA7; LT AAAsf; Affirmed
- Class B 82653DAB5; LT Asf; Affirmed
- Class C 82653DAC3; LT BBBsf; Affirmed
Sierra Timeshare 2018-3 Receivables Funding LLC
- Class A 82653GAA0; LT AAAsf; Affirmed
- Class B 82653GAB8; LT Asf Affirmed
- Class C 82653GAC6; LT BBBsf; Affirmed
- Class D 82653GAD4; LT BBsf; Affirmed
Sierra Timeshare 2019-1 Receivables Funding LLC
- Class A 82653EAA5; LT AAAsf; Affirmed
- Class B 82653EAB3; LT Asf; Affirmed
- Class C 82653EAC1; LT BBBsf; Affirmed
- Class D 82653EAD9; LT BBsf; Affirmed
Sierra Timeshare 2019-2 Receivables Funding LLC
- Class A 82652MAA8; LT AAAsf; Affirmed
- Class B 82652MAB6; LT Asf; Affirmed
- Class C 82652MAC4; LT BBBsf; Affirmed
- Class D 82652MAD2; LT BBsf; Affirmed
Sierra Timeshare 2019-3 Receivables Funding LLC
- Class A 82652NAA6; LT AAAsf; Affirmed
- Class B 82652NAB4; LT Asf; Affirmed
- Class C 82652NAC2; LT BBBsf; Affirmed
- Class D 82652NAD0; LT BBsf; Affirmed
KEY RATING DRIVERS
The affirmations of the class A, B, C (when applicable), and D
(when applicable) notes, for each transaction, reflect loss
coverage levels consistent with their current ratings. The Stable
Outlook for all classes of notes reflects Fitch's expectation that
loss coverage levels will remain supportive of these ratings.
To date, each transaction has performed slightly outside of Fitch's
initial expectations, with higher delinquencies and higher default
rates. As of the March 2020 collection period, the 61+ day
delinquency rates for 2015-3, 2016-1, 2016-2, 2016-3, 2017-1,
2018-2, 2018-3, 2019-1, 2019-2, and 2019-3 are 2.06%, 1.59%, 1.90%,
1.75%, 1.59%, 2.12%, 2.43%, 2.70%, 2.62%, and 3.15%, respectively.
Cumulative gross defaults (CGD's) are currently at 20.11%, 17.98%,
17.85%, 20.79%, 16.94%, 14.28%, 14.40%, 10.40%, 8.05%, and 5.76%,
respectively. All transactions are tracking above their initial
base cases of 19.15%, 19.00%, 18.90%, 19.00%, 18.80%, 19.30%,
19.40%, 19.40%, 19.40%, and 19.45%, respectively. Due to optional
repurchases by the seller, none of the transactions have
experienced a net loss to date.
Due to the uncertainty surrounding the coronavirus pandemic, Fitch
has established a base case coronavirus ratings scenario, which
assumes a global recession in 1H20 driven by sharp economic
contractions in major economies with a rapid spike in unemployment,
followed by a recovery that begins in 3Q20 as the health crisis
subsides. Timeshare ABS in particular is expected to experience
weaker asset performance in the near term as the sector is highly
correlated to tourism and travel, which has been impacted
significantly due to the pandemic, as evidenced by the significant
decline in occupancy rates at timeshare resorts. This is expected
to result in increases in delinquencies and defaults as owners are
unable to vacation at timeshare resorts.
To account for potential increases in delinquencies and defaults,
Fitch revised the lifetime CGD proxy to 19.30%, 19.90%, 20.30%,
20.90%, 22.50%, 21.40%, 22.00%, and 22.50% for 2016-1, 2016-2,
2017-1, 2018-2, 2018-3, 2019-1, 2019-2, and 2019-3, respectively.
The updated base case default proxies were increased upwards,
utilizing conservative extrapolations for each transaction to
account for the expected increase in defaults due to negative
impacts from the pandemic. The previous lifetime CGD proxy of
21.25% for 2015-3 and 23.10% for 2016-3 were deemed conservative
enough to maintain for this review given the significant
amortization levels. The risk horizon for these amortized
transactions is materially less than the outstanding 2017-2019 as
the collateral pools comprise of much more seasoned timeshare
loans, higher implied owner equity, and declining default pace.
Under Fitch's stressed cash flow assumptions, loss coverage for the
2015-3, 2016-1, 2016-2, 2016-3, and 2017-1 class A and B notes are
able to support multiples in excess of 2.50x and 1.75x for 'Asf'
and 'BBBsf', respectively. Loss coverage for the 2018-2 class A, B,
and C notes are able to support multiples in excess of 3.50x, 2.50x
and 1.75x for 'AAAsf', 'Asf', and 'BBBsf'. Loss coverage for the
2018-3 class A, B, C, and D notes are able to support multiples in
excess of 3.50x, 2.50x, 1.75x, and 1.25x for 'AAAsf', 'Asf,
'BBBsf', and 'BBsf'. Loss coverage for the 2019-1 class A and B
notes are able to support multiples in excess of 3.50x and 2.50x
for 'AAAsf' and 'Asf', while the class C and D loss coverage is
slightly short for the 1.75x, and 1.25x multiples for 'BBBsf' and
'BBsf'. The shortfalls are considered marginal and are within the
range of the multiples for the current ratings. Loss coverage for
the 2019-2 class A and C notes is slightly below the 3.50x and
1.75x multiple for 'AAAsf' and 'BBBsf', respectively, while the
class B and D loss coverage is able to support multiples in excess
of 2.50x and 1.25x for 'Asf' and 'BBsf', respectively. The
shortfall is considered marginal and within the range of the
multiples for the current rating. Loss coverage for the 2019-3
class A, B and C notes is slightly below the 3.50x, 2.50x, and
1.75x, multiple for 'AAAsf', 'Asf', and 'BBBsf' while the class D
loss coverage is able to support multiples in excess of 1.25x for
'BBsf'. The shortfalls are considered marginal and are within the
range of the multiples for the current rating.
The ratings also reflect the quality of Wyndham Destinations, Inc.
timeshare receivable originations, the sound financial and legal
structure of the transactions, and the strength of the servicing
provided by Wyndham Consumer Finance, Inc. Fitch will continue to
monitor economic conditions and their impact as they relate to
timeshare asset-backed securities and the trust level performance
variables and update the ratings accordingly.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance driven by stable
delinquencies and defaults would lead to increasing CE levels and
consideration for potential upgrades. Fitch applied an up
sensitivity, by reducing the base case proxy by 20%. The impact of
reducing the proxies by 20% from the current proxies could result
in one category upgrades or affirmations of ratings with stronger
multiples.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Conversely, unanticipated increases in the frequency of
defaults could produce default levels higher than the current
projected base case default proxy, and impact available loss
coverage and multiples levels for the transaction;
-- Weakening asset performance is strongly correlated to
increasing levels of delinquencies and defaults that could
negatively affect CE levels. Lower loss coverage could impact
ratings and Rating Outlooks, depending on the extent of the decline
in coverage. The timeshare sector is currently more exposed to
weaker asset performance due to the strong correlation with tourism
and travel that has been severely affected by the pandemic;
-- In Fitch's initial review of the transaction, the notes were
found to have limited sensitivity to a 1.5x and 2.0x increase of
Fitch's base case loss expectation. The 2.0x scenario was updated
and is considered Fitch's coronavirus downside rating sensitivity
that suggests consistent ratings for the outstanding notes could be
downgraded by one to two rating categories.
Due to the uncertainty surrounding the coronavirus outbreak, Fitch
ran additional sensitivities to account for potential increases in
delinquencies. Under this scenario, there was no rating impact on
all outstanding notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
START II LTD: Fitch Cuts Class C Notes to 'Bsf', Outlook Negative
-----------------------------------------------------------------
Fitch Ratings has downgraded the series A, B and C fixed-rate
secured notes issued by START II Ltd., and has maintained the
Rating Watch Negative on the series A, B and C fixed-rate secured
notes issued by START III Ltd. Fitch removed the existing RWN on
START II, and placed the notes on Rating Outlook Negative.
START II Ltd.
- Class A 85573LAA9; LT BBBsf; Downgrade
- Class B 85573LAB7; LT BBsf; Downgrade
- Class C 85573LAC5; LT Bsf; Downgrade
START III Ltd.
- Series A 85572VAA8; LT Asf; Rating Watch Maintained
- Series B 85572VAB6; LT BBBsf; Rating Watch Maintained
- Series C 85572VAC4; LT BBsf; Rating Watch Maintained
TRANSACTION SUMMARY
The rating actions reflect ongoing deterioration of all airline
lessee credits backing the leases in each pool, downward pressure
on certain aircraft values, Fitch's updated assumptions and
stresses, and resulting impairments to modeled cash flows and
coverage levels.
Fitch placed each tranche of START II on NO from RWN reflecting
Fitch's base case expectation for the structure to withstand
immediate and near-term stresses at the updated assumptions and
stressed scenarios and current ratings. Fitch maintained the RWN
for each tranche in START III given its limited ability to cover
further downward stress to modeled cash flow coverage levels from
the ongoing pandemic hitting airlines, aircraft values and other
related downside events at the current modeled scenarios and
ratings.
On March 31, 2020, Fitch placed all series of notes on RWN as a
part of its aviation ABS portfolio review, due to the ongoing
impact of the coronavirus on the global macro and travel/airline
sectors. The unprecedented worldwide pandemic continues to evolve
rapidly and negatively affect airlines across the globe. To
accurately reflect today's global recessionary environment and the
impact to airlines backing these pools, Fitch updated rating
assumptions for both rated and non-rated airlines with a vast
majority of ratings moving lower, which was a key driver of these
rating actions along with modeled cash flows.
Furthermore, recessionary timing was brought forward to start
immediately at this point in time. This scenario further stresses
airline credits, asset values and lease rates immediately while
incurring remarketing and repossession cost and downtime, at each
relevant rating stress level. Previously, Fitch assumed that the
first recession commenced six months from either the transaction
closing date or date of subsequent reviews.
GE Capital Global Holdings, LLC (GECGH; BBB/F3/Stable) and GE
Capital Aviation Services Limited (GECAS; not rated [NR] by Fitch)
and certain of their subsidiaries are the initial sellers, and
GECAS acts as servicer to both transactions. OZ Aviation 2019-1,
LLC is the asset manager and E Note Holder for START II, and
Sculptor Aviation 2019-2, LLC the asset manager and E Note Holder
for START III (both NR by Fitch).
KEY RATING DRIVERS
Deteriorating Airline Lessee Credit:
The credit profiles of the airline lessees in the pools have
further deteriorated due to the coronavirus-related impact on all
global airlines in 2020, resulting in lower lessee rating
assumptions utilized for this review. The proportion of airline
lessees in the START II pool assumed at a 'CCC' Issuer Default
Rating jumped to 63.0% from 36.3% at closing, and for START III
doubled to 70.0% compared with 35.7% at closing.
Newly-assumed 'CCC' credit airlines include Aegean Airlines S.A.
and PT Batik for START II, and AsiaAviation Capital Limited and
Philippines AirAsia, Inc., Malindo Airways SDN. BHD., Jeju Air Co.,
Ltd., Thai Lion Mentari Co., Ltd. and T'Way Air Co., Ltd. for START
III. These assumptions reflect these airlines' ongoing
deteriorating credit profiles and fleet in the current operating
environment, due to the coronavirus-related impact on the sector.
Importantly, five aircraft in START II were not novated to the
trust by the delivery expiry date, including aircraft on lease to
Aerolineas Argentinas S.A., Air China, Biman Bangladesh Airlines
and Condor Flugdienst GmbH. The START II's portfolio aircraft
declined to 15 aircraft from 20 initially at closing. One aircraft
on lease to South African Airways in START III was not novated,
reducing the portfolio to 19 aircraft from 20 initially at closing.
On the liability side, a proportional amount of each outstanding
series of notes in START II and START III will be redeemed without
premium based on the designated percentage of these aircraft.
Combined with Fitch's assumptions and stresses applied to the
reduced pool of 15 aircraft and nine lessees in the pool, the START
II portfolio's aircraft, airline and geographic diversification
suffered with this failure to novate these aircraft into the trust
as initially planned. This then affected modeled cash flows and
coverage levels, and contributed to the downgrade of each series of
notes.
Asset Quality and Appraised Pool Value
Both pools feature 100% liquid narrowbody aircraft which is
generally viewed positively, with no widebody aircraft in either
pool. However, there continues to be elevated uncertainty around
ongoing base and market values, and how the current environment
will affect near-term lease maturities in each pool. Fitch
recognizes that there will be downward pressure on values in the
short to medium term, and has taken this into consideration during
this review. IBA Group Limited and morten beyer & agnew Inc.
provided appraisals for START II and START III. AVITAS, Inc. was
the third appraiser for START II, while Collateral Verifications,
Inc. was the third appraiser in START III.
START II received updated appraisals in October 2019, which
resulted in a sizable decline in adjusted portfolio value of
approximately 12% to $517.6 million from $588.7 million at closing
using September 2018 appraisals. The current pool value then
dropped to $368.9 million with only 15 aircraft novating and loss
of five aircraft that did not novate and were paid off, which was a
cash flow negative for the pool given the updated remaining
aircraft with the pool having less diversification from an aircraft
number and value, airline lessees, and cash flow perspective.
START III values were based August 2019 appraisals and will be
updated in the latter half of this year. The current pool with one
less aircraft (A320-200 that was on lease to SAA), declined to
$509.6 million in value compared to $538.8 million at closing.
Fitch utilized the average of the two lowest most current appraised
base values (BVs) for each pool in modeling. These approaches
resulted in a Fitch modeled value of $363.1 million for START II,
and $484.2 million for START III.
Performance of the Transactions to Date
Nearly all lessees across both transactions have requested some
form of payment relief/deferrals. As of April, GECAS as servicer
approved deferrals for approximately 80% of monthly rental amounts
due for START II and START III. Typical terms have been around
three months deferral, with repayment thereof plus interest
assessed over a subsequent six-month period, which Fitch applied
for both transactions in for these reviews.
Lease collections and transaction cash flows have trended down
since the beginning of 2020. START II received $3.9 million in the
April collection report, versus the peak monthly $6.4 million
received in the January reporting report. With limited seasoning to
date, START III received $4.5 million in the April period compared
with the peak monthly level of $5.7 million in February. As of the
April period, START II payments flowed down the waterfall to
partially pay series C interest, while START III payments were able
to pay the E Note Account.
Fitch Assumptions, Stresses and Cash Flow Modeling
Nearly all GECAS servicer-driven Fitch assumptions are unchanged
from the initial review at closing for each transaction. These
include repossession and remarketing costs, new lease and extended
lease terms.
For START II, one aircraft on lease to Flynas Company is expected
to end in December 2020. Fitch assumed an additional three-month
downtime at lease end on top of lessor-specific remarketing
downtime assumptions, to account for potential remarketing
challenges in placing this aircraft with a new lessee in the
current distressed environment. Please refer to each transaction's
published presale at close for further information on these
assumptions and stresses.
With the grounding of global fleets and significant reduction in
air travel, maintenance revenue and costs will be affected and are
expected to decline due to airline lessee credit issues and
grounded aircraft. Maintenance revenues were reduced by 50% over
the next immediate 12 months, and such missed payments were assumed
to be recouped in the following 12 months thereafter, starting May
2021. Maintenance costs over the immediate six months were assumed
to be incurred as reported. Costs in the next 12 months were
reduced by 50%. Over the following 12 months, costs were assumed to
increase straight line to 100% to repay any deferred costs from the
prior 12 months.
RATING SENSITIVITIES
The NO on START II notes and RWN for START III notes reflect the
potential for further negative rating actions due to concerns
surrounding the ultimate impact of the coronavirus pandemic, and
resulting performance concerns associated with airlines, aircraft
values and other assumptions across the aviation industry due to
the severe decline in travel and grounding of airlines.
At close of each transaction, Fitch conducted multiple rating
sensitivities to evaluate the impact of changes to a number of the
variables in the analysis. The performance of aircraft operating
lease securitizations is affected by various factors, which in turn
could have an impact on the assigned ratings. Due to the
correlation between global economic conditions and the airline
industry, the ratings can be affected by the strength of the
macroeconomic environment over the remaining term of these
transactions.
In the initial rating analysis, Fitch found the transactions to
exhibit sensitivity to the timing or severity of assumed
recessions. There is also greater default probability of the leases
that will have a material impact on the ratings. The timing or
degree of technological advancement in the commercial aviation
space and the impacts these changes would have on values, lease
rates, and utilization, would have a moderate impact on the
ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Up: Base Assumptions with Stronger Residual Value Realization
The Aircraft ABS sector has a rating cap of 'Asf'. All subordinate
tranches carry one category of ratings lower than the senior
tranche, and remain below the initial ratings. However, if the
transactions experiences stronger residual value realization than
what was modeled by Fitch, or if it experiences a stronger lease
cash flow collection than the stressed scenarios, the transactions
could perform better than expected. Future upgrades beyond current
ratings would not be considered due to the rating cap in the
sector, the industry cyclicality, and weaker lessee mix present in
ABS pools and uncertainty around future lessee mix, all combined
with the negative impact on the coronavirus on the global
travel/airline sectors and ultimately ABS transactions.
Under this scenario, residual value recoveries at time of sale are
assumed at 75% of their depreciated market values up from 50% in
the base case. The START II and START III series A, B and C notes'
resulting cash flows for both transactions are able to pass at
ratings of 'Asf', 'BBBsf' and 'BBsf', respectively.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Down: Base Assumptions with No Recoveries for Original 'CCC'
Credits
At initial rating of START II, 36.3% of lessees were assumed to
carry 'CCC' IDR airline credits. This sensitivity scenario explores
the potential cash flow declines if the same airline credits who
were initially assumed 'CCC', were assumed at 'CC' at the start of
the recession rather than 'CCC'. Fitch believes this would be a
severe case, as the default rate for a 'CC' credit increases to
roughly 45% in the first year, from 15% in the first year for a
'CCC'. These credits would assume no recoveries after the end of
the recession.
Under this scenario, asset values are not stressed directly as the
pool is assessed at the same starting value of $363 million, and
undergo the same stressed value declines. The stress comes from
higher default probability of lessees, thereby increasing downtime
and costs associated with more frequent modeled lease transitions.
Net cash flow decline by approximately $15 million at the 'Asf'
rating category. All classes are unable to pass at their current
ratings. The class A notes could experience a further downgrade to
'BBsf', and classes B and C are able to pass at their current
ratings of 'BBsf' and 'Bsf' level.
At initial rating of START III, 35.7% of lessees were assumed to
carry 'CCC' IDR airline credits. Similar to START II, this
sensitivity scenario explores the potential cash flow declines if
the same airline credits who were initially assumed 'CCC', were
assumed at 'CC' at the start of the recession rather than 'CCC'.
Fitch believes this would be a severe case, as the default rate for
a 'CC' credit increases to roughly 45% in the first year, from 15%
in the first year for a 'CCC'. These credits would assume no
recoveries after the end of the recession.
Under this scenario, asset values are not stressed directly as the
pool is assessed at the same starting value of $484 million and
undergo the same stressed value declines. The stress comes from
higher default probability of lessees, thereby increasing downtime
and costs associated with more frequent modeled lease transitions.
Net cash flow declines by approximately $12 million at 'Asf' rating
category. The class A experiences a $5 million principal shortfall
under the 'Asf' stres scenario, resulting in a possible downgrade
to the class A notes to 'BBBsf'. Classes B and C are able to pass
at their current ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to or reviewed by Fitch
in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
TOWD POINT 2020-2: Fitch Gives B(EXP) Rating to Class B2 Notes
--------------------------------------------------------------
Fitch Ratings assigns ratings and Rating Outlooks to Towd Point
Mortgage Trust 2020-2.
TPMT 2020-2
- Class A1A1; LT AAAsf New Rating; AAA(EXP)sf
- Class A1A2; LT AAAsf New Rating; AAA(EXP)sf
- Class A1B; LT AAAsf New Rating; AAA(EXP)sf
- Class A2; LT AAsf New Rating; AA(EXP)sf
- Class M1; LT Asf New Rating; A(EXP)sf
- Class M2; LT BBBsf New Rating; BBB(EXP)sf
- Class B1; LT BBsf New Rating; BB(EXP)sf
- Class B2; LT Bsf New Rating; B(EXP)sf
- Class B3; LT NRsf New Rating; NR(EXP)sf
- Class B4; LT NRsf New Rating; NR(EXP)sf
- Class B5; LT NRsf New Rating; NR(EXP)sf
- Class A1; LT AAAsf New Rating; AAA(EXP)sf
- Class A1A; LT AAAsf New Rating; AAA(EXP)sf
- Class A2A; LT AAsf New Rating; AA(EXP)sf
- Class A2AX; LT AAsf New Rating; AA(EXP)sf
- Class A2B; LT AAsf New Rating; AA(EXP)sf
- Class A2BX; LT AAsf New Rating; AA(EXP)sf
- Class M1A; LT Asf New Rating; A(EXP)sf
- Class M1AX; LT Asf New Rating; A(EXP)sf
- Class M1B; LT Asf New Rating; A(EXP)sf
- Class M1BX; LT Asf New Rating; A(EXP)sf
- Class M2A; LT BBBsf New Rating; BBB(EXP)sf
- Class M2AX; LT BBBsf New Rating; BBB(EXP)sf
- Class M2B; LT BBBsf New Rating; BBB(EXP)sf
- Class M2BX; LT BBBsf New Rating; BBB(EXP)sf
- Class A3; LT AAsf New Rating; AA(EXP)sf
- Class A4; LT Asf New Rating; A(EXP)sf
- Class A5; LT BBBsf New Rating; BBB(EXP)sf
TRANSACTION SUMMARY
The notes are supported by one collateral group that consists of
7,358 seasoned performing loans and reperforming loans with a total
balance of approximately $1.23 billion, which includes $90 million,
or 7%, of the aggregate pool balance in noninterest-bearing
deferred principal amounts, as of the statistical calculation date.
The transaction is expected to close on May 1, 2020.
Distributions of principal and interest and loss allocations are
based on a traditional senior-subordinate, sequential structure.
The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicers will not be advancing delinquent monthly
payments of P&I.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage, SPLs and RPLs. Of the pool,
5.7% was 30 days delinquent as of the statistical calculation date,
and 19% of loans are current but have had recent delinquencies or
incomplete 24-month pay strings. A total of 75% of the loans have
been paying on time for the past 24 months. Roughly 98% have been
modified.
Payment Deferrals related to Coronavirus Expected (Negative): The
coronavirus pandemic and widespread containment efforts in the
United States will result in increased unemployment and cash flow
disruptions. Mortgage payment deferrals will provide immediate
relief to affected borrowers and Fitch expects servicers to broadly
adopt this practice. The missed payments will result in interest
shortfalls that will likely be recovered, the timing of which will
depend on repayment terms; if interest is added to the underlying
balance as a non-interest-bearing amount, repayment will occur at
refinancing, property liquidation or loan maturity.
To account for the cash flow disruptions, Fitch assumed deferred
payments on 40% of the pool for the first six months of the
transaction at all rating categories with a reversion to its
standard delinquency and liquidation timing curve by month 10. This
assumption is based on observed peak delinquencies for legacy Alt-A
collateral. Because the cash flow waterfall provides for principal
otherwise distributable to the lower rated bonds to pay timely
interest to the 'AAAsf' and 'AAsf' bonds, the lowest rate classes
will likely experience interest shortfalls to the extent excess
cash flow is insufficient. The excess cash flow in the structure
helped mitigate the impact of this assumption and the increase in
credit enhancement needed was minimal.
Low Operational Risk (Positive): Operational risk is well
controlled for in this transaction. FirstKey Mortgage, LLC has a
well-established track record in RPL activities and has an "above
average" aggregator assessment from Fitch. Select Portfolio
Servicing, Inc. and Specialized Loan Servicing LLC will perform
primary and special servicing functions for this transaction and
are rated 'RPS1-' and 'RPS2+', respectively, for this product type.
The benefit of highly-rated servicers decreased Fitch's loss
expectations by 115bps at the 'AAAsf' rating category. The issuer's
retention of at least 5% of the bonds helps ensure an alignment of
interest between issuer and investor.
Low Aggregate Servicing Fee (Mixed): Fitch determined that the
stated aggregate servicing fee of approximately 15bps (SPS
servicing fee of 15bps and SLS servicing fee of 32bps) may be
insufficient to attract subsequent servicers under a period of poor
performance and high delinquencies. To account for the potentially
higher fee needed to obtain a subsequent servicer, Fitch's cash
flow analysis assumed a 45bp servicing fee.
Third-Party Due Diligence (Negative): A third-party due diligence
review was conducted on 80% of the loan-by-loan count and focused
on regulatory compliance, pay history and a tax and title lien
search. Of the loans reviewed, the third-party review firm's due
diligence review resulted in approximately 3% (by loan count) of
'C' and 'D' graded loans, meaning the loans had material violations
or lacked documentation to confirm regulatory compliance. See the
Third-Party Due Diligence section for additional details.
Representation Framework (Negative): Fitch considers the
representation, warranty and enforcement mechanism construct for
this transaction to generally be consistent with what it views as a
Tier 2 framework, due to the inclusion of knowledge qualifiers and
the exclusion of loans from certain reps as a result of third-party
due diligence findings. Additionally, the issuer is not providing
R&Ws for second liens and therefore Fitch treated these as Tier 5.
Fitch increased its 'AAAsf' loss expectations by 148bps to account
for a potential increase in defaults and losses arising from
weaknesses in the reps. See Mortgage Loan Representations and
Warranties section for more detail.
Limited Life of Rep Provider (Negative): FirstKey, as rep provider,
will only be obligated to repurchase a loan due to breaches prior
to the payment date in May 2021. Thereafter, a reserve fund will be
available to cover amounts due to noteholders for loans identified
as having rep breaches. Amounts on deposit in the reserve fund as
well as the increased level of subordination will be available to
cover additional defaults and losses resulting from rep weaknesses
or breaches occurring on or after the payment date in May 2021.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduce
liquidity to the trust. P&I advances made on behalf of loans that
become delinquent and eventually liquidate reduce liquidation
proceeds to the trust. Due to the lack of P&I advancing, the
loan-level loss severity is 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.
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 reallocate principal to pay interest
on the 'AAAsf'- and 'AAsf'-rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class in the absence of servicer advancing.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $90 million (7%) of the UPB are
outstanding on 2,280 loans. Fitch included the deferred amounts
when calculating the borrower's loan-to-value ratio and sustainable
LTV, despite the lower payment and amounts not being owed during
the term of the loan. The inclusion resulted in a higher
probability of default and LS than if there were no deferrals.
Fitch believes that borrower default behavior for these loans will
resemble that of the higher LTVs, as exit strategies (i.e. sale or
refinancing) will be limited relative to those borrowers with more
equity in the property.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines than
assumed at both the metropolitan statistical area 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.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up-and-down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch conducted a defined positive rating sensitivity analysis
to demonstrate how the ratings would react to negative MVDs at the
national level, or in other words, positive home price growth with
no assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior class, which is already
'AAAsf', the analysis indicates there is potential positive rating
migration for all of the rated classes. Specifically, a 10% gain in
home prices would result in a full category upgrade for the rated
class excluding those being assigned ratings of AAAsf.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch conducted a defined negative rating sensitivity analysis
to demonstrate how the ratings would react to steeper MVDs at the
national level. The analysis assumes additional MVDs of 10.0%,
20.0% and 30.0% in addition to the model-projected 37.2% at the
'AAA' rating stress. The analysis indicates that there is some
potential rating migration with higher MVDs for all rated classes,
compared with the model projection. Specifically, a 10% additional
decline in home prices would lower all rated classes by at least
one full category.
-- Fitch has also added a Coronavirus Sensitivity Analysis that
contemplates a more severe and prolonged economic stress caused by
a re-emergence of infections in the major economies, before a slow
recovery begins in 2Q21. Under this severe scenario, Fitch expects
the ratings to be impacted by changes in its sustainable home price
model due to updates to the model's underlying economic data
inputs. Any long-term impact arising from coronavirus disruptions
on these economic inputs will likely affect both investment and
speculative grade ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E as prepared by
WestCor Land Title Insurance Company, Clayton Services LLC and AMC
Diligence, LLC. The third-party due diligence described in Form 15E
focused on regulatory compliance, pay history, the presence of key
documents in the loan file and data integrity.
Fitch received certifications indicating that due diligence was
conducted in accordance with its published standards for
legal/regulatory compliance. The certifications also stated that
the companies performed their work in accordance with the
independence standards, per Fitch's "U.S. RMBS Rating Criteria."
The due diligence analysts performing the reviews met Fitch's
criteria of minimum years of experience.
A third-party regulatory compliance review was completed on
approximately 80% of the loans (by loan count) in the transaction
pool. Although 100% due diligence is typically performed for RPL
RMBS, all of the first lien loans (approximately 95% of the pool)
are from a single source. 89% of the first lien loan received a
compliance review. Fitch's sample size criteria for single
originators of seasoned and RPL collateral is 20%. A criteria
variation was applied for the second liens since a diligence review
was conducted only conducted on 29% of these loans by loan count;
however, Fitch is comfortable with the lack of a review due to the
100% LS applied to each loan and any adjustments based on due
diligence findings for regulatory compliance exceptions are
primarily applied to the LS.
About 3% of the reviewed loans (192 loans) were assigned a grade of
'C' or 'D'. The diligence results indicated better operational risk
to prior TPMT transactions as well as other Fitch-reviewed RPL
transactions. Fitch adjusted its loss expectation at the 'AAAsf'
rating stress by 2 bps to reflect these additional risks.
AMC and WestCor were retained to perform an updated tax and title
on 90% of the pool by loan count, 96% by UPB. All first-lien loans
and 27% of the second-lien loans were reviewed. While Fitch
generally requests a 100% tax and title search, the loans that did
not receive a search are second liens that do not require a search
per Fitch criteria. The tax, title and lien search identified the
loans with outstanding liens and taxes that could take priority
over the subject mortgage. To the extent that there are outstanding
delinquent property taxes (including any recorded liens resulting
from such unpaid property taxes) on the first-lien mortgage loans,
delinquent energy lien installments, HOA or municipal liens, the
servicers will advance those payments to preserve the trust's
interest in the properties. Fitch adjusted its LS by approximately
19bps at AAAsf to account for this.
Fitch adjusted its loss expectation at the 'AAAsf' level by
approximately 2bps to account for the due diligence findings.
Included in this adjustment were 52 of the 'C' or 'D' graded loans,
due to missing documents that prevented testing for predatory
lending compliance. The inability to test for predatory lending may
expose the trust to potential assignee liability, which creates
added risk for bond investors. To mitigate this risk, Fitch assumed
a 100% LS for loans in the states that fall under Freddie Mac's do
not purchase list of "high cost" or "high risk;" 12 loans were
affected by this approach. For the remaining 40 loans, where the
properties are not located in the states that fall under Freddie
Mac's do not purchase list, the likelihood of all loans being high
cost is low. However, Fitch assumes the trust could potentially
incur notable legal expenses. Fitch increased its loss severity
expectations by 5% for these loans to account for the risk.
Other causes for the remaining 'C' and 'D' grades include missing
final HUD1s that are not subject to predatory lending, missing
state disclosures and other missing compliance-related documents.
Fitch believes these issues do not add material risk to
bondholders, since the statute of limitations has expired. No
adjustment to loss expectations were made for these loans.
A total of 681 loans were missing modification documents or a
signature on modification documents. For these loans, timelines
were extended by an additional three months, in addition to the
six-month timeline extension applied to the entire pool.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
[*] Fitch Alters Outlook on 95 Tranches From 37 CMBS Deals to Neg.
------------------------------------------------------------------
Fitch Ratings has revised the Rating Outlooks to Negative from
Stable on 95 classes from 37 U.S. CMBS conduit transactions from
the 2016 vintage. In addition, 16 classes from two transactions
were removed from Rating Watch Negative, affirmed and assigned
Negative Outlooks. Fitch has also revised the Rating Outlooks to
Stable from Positive on three classes from one transaction.
Three 2016 transactions, MSC 2016-UBS11, CSAIL 2016-C6 and CFCRE
2016-C4, were reviewed by Fitch in the past two weeks, and Negative
Rating Outlooks were assigned; no further actions on these three
deals were taken in this review.
In the current review, Fitch analyzed its entire portfolio of 2016
U.S. CMBS conduit transactions, which consists of 55 deals. The
review focused solely on the impact of the coronavirus pandemic on
the transactions. Forty-three transactions from the 2016 vintage
now have at least one class with a Negative Outlook. Twelve
transactions have Stable Rating Outlooks on all outstanding
classes.
CGCMT 2016-P6
- Class F 17291EAE1; LT B-sf; Revision Outlook
WFCM 2016-NXS6
- Class F 95000KAN5; LT B-sf; Revision Outlook
COMM 2016-DC2 Mortgage Trust
- Class E 12594CAN0; LT BB+sf; Revision Outlook
CGCMT 2016-GC36
- Class E 17324TAQ2; LT BB-sf; Revision Outlook
- Class F 17324TAS8; LT B-sf; Revision Outlook
MSC 2016-BNK2
- Class EF 61690YAU6; LT B-sf; Revision Outlook
- Class F 61690YAS1; LT B-sf; Revision Outlook
DBJPM 2016-C1
- Class A-M 23312LAT5; LT AAAsf; Revision Outlook
- Class B 23312LAU2; LT AA-sf; Affirmed
- Class C 23312LAV0; LT A-sf; Affirmed
- Class D 23312LAG3; LT BBB-sf; Affirmed
- Class E 23312LAH1; LT BB-sf; Affirmed
- Class F 23312LAJ7; LT B-sf; Affirmed
- Class X-A 23312LAW8; LT AAAsf; Revision Outlook
- Class X-B 23312LAB4; LT A-sf; Affirmed
- Class X-C 23312LAC2; LT BBB-sf; Affirmed
- Class X-D 23312LAD0; LT BB-sf; Affirmed
DBJPM 2016-C3
- Class B 23312VAJ5; LT AA-sf; Revision Outlook
- Class C 23312VAK2; LT A-sf; Revision Outlook
- Class X-B 23312VAL0; LT AA-sf; Revision Outlook
WFCM 2016-NXS5
- Class F 95000CAL7; LT BB-sf; Revision Outlook
- Class X-F 95000CAC7; LT BB-sf; Revision Outlook
CSAIL 2016-C7
- Class E 12637UAJ8; LT BB-sf; Revision Outlook
- Class X-E 12637UAA7; LT BB-sf; Revision Outlook
CGCMT 2016-C1
- Class E 17290YAC2; LT BB-sf; Revision Outlook
- Class F 17290YAE8; LT B-sf; Revision Outlook
GSMS 2016-GS3
- Class E 36251PAR5; LT BB-sf; Revision Outlook
- Class F 36251PAT1; LT B-sf; Revision Outlook
MSC 2016-UBS12
- Class A-S 61691EBD6; LT AAAsf; Revision Outlook
- Class B 61691EBE4; LT AA-sf; Revision Outlook
- Class C 61691EBF1; LT A-sf; Revision Outlook
- Class D 61691EAJ4; LT BBB-sf; Revision Outlook
- Class E 61691EAL9; LT BB-sf; Revision Outlook
- Class F 61691EAN5; LT B-sf; Revision Outlook
- Class X-B 61691EBC8; LT AA-sf; Revision Outlook
- Class X-D 61691EAA3; LT BBB-sf; Revision Outlook
- Class X-E 61691EAC9; LT BB-sf; Revision Outlook
- Class X-F 61691EAE5; LT B-sf; Revision Outlook
MSBAM 2016-C32
- Class E 61691GAE0; LT BB-sf; Revision Outlook
- Class F 61691GAG5; LT B-sf; Revision Outlook
WFCM 2016-C36
- Class A-S 95000MBR1; LT AAAsf; Revision Outlook
- Class B 95000MBU4; LT AA-sf; Revision Outlook
- Class C 95000MBV2; LT A-sf; Revision Outlook
- Class D 95000MAC5; LT BBB-sf; Revision Outlook
- Class X-B 95000MBT7; LT AA-sf; Revision Outlook
- Class X-D 95000MAA9; LT BBB-sf; Revision Outlook
CFCRE 2016-C7
- Class E 12532BAN7; LT BB-sf; Revision Outlook
- Class X-E 12532BAW7; LT BB-sf; Revision Outlook
COMM 2016-COR1
- Class F 12594MAQ1; LT B-sf; Revision Outlook
- Class X-F 12594MAG3; LT B-sf; Revision Outlook
CD 2016-CD1
- Class F 12514MAQ8; LT B-sf; Revision Outlook
- Class X-E 12514MAG0; LT B-sf; Revision Outlook
WFCM 2016-C35
- Class E 95000FAE6; LT BBsf; Revision Outlook
CSMC 2016-NXSR
- Class D 12594PAG6; LT BBB-sf; Revision Outlook
- Class V1-D 12594PBF7; LT BBB-sf; Revision Outlook
JPMCC 2016-JP4
- Class E 46645UAE7; LT BB-sf; Revision Outlook
CD 2016-CD2
- Class E 12515AAQ3; LT BB-sf; Revision Outlook
- Class F 12515AAS9; LT B-sf; Revision Outlook
- Class X-E 12515AAG5; LT BB-sf; Revision Outlook
- Class X-F 12515AAJ9; LT B-sf; Revision Outlook
CFCRE 2016-C3
- Class F 12531WAQ5; LT BB-sf; Revision Outlook
- Class X-F 12531WAE2; LT BB-sf; Revision Outlook
CGCMT 2016-C3
- Class E 17325GAN6; LT BB-sf; Revision Outlook
- Class F 17325GAQ9; LT B-sf; Revision Outlook
- Class X-E 17325GAW6; LT BB-sf; Revision Outlook
- Class X-F 17325GAY2; LT B-sf; Revision Outlook
MSBAM 2016-C29
- Class E 61766EAN5; LT BB-sf; Revision Outlook
- Class F 61766EAQ8; LT B-sf; Revision Outlook
- Class X-E 61766EAC9; LT BB-sf; Revision Outlook
- Class X-F 61766EAE5; LT B-sf; Revision Outlook
CGCMT 2016-P3
- Class D 29429CAM7; LT BBB-sf; Revision Outlook
- Class X-D 29429CAV7; LT BBB-sf; Revision Outlook
GSMS 2016-GS2
- Class D 36252TAA3; LT BBB-sf; Revision Outlook
- Class E 36252TAE5; LT BB-sf; Revision Outlook
- Class F 36252TAG0; LT B-sf; Revision Outlook
- Class X-D 36252TAC9; LT BBB-sf; Revision Outlook
MSBAM 2016-C28
- Class E 61766LAJ8; LT BB-sf; Revision Outlook
- Class E-1 61766LAE9; LT BBsf; Revision Outlook
- Class E-2 61766LAG4; LT BB-sf; Revision Outlook
- Class EF 61766LAS8; LT B-sf; Revision Outlook
- Class F 61766LAQ2; LT B-sf; Revision Outlook
JPMCC 2016-JP3
- Class E 46590RAR0; LT BBsf; Revision Outlook
- Class F 46590RAT6; LT B-sf; Revision Outlook
CGCMT 2016-P4
- Class F 29429EAQ4; LT B-sf; Revision Outlook
MSBAM 2016-C31
- Class A-S 61766RBC9; LT AAAsf; Revision Outlook
- Class B 61766RBD7; LT AA-sf; Revision Outlook
- Class X-B 61766RBB1; LT AA-sf; Revision Outlook
WFCM 2016-C33
- Class F 95000LAN3; LT B-sf; Revision Outlook
JPMBB 2016-C1
- Class F 46645LAL1; LT B-sf; Revision Outlook
CFCRE 2016-C6
- Class E 12532AAC3; LT BB-sf; Revision Outlook
- Class F 12532AAE9; LT B-sf; Revision Outlook
- Class X-E 12532AAL3; LT BB-sf; Revision Outlook
- Class X-F 12532AAN9; LT B-sf; Revision Outlook
JPMDB 2016-C4
- Class F 46646RAD5; LT B-sf; Revision Outlook
WFCM 2016-BNK1
- Class A-S 95000GBA1; LT AAAsf; Revision Outlook
WFCM 2016-C37
- Class E 95000PAZ7; LT BB+sf; Revision Outlook
- Class F 95000PBB9; LT BB-sf; Revision Outlook
- Class G 95000PBD5; LT B-sf; Revision Outlook
- Class X-EF 95000PAP9; LT BB-sf; Revision Outlook
- Class X-G 95000PAR5; LT B-sf; Revision Outlook
CGCMT 2016-GC37
- Class A-S 17290XAV2; LT AAAsf; Revision Outlook
- Class B 17290XAW0; LT AA-sf; Affirmed
- Class C 17290XAX8; LT A-sf; Affirmed
- Class D 17290XAA8; LT BBB-sf; Affirmed
- Class E 17290XAC4; LT BB-sf; Affirmed
- Class EC 17290XBA7; LT A-sf; Affirmed
- Class F 17290XAE0; LT B-sf; Affirmed
- Class X-A 17290XAY6; LT AAAsf; Revision Outlook
- Class X-B 17290XAZ3; LT AA-sf; Affirmed
- Class X-D 17290XAL4; LT BBB-sf; Affirmed
WFCM 2016-C34
- Class A-S 95000DBF7; LT AAAsf; Revision Outlook
- Class B 95000DBJ9; LT AA-sf; Revision Outlook
- Class X-A 95000DBG5; LT AAAsf; Revision Outlook
- Class X-B 95000DBH3; LT AA-sf; Revision Outlook
KEY RATING DRIVERS
The Negative Rating Outlooks reflect the potential for future
downgrades stemming from an increase in expected losses due to
Fitch's anticipation of a significant negative economic impact and
property performance deterioration due to the coronavirus pandemic.
Near-term cash flow performance declines on certain properties are
expected. However, it is difficult to discern at this time which
loans will ultimately default and whether the default will result
in losses to the trust given the lack of clarity about the length
of the pandemic and permanence of the performance declines.
As described in Fitch's "Update on Response on Coronavirus Related
Reviews for North American CMBS", published on April 13, 2020,
Fitch continues to incorporate the baseline scenario from its
Global Economic Outlook into its analysis.
For property sectors highly vulnerable to the coronavirus pandemic,
Fitch has assumed significant declines in cash flow occurring over
the next two to four months; for hotel, a 65% decline; for retail,
a 45% decline; and for multifamily, a 20% decline. After applying
such declines in cash flow, Fitch assumed any loan with a resulting
debt service coverage ratio less than 0.95x would have a 75%
probability of default. For hotel, this cash flow stress is roughly
equivalent to a loan with the most recent servicer-reported DSCR of
2.75x moving to 0.95x; for retail, the most recent
servicer-reported DSCR of 1.75x moving to 0.95x; and for
multifamily, the most recent servicer-reported DSCR of 1.20x moving
to 0.95x. Although Fitch expects significant defaults among those
properties that suffer the harshest short-term cash flow declines,
some well-capitalized sponsors will be willing and able to support
their properties through this period, particularly those in high
demand locations. Fitch does not expect loans to be liquidated in
any great number prior to the end of the 2Q21 when its Global
Economic Outlook envisages a slow recovery will be under way. The
expected losses for the loans assumed to default were calculated by
applying Fitch's stressed cap rate to the most recent
servicer-reported net operating income less a haircut of 26% for
hotel, 20% for retail and 15% for multifamily. Fitch's stressed cap
rates generally range between 10.25%-13.50% for hotel; 8.00%-11.25%
for retail; and 8.00%-10.00% for multifamily.
Fitch did not apply distinct coronavirus stresses for office and
industrial properties; however, individual factors such as tenancy,
lease term, demand drivers and location were considered. For
example, single tenant office properties with unrated tenants and
office properties with significant exposure to co-working tenants
were assumed likely to default.
The rating actions at this time were limited to Negative Rating
Outlooks. Over the next few months, Fitch will monitor the
performance of the loans in the transactions to evaluate if actual
defaults are occurring in line with Fitch's expectations. A
significant divergence to the downside may accelerate ratings
downgrades. Otherwise, ratings changes, if any, will likely occur
in 2021 with a clearer view of how an economic recovery is
affecting property performance and values.
Additionally, all of the transactions will be subject to their
annual review over the next 12 months and Fitch's analysis will
incorporate adjustments, both less and more stressful, if
warranted, based on idiosyncratic features of the loans and
properties.
The transactions that were not assigned Negative Rating Outlooks
had several common factors including increased credit enhancement
from paydowns and/or defeasance, lower concentrations of loans to
sectors vulnerable to the pandemic and/or higher debt service
coverage relative to Fitch's assumptions on default risk.
By rating category, a summary of the current ratings and
transaction characteristics of the 111 classes from 37 transactions
with Negative Outlook revisions or assignments is as follows:
Ten classes from seven transactions in the 'AAAsf' category.
-- These seven transactions include: WFCM 2016-BNK1, CGCMT
2016-GC37, DBJPM 2016-C1, MSBAM 2016-C31, MSC 2016-UBS12,
WFCM 2016-C34 and WFCM 2016-C36;
-- Average hotel concentration of 16% (ranging between 12%-21%);
-- Average retail concentration of 32% (ranging between 20%-
39%).
Eleven classes from six transactions in the 'AAsf' category.
-- These six transactions include: MSBAM 2016-C31,
WFCM 2016-C34, CGCMT 2016-GC37, DBJPM 2016-C1, MSC
2016-UBS12, and WFCM 2016-C36;
-- Average hotel concentration of 16% (ranging between
12%-21%);
-- Average retail concentration of 33% (ranging between
20%-39%).
Six classes from four transactions in the 'Asf' category.
-- These four transactions include: CGCMT 2016-GC37, DBJPM
2016-C1, MSC 2016-UBS12, and WFCM 2016-C36;
-- Average hotel concentration of 16% (ranging between 12%-21%);
-- Average retail concentration of 31% (ranging between
20%-37%).
Fourteen classes from seven transactions in the 'BBBsf' category.
-- These seven transactions include: CGCMT 2016-P3, CSMC
2016-NXSR, GSMS 2016-GS2, CGCMT 2016-GC37, DBJPM 2016-C1,
MSC 2016-UBS12 and WFCM 2016-C36;
-- Average hotel concentration of 16% (ranging between 12%-21%);
-- Average retail concentration of 33% (ranging between
20%-44%).
-- 36 classes from 22 transactions in the 'BBsf' category; this
represents 43% of the total number of classes rated in the
'BBsf' category from the 2016 vintage.
-- Average hotel concentration of 15% (ranging between 3%-21%);
-- Average retail concentration of 33% (ranging between
13%-44%).
-- 34 classes from 24 transactions in the 'Bsf' category;
this represents 52% of the total number of classes rated
in the 'Bsf' category from the 2016 vintage.
-- Average hotel concentration of 14% (ranging between 3%-23%);
-- Average retail concentration of 29% (ranging between
11%-44%).
The Rating Outlooks on three classes from the DBJPM 2016-C3
transaction were revised to Stable from Positive.
Fitch will be reviewing its entire portfolio and expects to release
updated rating actions for each vintage with the 2017 and 2018
vintage transactions to follow.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades, although not likely in the near term would occur with
stable to improved asset performance coupled with paydown and/or
defeasance. The Negative Rating Outlooks may be revised back to
Stable if overall pool performance and/or properties vulnerable to
the coronavirus stabilize to pre-pandemic levels. Classes with
Negative Outlooks in the 'AAAsf', 'AAsf' and 'Asf' may be more
likely to be revised back to Stable should CE or defeasance
increase significantly. Prior to any classes being upgraded,
adverse selection, sensitivity to concentrations and/or the
potential for future concentration would be taken into
consideration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Factors that could lead to downgrades include an increase in
expected pool level losses from underperforming or specially
serviced loans. Downgrades of one category or more to the classes
assigned Negative Rating Outlooks would occur if expected losses
increase, or a high proportion of the pool defaults and/or
properties vulnerable to the coronavirus fail to return to
pre-pandemic levels. The severity of the downgrades would be based
on the level of CE relative to losses. Below-investment grade
classes with Negative Outlooks would likely be downgraded first as
losses would impact these classes sooner.
In addition to its baseline scenario related to the coronavirus,
Fitch also envisions a downside scenario where the health crisis is
prolonged beyond 2021; should this scenario play out, Fitch expects
that a greater percentage of classes may be assigned a Negative
Rating Outlook and/or those with Negative Rating Outlooks may be
downgraded by a greater magnitude.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
[*] S&P Cuts Ratings on 2 Classes From 2 U.S. CMBS Deals
--------------------------------------------------------
S&P Global Ratings lowered its rating on the class B commercial
mortgage pass-through certificates from LB Commercial Mortgage
Trust 2007-C3, a U.S. commercial mortgage-backed securities (CMBS)
transaction, to 'D (sf)' from 'CCC- (sf)'. In addition, S&P lowered
its rating on the class F commercial mortgage pass-through
certificates from Morgan Stanley Capital I Trust 2005-HQ7, also a
U.S. CMBS transaction, to 'D (sf)' from 'CCC (sf)'.
S&P lowered its ratings on the two classes because of accumulated
interest shortfalls that it expects to remain outstanding for the
foreseeable future as well as credit support erosion that it
expects upon the eventual resolution of the specially serviced
assets. The recurring interest shortfalls for the certificates are
primarily due to one or more of the following factors:
-- Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced assets;
-- The lack of servicer advancing for loans or assets where the
servicer has made nonrecoverable advance declarations;
-- Interest rate modifications or deferrals, or both, related to
corrected mortgage loans;
-- The recovery of prior servicing advances; or
-- Special servicing fees.
S&P's analysis primarily considered the ASER amounts based on
appraisal reduction amounts (ARAs) calculated using recent Member
of the Appraisal Institute (MAI) appraisals.
"We also considered servicer-nonrecoverable advance declarations
and special servicing fees that are likely, in our view, to cause
recurring interest shortfalls, S&P said.
The servicer implements ARAs and resulting ASER amounts according
to each transaction's terms. Typically, these terms call for an ARA
equal to 25% of the loan's stated principal balance to be
implemented when it is 60 days past due and an appraisal or other
valuation is not available within a specified time. S&P primarily
considered ASER amounts based on ARAs calculated from MAI
appraisals when deciding which classes from the affected
transactions to downgrade to 'D (sf)'. This is because ARAs based
on a principal balance haircut are highly subject to change, or
even reverse, once the special servicer obtains the MAI
appraisals.
Servicer-nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt-service advancing, the recovery of previously
made advances after an asset was deemed nonrecoverable, or the
failure to advance trust expenses when nonrecoverable declarations
have been determined. Trust expenses may include, but are not
limited to, property operating expenses, property taxes, insurance
payments, and legal expenses.
LB Commercial Mortgage Trust 2007-C3
The class B certificates currently have accumulated interest
shortfalls outstanding for five consecutive months. S&P believes
that this class will continue to experience shortfalls and that
accumulated interest shortfalls will remain outstanding for a
prolonged period until the resolution of the specially serviced
University Mall real estate owned asset ($92.0 million, 72.4%).
According to the April 17, 2020, trustee remittance report, the
current monthly interest shortfalls totaled $495,891 and resulted
from:
-- Interest not advanced due to nonrecoverable determinations
totaling $475,351;
-- Special servicing fees totaling $20,325; and
-- Other Fees totaling $215.
The current reported interest shortfalls have affected all classes
subordinate to and including class B.
Morgan Stanley Capital I Trust 2005-HQ7
The class F certificates currently have accumulated interest
shortfalls outstanding for three consecutive months. S&P believes
that this class will continue to experience shortfalls and that
accumulated interest shortfalls will remain outstanding for a
prolonged period as well as credit support erosion that it expects
upon the resolution of the sole specially serviced Crown Ridge at
Fair Oaks loan ($33.0 million, 80.5%).
According to the April 14, 2020, trustee remittance report, the
current monthly interest shortfalls totaled $80,952 and resulted
from an ASER amount of $73,854 and Special servicing fees totaling
$7,098.
The current reported interest shortfalls have affected all classes
subordinate to and including class F.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly," S&P said.
[*] S&P Puts 48 U.S. BSL CLO Ratings on CreditWatch Negative
------------------------------------------------------------
S&P Global Ratings placed its ratings on 48 classes from 27 U.S.
broadly syndicated loan collateralized loan obligation (BSL CLO)
transactions on CreditWatch with negative implications.
"This continues our ongoing CreditWatch negative placements that
commenced on March 20, 2020. The aggregate number of CLO ratings
currently on CreditWatch with negative implications, including the
rating actions, is now at 406, which is about 9.7% of our
outstanding CLO ratings," S&P said.
The CreditWatch negative placements continue to focus on its rated
U.S. BSL CLOs with a majority of the deals in their amortizing
period.
"Our review considered rating actions taken by our corporate
ratings team and the increase in the underlying assets of these CLO
portfolios that now fall under the 'CCC' category. Additionally, we
examined the failure of the coverage tests, excess 'CCC' haircuts,
and interest deferrals if any. In the case of two combo notes, we
also assessed the effect of the significant drop in LIBOR during
recent months or the underlying component being placed on
CreditWatch with negative implications," S&P said.
"We specifically focused on the 'B' rated junior tranche of these
CLOs, as they are the first of the rated notes that will be
affected by any credit deterioration, increase in defaults, or any
par loss arising from credit risk trades. Following the rating
actions, nearly all of our 'B' ratings on the BSL CLOs are on
CreditWatch with negative implications," the rating agency said.
S&P also focused on some of the 'BB' rated notes of these BSL CLOs
that now have a significant exposure to 'CCC' rated assets. After
the actions, the percentage of 'BB' and 'B' ratings across all
reinvesting and amortizing CLOs now under CreditWatch negative has
increased to 35% and 94%, respectively, from 32% and 80% last
week.
U.S. CLO Tranche Ratings On CreditWatch Negative
Rating No. of No. of tranche ratings % of tranche ratings
Category tranches on CreditWatch Neg on CreditWatch Neg
'AAA' 1,076 0 --
'AA' 853 0 --
'A' 738 5 0.7
'BBB' 711 9 1.3
'BB' 604 210 34.8
'B' 184 172 93.5
'CCC' 10 10 100.0
Total 4,176 406 9.7
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession and could
cause a surge of defaults among nonfinancial corporate borrowers.
As the situation evolves, we will update our assumptions and
estimates accordingly," S&P said.
In light of these macroeconomic events, S&P will continue to review
the ratings on S&P's remaining transactions.
"We typically resolve CreditWatch placements within 90 days after
we complete cash flow analysis and committee review for each of the
affected transactions. As we work to resolve these CreditWatch
placements, we will attempt to contact the managers of these
transactions to ensure we have the most current data--including any
credit risk sales or other trades that may have occurred but are
yet to be reflected in trustee reports--and aim to understand their
strategies for their portfolios moving forward," S&P said.
"We will continue to monitor the transactions we rate and take
rating actions, including CreditWatch placements, as we deem
appropriate," the rating agency said.
A list of Affected Ratings can be viewed at:
https://bit.ly/2W05yyC
*********
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 2020. 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 ***