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/raid1/www/Hosts/bankrupt/TCR_Public/200830.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, August 30, 2020, Vol. 24, No. 242 Headlines ANGEL OAK 2020-5: Fitch Rates Class B-2 Debt 'B(EXP)sf' AQUA FINANCE 2020-A: Moody's Gives Ba2 Rating on Class D Notes AVIS BUDGET: DBRS Confirms 'B' LT Issuer Rating, Trend Negative BARINGS CLO 2016-I: Moody's Confirms Ba3 Rating on Class E-R Notes BELLEMEADE RE 2020-2: Moody's Gives (P)Ba2 Rating on M-2 Notes BRAVO RESIDENTIAL 2020-NQM1: DBRS Finalizes B Rating on B-2 Notes CALIFORNIA STREET XII: Moody's Lowers Rating on F Notes to Caa2 CATAMARAN 2014-1: Moody's Confirms Ba3 Rating on Class D-R Notes CBAM LTD 2017-1: Moody's Confirms Ba3 Rating on Class E Notes CEDAR FUNDING V: S&P Affirms B+ (sf) Rating on Class E-R Notes CEDAR FUNDING V: S&P Affirms B+ (sf) Rating on Class E-R Notes CIFC FUNDING 2020-II: S&P Assigns BB- (sf) Rating to Class E Notes CITIGROUP COMMERCIAL 2019-GC41:DBRS Confirms B Rating on GRR Certs COMM 2012-CCRE4: S&P Lowers Class E Certs Rating to 'D (sf)' CUTWATER LTD 2014-II: Moody's Lowers Rating on Class D Notes to B1 EATON VANCE 2020-1: S&P Assigns BB- (sf) Rating on Class E Notes ELEVATION CLO 2016-5: Moody's Confirms Ba3 Rating on Cl. E-R Notes ELEVATION CLO 2017-8: Moody's Lowers Class F Notes to Caa1 EVANS GROVE: Moody's Lowers Rating on Class F Notes to Caa3 FLAGSTAR MORTGAGE 2020-2: Fitch Rates Class B-5 Debt 'B+sf' FREDDIE MAC 2020-DNA4: S&P Rates 16 Classes of Notes 'BB+ (sf)' GMP CAPITAL: DBRS Keeps Pfd-4(high) on Preferred Shares on Review GNIRBES INC: Granada Capital Buying North Sebring Property GS MORTGAGE 2017-375H: S&P Lowers Class D Certs Rating to BB- (sf) GS MORTGAGE-BACKED 2020-NQM1: S&P Assigns 'B' Rating to B-2 Certs HALCYON LOAN 2013-2: Moody's Lowers Rating on Class E Notes to Ca HEMPSTEAD II: Moody's Lowers Rating on Class D Notes to B1 HERTZ VEHICLE II: DBRS Keeps Class D Bonds Under Review IOWA STUDENT 2012-1: Fitch Lowers Rating on Class B Notes to Bsf JP MORGAN 2011-C3: S&P Lowers Rating to B- (sf) on Class J Notes JP MORGAN 2012-LC9: S&P Lowers Class G Certs Rating to B- (sf) JPMBB COMMERCIAL 2013-C12: S&P Cuts Class F Certs Rating to B-(sf) JPMBB COMMERCIAL 2014-C23: Fitch Cuts Class F Certs to CCCsf LOCKWOOD GROVE: Moody's Confirms Ba3 Rating on Class E-RR Notes MADISON PARK XLVI: S&P Assigns Prelim BB- (sf) Rating to E Notes MIDOCEAN CREDIT V: Moody's Lowers Class F Notes to Caa2 MONARCH GROVE: Moody's Lowers Rating on Class E Notes to B1 MONROE CAPITAL X: Moody's Gives Ba3 Rating on Class E Notes MP CLO IV: Moody's Lowers Rating on Class E-R Notes to B2 OCEAN TRAILS IX: S&P Assigns BB- (sf) Rating to Class E Notes OCTAGON INVESTMENT 30: Moody's Confirms Ba3 Rating on Class D Notes OCTAGON INVESTMENT 42: Moody's Confirms Ba3 Rating on Class E Notes PALMER SQUARE 2020-2: S&P Assigns BB- (sf) Rating to Class D Notes SHACKLETON 2017-XI: Moody's Cuts Rating on Class F Notes to Caa2 SOUND POINT XX: Moody's Confirms Ba3 Rating on Class E Notes SOUND POINT XXI: Moody's Confirms Ba3 Rating on Class D Notes STEELE CREEK 2014-1R: Moody's Confirms Ba3 Rating on Class E Notes WELLFLEET CLO 2020-2: S&P Rates Class E Notes 'BB- (sf)' WIND RIVER 2016-2: Moody's Confirms Ba3 Rating on Class E-R Notes ZAIS CLO 2: Moody's Lowers Rating on Class D Notes to Caa1 ********* ANGEL OAK 2020-5: Fitch Rates Class B-2 Debt 'B(EXP)sf' ------------------------------------------------------- Fitch Ratings has assigned expected ratings to Angel Oak Mortgage Trust 2020-5. RATING ACTIONS AOMT 2020-5 Class A-1; LT AAA(EXP)sf; Expected Rating Class A-2; LT AA(EXP)sf; Expected Rating Class A-3; LT A(EXP)sf; Expected Rating Class A-IO-S; LT NR(EXP)sf; Expected Rating Class B-1; LT BB(EXP)sf; Expected Rating Class B-2; LT B(EXP)sf; Expected Rating Class B-X; LT NR(EXP)sf; Expected Rating Class M-1; LT BBB-(EXP)sf; Expected Rating TRANSACTION SUMMARY Fitch Ratings expects to rate the residential mortgage-backed certificates to be issued by Angel Oak Mortgage Trust 2020-5, Mortgage-Backed Certificates, Series 2020-5 (AOMT 2020-5) as indicated. The certificates are supported by 784 loans with a balance of $324.37 million as of the cutoff date. This will be the eleventh Fitch-rated transaction consisting of loans originated by several Angel Oak-affiliated entities (collectively, Angel Oak). The certificates are secured mainly by nonqualified mortgages (Non-QM) as defined by the Ability to Repay (ATR) rule. The majority of the loans were originated by several Angel Oak entities, which include Angel Oak Mortgage Solutions LLC (AOMS) (77.9%), Angel Oak Home Loans LLC (AOHL) (6.8%) and Angel Oak Prime Bridge LLC (AOPB) (0.2%). The remaining 15.1% of loans were originated by third-party originators. Of the pool, 82.6% comprises loans designated as Non-QM, 17.2% are investment properties not subject to ATR and the remaining 0.2% were designated either SHQM or HPQM. KEY RATING DRIVERS Revised GDP Due to the Coronavirus: The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus pandemic, an Economic Risk Factor (ERF) floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Liquidity Stress for Payment Forbearance (Negative): The outbreak of the coronavirus pandemic and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 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 observations of legacy Alt-A delinquencies and past due payments following Hurricane Maria in Puerto Rico. The cash flows on the certificates will not be disrupted for the first six months due to principal and interest (P&I) advancing on delinquent loans by the servicer; however, after month six, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent there is not enough funds available once the more senior bonds are paid. Stop Advance Structure (Mixed): The transaction has a stop advance feature where the servicer will advance delinquent P&I up to 180 days. While the limited advancing of delinquent P&I benefits the pool's projected loss severity (LS), it reduces liquidity. To account for the reduced liquidity of a limited advancing structure, principal collections are available to pay timely interest to the 'AAAsf', 'AAsf' and 'Asf' rated bonds. Fitch expects 'AAAsf' and 'AAsf' rated bonds to receive timely payments of interest and all other bonds to receive ultimate interest. Additionally, as of the closing date, the deal benefits from approximately 321bps of excess spread, which will be available to cover shortfalls prior to any writedowns. The servicer Select Portfolio Servicing (SPS) will provide P&I advancing on delinquent loans (even the loans on a coronavirus forbearance plan). If SPS is not able to advance, the master servicer (Wells Fargo Bank) will advance P&I on the certificates. Payment Forbearance (Mixed): As of the cut-off date, 15.5% of the borrowers opted in for coronavirus relief and were put on a forbearance plan; however, only 8.8% (54 loans) are currently on a coronavirus relief plan while 6.7% of the borrowers who opted in for relief are no longer on a forbearance plan as the term of their coronavirus relief plan has expired and the borrowers are contractually current as of Aug. 4, 2020, but were delinquent as of the cut-off date. Of the 8.8% of borrowers who are still on a coronavirus relief plan as of Aug. 4, 2020, 2.8% have extended the term of the plan and are 4 months delinquent (last payment was in March 2020), 2.4% are 3 months delinquent (last payment was in April 2020), 1.6% are 2 months delinquent (last payment was in May 2020), and 2.1% are 1 month delinquent (last payment was in June 2020). 2.8% of the borrowers have opted out of their coronavirus relief plan and are contractually current as of Aug. 4, 2020. Fitch considered borrowers who are on coronavirus relief plan that are cash flowing as current while the borrowers who are not cash flowing were treated as delinquent. Angel Oak is offering borrowers up to an initial three-month payment forbearance plan (some borrowers have been offered a two-month payment forbearance plan). Beginning in month three (or the expiration of the forbearance plan), the borrower can opt to reinstate (i.e. repay the three missed mortgage payments in a lump sum) or repay the missed amounts with a repayment plan. If reinstatement or a repayment plan is not affordable, the missed payments will be added to the end of the loan term due at payoff or maturity as a deferred principal. If the borrower does not become current under a repayment plan or is not able to make payments after a deferral plan was granted, other loss mitigation options will be pursued (including extending the forbearance term). There are 41 loans in the pool that have had their forbearance plan extended three months until Oct. 1, 2020. These loans have an average FICO of 714, average original CLTV of 83.4%, and average liquid cash reserves of $148,505. 11 borrowers in the pool extended their forbearance plan by two months until Oct. 1, 2020. These loans have an average FICO of 733, average original CLTV of 76.6%, and average liquid cash reserves of $144,656. Two loans in the pool have extended their forbearance plan one month until Oct. 1, 2020. The servicer will continue to advance during the forbearance period. Recoveries of advances will be repaid either from reinstated or repaid amounts from loans where borrowers are on a repayment plan. For loans with deferrals of missed payments, the servicer can recover advances from the principal portion of collections, which may result in a mismatch between the loan balance and certificate balance. While this may increase realized losses, the 321 bps of excess spread as of the closing date should be available to absorb these amounts and reduce the potential for writedowns. If the borrower doesn't resume making payments, the loan will likely become modified and the advancing party will be reimbursed from available funds at the time of modification. Fitch increased its loss expectations by adding 0.30% to the model output loss then rounded up to the nearest 0.25% in all rating categories to address the potential for writedowns due to reimbursements of servicer advances. In addition, there is 3.21% excess spread as of the closing date that will be available to cover any writedowns due to reimbursements of servicer advances. Expanded Prime Credit Quality (Mixed): The collateral consists of 15-year, 20-year, 30-year and 40-year mainly fixed-rate loans (12.9% of the loans are adjustable rate); 13.8% of the loans are interest-only (IO) loans and the remaining 86.2% of the loans are fully amortizing loans. The pool is seasoned approximately nine months in aggregate (as determined by Fitch). The borrowers in this pool have strong credit profiles with a 723 weighted-average (WA) FICO (as determined by Fitch) and moderate leverage (81.6% sLTV). In addition, the pool contains 54 loans over $1 million and the largest is $3.05 million. Self-employed borrowers make up 74.6% of the pool, 16.8% of the pool are salaried employees, and 8.6% of the pool comprises investor cash flow loans. There are 18 loans that are a second lien and represents 0.5% of the pool balance. Fitch considered 4.4% of borrowers as having a prior credit event in the past seven years, and six loans in the pool were to nonpermanent residents. The pool characteristics resemble recent nonprime collateral, and therefore, the pool was analyzed using Fitch's non-prime model. Bank Statement Loans Included (Negative): Approximately 65.2% (405 loans) were made to self-employed borrowers underwritten to a bank statement program (26% to a 24-month bank statement program and 39.2% to a 12-month bank statement program) for verifying income in accordance with either AOHL's or AOMS's guidelines, which is not consistent with Appendix Q standards or Fitch's view of a full documentation program. To reflect the additional risk, Fitch increases the probability of default (PD) by 1.5x on the bank statement loans. High Investor Property Concentration (Negative): Of the pool, 17.2% comprises investment properties. Specifically, 8.6% of loans were underwritten using the borrower's credit profile, while the remaining 8.6% were originated through the originators' investor cash flow program that targets real estate investors qualified on a debt service coverage ratio (DSCR) basis. The borrowers of the non-DSCR investor properties in the pool have strong credit profiles, with a WA FICO of 721 (as calculated by Fitch) and an original CLTV of approximately 77% and DSCR loans have a WA FICO of 736 (as calculated by Fitch) and an original CLTV of roughly 64%. Fitch increased the PD by approximately 2.0x for the cash flow ratio loans (relative to a traditional income documentation investor loan) to account for the increased risk. Geographic Concentration (Neutral): Approximately 37% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (18.9%) followed by the Miami MSA (8.2%) and the Dallas MSA (5.1%). The top three MSAs account for 32.5% of the pool. As a result, there was no adjustment to the 'AAA' expected loss to account for geographic concentration. Modified Sequential Payment Structure (Neutral): The structure distributes collected principal pro rata among the class A certificates while shutting out the subordinate bonds from principal until all three classes have been reduced to zero. To the extent that either the cumulative loss trigger event or the delinquency trigger event occurs in a given period, principal will be distributed sequentially to the class A-1, A-2 and A-3 bonds until they are reduced to zero. Low Operational Risk (Positive): Operational risk is well controlled for in this transaction. Angel Oak employs sound sourcing and underwriting processes and is assessed by Fitch as an 'Average' originator. Primary and master servicing responsibilities will be performed by Select Portfolio Servicing, Inc. (SPS) and Wells Fargo Bank, NA (Wells Fargo), rated by Fitch at 'RPS1-' and 'RMS1-', respectively. Fitch adjusted its expected loss at the 'AAAsf' rating stress by 246 bps to reflect strong counterparties with established servicing platforms and operating experience in non-agency PLS. The sponsor's retention of an eligible horizontal residual interest of at least 5% helps ensure an alignment of interest between the issuer and investors. R&W Framework (Negative): AOHL will be providing loan-level representations and warranties (R&W) to the loans in the trust. If the entity is no longer an ongoing business concern, it will assign to the trust its rights under the mortgage loan purchase agreements with the originators, which include repurchase remedies for R&W breaches. While the loan-level reps for this transaction are substantially consistent with a Tier I framework, the lack of an automatic review for loans other than those with ATR realized loss and the nature of the prescriptive breach tests, which limit the breach reviewers' ability to identify or respond to issues not fully anticipated at closing, resulted in a Tier 2 framework. Fitch increased its loss expectations (95 bps at the 'AAAsf' rating category) to mitigate the limitations of the framework and the non-investment-grade counterparty risk of the provider. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction pool. The reviews were conducted by SitusAMC and Clayton Services (Clayton), both assessed by Fitch as 'Acceptable - Tier 1' TPR firms, and Digital Risk, assessed as 'Acceptable - Tier 2'. The results of the review confirm effective origination practices with minimal incidence of material exceptions. Loans that received a final grade of 'B' had immaterial exceptions and either had strong compensating factors or the risk was captured in Fitch's loan loss model. Fitch applied a credit for the high percentage of loan-level due diligence which reduced the 'AAAsf' loss expectation by 47 bps. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines (MVDs than assumed at the MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool, as well as lower MVDs, illustrated by a gain in home prices. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: This defined negative stress sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the model projected 8.7% at the base case. This analysis indicates that there is some potential rating migration with higher MVDs compared with the model projection. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes which are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling 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. 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 Fitch's stress and rating sensitivity analysis are discussed in its presale report "Angel Oak Mortgage Trust 2020-5". DATA ADEQUACY Fitch relied on an independent third-party due diligence review performed on 100% of the pool. The third-party due diligence was generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC, Clatyon, and Digital Risk were engaged to perform the review. Loans reviewed under this engagement were given compliance, credit and valuation grades, and assigned initial grades for each subcategory. Minimal exceptions and waivers were noted in the due diligence reports. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. Fitch received loan-level information based on the American Securitization Forum's (ASF) data layout format, and the data are considered to be comprehensive. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the ASF layout data tape were reviewed by the due diligence companies, and no material discrepancies were noted. 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). AQUA FINANCE 2020-A: Moody's Gives Ba2 Rating on Class D Notes -------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to the notes issued by Aqua Finance Trust 2020-A (AQFIT 2020-A). The collateral backing AQFIT 2020-A consists of primarily home improvement installment loans and a small amount of installment loans backed by marine or recreational vehicles (marine/RVs) originated by approved dealers in Aqua Finance, Inc. (Aqua)'s network. Aqua also acts as the servicer of the loans. The complete rating actions are as follows: Issuer: Aqua Finance Trust 2020-A $316,230,000, 1.90%, Class A Asset Backed Notes, Definitive Rating Assigned A2 (sf) $32,430,000, 2.79%, Class B Asset Backed Notes, Definitive Rating Assigned A3 (sf) $45,720,000, 3.97%, Class C Asset Backed Notes, Definitive Rating Assigned Baa2 (sf) $36,490,000, 7.15%, Class D Asset Backed Notes, Definitive Rating Assigned Ba2 (sf) RATINGS RATIONALE The ratings are based on the quality of the underlying collateral and its expected performance, the capital structure, and the experience and expertise of Aqua Finance, Inc. as servicer and the back-up servicing arrangement with Vervent, Inc (previously known as First Associates and Portfolio Financial Servicing Company), an experienced servicer. The rapid spread of the COVID-19 outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of consumer assets from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. Specifically, for US personal loan ABS, performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. Furthermore, borrower assistance programs to affected borrowers, such as payment deferrals, may adversely impact scheduled cash flows to bondholders. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's median cumulative gross and net loss expectation for the 2020-A pool are 20.0% and 16.0%, respectively. Moody's based its cumulative gross and net loss expectations on an analysis of the credit quality of the underlying collateral; the historical performance of similar collateral, including securitization performance and managed portfolio performance; the ability of Aqua to perform the servicing functions and Vervent, Inc. to perform the backup servicing functions; and current expectations for the macroeconomic environment during the life of the transaction. At closing, the Class A notes, Class B notes, Class C notes and Class D notes will benefit from 30.30%, 23.10%, 12.95% and 4.85% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of overcollateralization, a non-declining reserve account and subordination. The notes may also benefit from excess spread. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Approach to Rating Consumer Loan-Backed ABS" published in July 2020. Factors that would lead to an upgrade or downgrade of the ratings: Up Moody's could upgrade the notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with higher ratings. In partial sequential pay structures, such as the one in this transaction, credit enhancement grows as a percentage of the collateral balance as collections pay down senior notes, until certain enhancement levels are reached. Moody's expectation of pool losses could decline as a result of better than expected improvements in the economy, changes to servicing practices that enhance collections or refinancing opportunities that result in prepayments. Down Moody's could downgrade the ratings of the notes if pool losses exceed its expectations and 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 may increase, for example, due to performance deterioration stemming from a downturn in the US economy, deficient servicing, errors on the part of transaction parties, inadequate transaction governance or fraud. AVIS BUDGET: DBRS Confirms 'B' LT Issuer Rating, Trend Negative --------------------------------------------------------------- DBRS, Inc. confirmed the ratings of Avis Budget Group, Inc. and its related subsidiary Avis Budget Car Rental, LLC, including the Company's Long-Term Issuer Rating of B. At the same time, DBRS Morningstar placed all ratings of Avis Budget and its related entity on Negative trend. The Company's Intrinsic Assessment (IA) is B, while its Support Assessment is SA3, resulting in Avis Budget's final ratings being equal with its IA. With these rating actions, DBRS Morningstar has removed all ratings from Under Review with Negative Implications, where they were placed on May 7, 2020. KEY RATING CONSIDERATIONS The Negative trend reflects DBRS Morningstar's view that the current economic downturn driven by the Coronavirus Disease (COVID-19) pandemic will continue to place significant pressure on the Company's rental car franchise, especially its on-airport business. The Negative trend also takes into consideration that the full impact of the coronavirus pandemic remains unclear, including the severity of the disease, as well as its duration before it runs its course and the economy approaches pre-coronavirus levels. The confirmation of the ratings reflects the Company's improving utilization rate through solid progress in downsizing its vehicle fleet to meet the significant decline in customer demand due to the pandemic, as well as significant cost savings. While these actions have better positioned the Company to offset lower rental car demand and corresponding decline in revenues, we still expect profitability to remain pressured. Gains on vehicle sales have been better than we have expected, benefiting from solid used vehicle values and the Company's increasing utilization of alternative disposition channels. The confirmation also considers Avis Budget's acceptable but constrained liquidity position, which benefited from lower than anticipated cash burn, as well as proceeds from recent notes issuances. RATING DRIVERS Given the Negative trend, an upgrade in the near term is unlikely. If Avis Budget's vehicle utilization rate were to track back to pre-pandemic levels and the Company were to restore sustained positive cash flow generation, the trends would move to Stable. Ratings would be downgraded if liquidity materially weakens. If vehicle utilization rates remain significantly below pre-pandemic levels leading to material losses, the ratings would be downgraded. RATING RATIONALE Founded in 1946, Avis Budget maintains a top tier global multi-brand rental car franchise, underpinned by large U.S. on-airport, off-airport, and international businesses. The Company maintains corporate and licensee locations in 180 countries, with more than 11,000 car and truck rental locations. Although the senior management team is in transition, DBRS Morningstar views the team's deep industry knowledge and experience as beneficial in countering the coronavirus headwinds. The substantial reduction in airline passenger rentals at on-airport locations, along with constrained yet improving rentals at off-airport locations, continues to pressure the Company's top line and cash flows. These dynamics reflected in Avis Budget's significant 1H20 loss. For 1H20, the Company reported a $639 million loss, materially worse than the $29 million loss in 1H19, primarily reflecting a 40.9% decrease in revenues. The substantial YoY decline in revenues was driven by a 35% decrease in rental volume and an 8% decrease in revenue per day (excluding exchange rate movements) as a result of the impact of the coronavirus pandemic, along with a $28 million negative impact from currency exchange rate movements. Top line revenue pressures were partially offset by cost reduction actions taken by management which resulted in a 21.4% YoY decline in expenses. Although airline passenger travel is not likely to revert back to the pre-pandemic levels over the medium term, Avis Budget's significant cost mitigation efforts and the continuing right-sizing of its fleet to meet lower demand will help ease the negative impact on the Company's bottom line. Going forward, we expect that the Company's 2H20 results will improve as compared to 1H20, especially as vehicle utilization continues to improve and the economy reopens. The ratings also consider Avis Budget's constrained liquidity position, particularly given the Company's low cash flow generation, significant levels of interest expense, lease costs, and other working capital needs. Avis Budget's liquidity position has benefitted from recent corporate debt issuances and lower than anticipated cash burn in 2Q20, driven by better than expected vehicle fleet disposals and strong expense controls. As of June 30, 2020, Avis Budget's available liquidity totaled $1.5 billion ($1.3 billion of available cash and cash equivalents and $0.2 billion in available borrowings under its revolving credit facility). DBRS Morningstar notes that the adequacy of the Company's liquidity will be dependent on how quickly it can match its fleet levels to customer demand. Importantly, Avis Budget has made considerable headway with realigning its fleet to demand benefitting utilization rates. Overall, the Company's debt maturities remain manageable. Ratings also reflect the Company's high level of collateralized funding, and equity deficit. The majority of Avis Budget's assets are encumbered, limiting its financial flexibility, especially during periods of stress, which results in the one notch differential between the Long-Term Issuer Rating and Long-Term Senior Debt rating. Notes: All figures are in U.S. dollars unless otherwise noted. BARINGS CLO 2016-I: Moody's Confirms Ba3 Rating on Class E-R Notes ------------------------------------------------------------------ Moody's Investors Service confirmed the ratings on the following notes issued by Barings CLO Ltd. 2016-I: US$28,000,000 Class C-R Secured Deferrable Mezzanine Term Notes due 2030 (the "Class C-R Notes"), Confirmed at A2 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$23,000,000 Class D-R Secured Deferrable Mezzanine Term Notes due 2030 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,000,000 Class E-R Secured Deferrable Junior Term Notes due 2030 (the "Class E-R Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C-R, D-R, and E-R Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-R and E-R Notes and on June 3, 2020 on the Class C-R Notes issued by the CLO. The CLO, originally issued in February 2016 and refinanced in August 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in July 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3330, compared to 2862 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2943 reported in the July 2020 trustee report. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 19.6% as of July 2020. Moody's noted that the OC tests for the Class E notes, as well as the interest diversion test were recently reported [3] as failing, which would result in repayment of senior notes or in a portion of excess interest collections being diverted towards reinvestment in collateral at the next payment date should the failures continue. Nevertheless, Moody's noted that the OC tests for the Class B, C, and D Notes were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $380,243,621 Defaulted Securities: $6,228,036 Diversity Score: 74 Weighted Average Rating Factor (WARF): 3264 Weighted Average Life (WAL): 5.6 years Weighted Average Spread (WAS): 3.37% Weighted Average Recovery Rate (WARR): 48.2% Par haircut in O/C tests and interest diversion test: 1.6% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. BELLEMEADE RE 2020-2: Moody's Gives (P)Ba2 Rating on M-2 Notes -------------------------------------------------------------- Moody's Investors Service assigned provisional ratings to five classes of mortgage insurance credit risk transfer notes issued by Bellemeade Re 2020-2 Ltd. Bellemeade Re 2020-2 Ltd is the second transaction issued in 2020 under the Bellemeade Re program, which transfers to the capital markets the credit risk of private mortgage insurance (MI) policies issued by Arch Mortgage Insurance Company (Arch) and United Guaranty Residential Insurance Company (UGRIC) (each, a subsidiary of Arch Capital Group Ltd., and collectively, the ceding insurer) on a portfolio of residential mortgage loans. The notes are exposed to the risk of claims payments on the MI policies, and depending on the notes' priority, may incur principal and interest losses when the ceding insurer makes claims payments on the MI policies. On the closing date, Bellemeade Re 2020-2 Ltd (the issuer) and the ceding insurer will enter into a reinsurance agreement providing excess of loss reinsurance on mortgage insurance policies issued by the ceding insurer on a portfolio of residential mortgage loans. Proceeds from the sale of the notes will be deposited into the reinsurance trust account for the benefit of the ceding insurer and as security for the issuer's obligations to the ceding insurer under the reinsurance agreement. The funds in the reinsurance trust account will also be available to pay noteholders, following the termination of the trust and payment of amounts due to the ceding insurer. Funds in the reinsurance trust account will be used to purchase eligible investments and will be subject to the terms of the reinsurance trust agreement. Following the instruction of the ceding insurer, the trustee will liquidate assets in the reinsurance trust account to (1) make principal payments to the notes as the insurance coverage in the reference pool reduces due to loan amortization or policy termination, and (2) reimburse the ceding insurer whenever it pays MI claims after the Class B-2 and Class B-3 coverage levels are written off. While income earned on eligible investments is used to pay interest on the notes, the ceding insurer is responsible for covering any difference between the investment income and interest accrued on the notes' coverage levels. The complete rating actions are as follows: Issuer: Bellemeade Re 2020-2 Ltd Cl. M-1A, Assigned (P)A2 (sf); Cl. M-1B, Assigned (P)Baa1 (sf); Cl. M-1C, Assigned (P)Baa3 (sf); Cl. M-2, Assigned (P)Ba2 (sf); Cl. B-1, Assigned ccc (sf) RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expects this insured pool's aggregate exposed principal balance to incur 2.47% losses in a base case scenario, and 17.88% losses under loss a Aaa stress scenario. The aggregate exposed principal balance is the product, for all the mortgage loans covered by MI policies, of (i) the unpaid principal balance of each mortgage loan, (ii) the MI coverage percentage, and (iii) for approximately 98.85% of the mortgage loans where 7.5% of the losses are covered by existing third-party insurance, 92.5%, and for the rest of the mortgage loans, 100% (the reinsurance coverage percentage). Its analysis has considered the effect of the COVID-19 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 mortgage loans. 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 rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. The contraction in economic activity in the second quarter was 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 increased its model-derived median expected losses by 15% (mean expected losses by 13.37%) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Servicing practices, including tracking COVID-19-related loss mitigation activities, may vary among servicers in the transaction. These inconsistencies could impact reported collateral performance and affect the timing of any breach of performance triggers, the timing of policy terminations and the amount of ultimate net loss. Moody's may infer and extrapolate from the information provided based on this or other transactions or industry information, or make stressed assumptions. Moody's calculated losses on the pool using its US Moody's Individual Loan Analysis (MILAN) model based on the loan-level collateral information as of the cut-off date. Loan-level adjustments to the model results included, but were not limited to, adjustments for origination quality. Collateral Description Each mortgage loan has an insurance coverage effective date on or after January 1, 2019, but on or before May 31, 2020. The reference pool consists of 117,562 primes, fixed- and adjustable-rate, one- to four-unit, first-lien fully-amortizing conforming mortgage loans with a total insured loan balance of approximately $32 billion. Nearly all loans in the reference pool had a loan-to-value (LTV) ratio at origination that was greater than 80%, with a weighted average of 90.9%. The borrowers in the pool have a weighted average FICO score of 749, a weighted average debt-to-income ratio of 35% and a weighted average mortgage rate of 3.5%. The weighted average risk in force (MI coverage percentage) is approximately 22.3% of the reference pool total unpaid principal balance. The aggregate exposed principal balance is the portion of the pool's risk in force that is not covered by existing third-party reinsurance. The weighted average LTV of 90.9% is far higher than those of recent private label prime jumbo deals, which typically have LTVs in the high 60's range, however, it is in line with those of recent STACR high LTV CRT transactions. Except for 36 loans, all other insured loans in the reference pool were originated with LTV ratios greater than 80%. 100% of insured loans were covered by mortgage insurance at origination with 98.45% covered by BPMI and 1.55% covered by LPMI based on risk in force. Underwriting Quality Moody's took into account the quality of Arch's insurance underwriting, risk management and claims payment process in its analysis. Arch's underwriting requirements address credit, capacity (income), capital (asset/equity) and collateral. It has a licensed in-house appraiser to review appraisals. Lenders submit mortgage loans to Arch for insurance either through delegated underwriting or non-delegated underwriting program. Under the delegated underwriting program, lenders can submit loans for insurance without Arch re-underwriting the loan file. Arch issues an MI commitment based on the lender's representation that the loan meets the insurer's underwriting requirement. Arch does not allow exceptions for loans approved through its delegated underwriting program. Lenders eligible under this program must be pre-approved by Arch. Under the non-delegated underwriting program, insurance coverage is approved after full-file underwriting by the insurer's underwriters. For Arch's overall portfolio, approximately 57.1% of the loans are insured through delegated underwriting and 42.9% through non-delegated. Arch follows the GSE underwriting guidelines via DU/LP but applies additional overlays. Servicers provide Arch monthly reports of insured loans that are 60-day delinquent prior to any submission of claims. Claims are typically submitted when servicers have taken possession of the title to the properties. Claims are submitted by uploading or entering on Arch's website, electronic transfer or paper. Arch performs an internal quality assurance review on a sample basis of delegated and non-delegated underwritten loans to ensure that (i) the risk exposure of insured mortgage loans is accurately represented, (ii) lenders submitting loans via delegated underwriting program are adhering to Arch's guidelines, and (iii) internal underwriters are following guidelines and maintaining consistent underwriting standards and processes. Arch has a solid quality control process to ensure claims are paid timely and accurately. Similar to the above procedure, Arch's claims management reviews a sample of paid claims each month. Findings are used for performance management as well as identified trends. In addition, there is strong oversight and review from internal and external parties such as GSE audits, Department of Insurance audits, audits from an independent account firm, and Arch's internal audits and compliance. Arch is also SOX compliant. PwC, an independent account firm, performs a thorough audit of Arch's claim payment process. Third-Party Review Arch engaged Opus Capital Markets Consultants, LLC, to perform a data analysis and diligence review of a sampling of mortgage loans files submitted for mortgage insurance. This review included validation of credit qualifications, verification of the presence of material documentation as applicable to the mortgage insurance application, updated valuation analysis and comparison, and a tape-to-file data integrity validation to identify possible data discrepancies. The scope does not include a compliance review. The review sample size was small (only 325 of the total loans in the initial reference pool as of June 2020, or 0.28% by loan count). In spite of the small sample size and a limited TPR scope for Bellemeade Re 2020-2 Ltd, Moody's did not make an additional adjustment to the loss levels because, (1) approximately 42.9% of the loans in the reference pool have gone through full re-underwriting by the ceding insurer, (2) the underwriting quality of the insured loans is monitored under the GSEs' stringent quality control system, and (3) MI policies will not cover any costs related to compliance violations. Scope and results. The third-party due diligence scope focuses on the following: Appraisals: The third-party diligence provider also reviewed property valuation on 325 loans in the sample pool. A Freddie Mac Home Value Explorer ("HVE") was ordered on the entire population of 325 files. If the resulting value of the AVM was less than 90% of the value reflected on the original appraisal, or if no results were returned, a Broker Price Opinion ("BPO") was ordered on the property. If the resulting value of the BPO was less than 90% of the value reflected on the original appraisal, an Appraisal Review appraisal was ordered on the property. Among the 325 loans, one loan was not assigned any grade by the third-party review firm and all other loans were graded A. The third-party diligence provider was not able to obtain property valuations on one mortgage loan due to the inability to complete the field review assignment during the due diligence review period. Credit: The third-party diligence provider reviewed credit on 325 loans in the sample pool. Data integrity: The third-party review firm was provided a data file with loan level data, which was audited against origination documents to determine the accuracy of data found within the data tape. Reps & Warranties Framework The ceding insurer does not make any representations and warranties to the noteholders in this transaction. Since the insured mortgages are predominantly GSE loans, the individual sellers would provide exhaustive representations and warranties to the GSEs that are negotiated and actively monitored. In addition, the ceding insurer may rescind the MI policy for certain material misrepresentation and fraud in the origination of a loan, which would benefit the MI CRT noteholders. Transaction Structure The transaction structure is very similar to GSE CRT transactions that Moody's has rated. The ceding insurer will retain the senior coverage level Class A, the Class B-2 coverage level and the Class B-3 coverage level. The offered notes benefit from a sequential pay structure. The transaction incorporates structural features such as a 10-year bullet maturity and a sequential pay structure for the non-senior tranches, resulting in a shorter expected weighted average life on the offered notes. Funds raised through the issuance of the notes are deposited into a reinsurance trust account and are distributed either to the noteholders, when insured loans amortize or MI policies terminate, or to the ceding insurer for reimbursement of claims paid when loans default. Interest on the notes is paid from income earned on the eligible investments and the coverage premium from the ceding insurer. Interest on the notes will accrue based on the outstanding balance of the notes, but the ceding insurer will only be obligated to remit coverage premium based on each note's coverage level. Credit enhancement in this transaction is comprised of subordination provided by mezzanine and junior tranches. The rated Class M-1A, Class M-1B, Class M-1C, Class M-2 and Class B-1 offered notes have credit enhancement levels of 8.15%, 6.80%, 5.00%, 3.75% and 3.50%, respectively. The credit risk exposure of the notes depends on the actual MI losses incurred by the insured pool. MI and investment losses are allocated in a reverse sequential order starting with the Class B-3 note. So long as the senior coverage level is outstanding, and no performance trigger event occurs, the transaction structure allocates principal payments on a pro-rata basis between the senior and non-senior reference tranches. Principal is then allocated sequentially amongst the non-senior tranches. Principal payments are all allocated to senior reference tranches when trigger event occurs. A trigger event with respect to any payment date will be in effect if the coverage level amount of coverage level A for such payment date has not been reduced to zero and either (i) the preceding three month average of the sixty-plus delinquency amount for that payment date equals or exceeds 75.00% of Class A subordination amount or (ii) the subordinate percentage (or with respect to the first payment date, the original subordinate percentage) for that payment date is less than the target CE percentage (minimum C/E test: 10.75%). Premium Deposit Account (PDA) The premium deposit account will benefit the transaction upon a mandatory termination event (e.g. the ceding insurer fails to pay the coverage premium and does not cure, triggering a default under the reinsurance agreement), by providing interest liquidity to the noteholders for 70 days while the assets of the reinsurance trust account are being liquidated to repay the principal of the notes. On the closing date, the ceding insurer will establish a cash and securities account (the PDA) but no initial deposit amount will be made to the account by the ceding insurer unless the premium deposit event is triggered. The premium deposit event will be triggered if the rating of the notes exceeds the insurance financial strength (IFS) rating of the ceding insurer or the ceding insurer's IFS rating falls below Baa2. If the note ratings exceed that of the ceding insurer, the insurer will be obligated to deposit into the premium deposit account the coverage premium only for the notes that exceeded the ceding insurer's rating. If the ceding insurer's rating falls below Baa2, it is obligated to deposit coverage premium for all reinsurance coverage levels. The required PDA amount for each class of notes and each month is equal to the excess, if any, of (i) the coupon rate of the note multiplied by (a) the applicable funded percentage, (b) the coverage level amount for the coverage level corresponding to such class of notes and (c) a fraction equal to 70/360, over (ii) two times the investment income collected on the eligible investments. Moody's believes the PDA arrangement does not establish a linkage between the ratings of the notes and the IFS rating of the ceding insurer because, 1) the required PDA amount is small relative to the entire deal, 2) the risk of PDA not being funded could theoretically occur if the ceding insurer suddenly defaults, causing a rating downgrade from investment grade to default in a very short period; which is a highly unlikely scenario, and 3) even if the insurer becomes insolvent, there would be a strong incentive for the insurer's insolvency regulator to continue to make the interest payments to avoid losing reinsurance protection provided by the deal. Claims Consultant To mitigate risks associated with the ceding insurer's control of the trust account and discretion to unilaterally determine the MI claims amounts (i.e. ultimate net losses), the ceding insurer will engage Opus Capital Markets, as claims consultant, to verify MI claims and reimbursement amounts withdrawn from the reinsurance trust account once the Class B-2 and the Class B-3 coverage levels have been written down. The claims consultant will review on a quarterly basis a sample of claims paid by the ceding insurer covered by the reinsurance agreement. In verifying the amount, the claims consultant will apply a permitted variance to the total paid loss for each MI Policy of +/- 2%. The claims consultant will provide a preliminary report to the ceding insurer containing results of the verification. If there are findings that cannot be resolved between the ceding insurer and the claims consultant, the claims consultant will increase the sample size. A final report will be delivered by the claim's consultant to the trustee, the issuer and the ceding insurer. The issuer will be required to provide a copy of the final report to the noteholders and the rating agencies. Unlike RMBS transactions where there is typically some level of independent third-party oversight by the trustee, the master servicer and/or the securities administrator, MI CRT transactions typically do not have such oversight. For example, the ceding insurer not only has full control of the trust account but can also determine, at its discretion, the MI claims amount. The ceding insurer will then direct the trustee to withdraw the funds to reimburse for the claims paid. Since the trustee is not required to verify the MI claims amount, there could be a scenario where funds are withdrawn from the reinsurance trust account in excess of the amounts necessary to reimburse the ceding insurer. As such, Moody's believes the claims consultant in this transaction will provide the oversight to mitigate such risks. Factors that would lead to an upgrade or downgrade of the ratings: Down Levels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud. Up Levels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings of the subordinate bonds up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Methodology The principal methodology used in these ratings was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020. BRAVO RESIDENTIAL 2020-NQM1: DBRS Finalizes B Rating on B-2 Notes ----------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following Mortgage Pass-Through Notes, Series 2020-NQM1 (the Notes) to be issued by BRAVO Residential Funding Trust 2020-NQM1 (BRAVO 2020-NQM1 or the Trust): -- $254.7 million Class A-1 at AAA (sf) -- $25.8 million Class A-2 at AA (sf) -- $23.4 million Class A-3 at A (sf) -- $18.5 million Class M-1 at BBB (sf) -- $12.3 million Class B-1 at BB (sf) -- $9.1 million Class B-2 at B (sf) Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. The AAA (sf) rating on the Class A-1 Certificates reflects 30.35% of credit enhancement provided by subordinate certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 23.30%, 16.90%, 11.85%, 8.50%, and 6.00% of credit enhancement, respectively. This transaction is a securitization of a portfolio of fixed- and adjustable-rate prime and nonprime first-lien residential mortgages funded by the issuance of the Mortgage-Backed Notes, Series 2020-NQM1 (the Notes). The Notes are backed by 806 loans with a total principal balance of $365,741,885 as of the Cut-Off Date (June 30, 2020). A portion of the loans in this pool was included in the COLT 2017-2 Mortgage Loan Trust (COLT 2017-2) and COLT 2018-1 Mortgage Loan Trust (COLT 2018-1), which were collapsed and cleaned up previously. The remaining loans were acquired by affiliates of the sponsor. The mortgage loans were originated by First Guaranty Mortgage Corporation (FGMC; 39.1%), Caliber Home Loans, Inc. (Caliber; 28.8%), Loanstream Mortgage (Loanstream; 21.6%), and various other originators, each comprising less than 10.0% of the mortgage loans. Although a portion of the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau (CFPB) ability-to-repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private label nonagency prime jumbo products for various reasons. In accordance with the CFPB Qualified Mortgage (QM) rules, 1.4% of the loans by balance are designated as QM Safe Harbor, 9.4% as QM Rebuttable Presumption or Higher Priced QM, and 74.0% as non-QM. QM/ATR exempt loans consist of loans made to investors for business purposes (14.0%) and loans originated by Quontic Bank (1.1%), a Community Development Financial Institution (CDFI). While CDFI loans are not required to adhere to the ATR rules, the CDFI loans included in this pool were made to mostly creditworthy borrowers with a weighted-average credit score of 728. There will be no advancing of delinquent principal or interest on any mortgage loan by the servicers or any other party to the transaction; however, the servicers are obligated to make advances in respect of taxes and insurance, the cost of preservation, restoration and protection of mortgaged properties, and any enforcement or judicial proceedings, including foreclosures and reasonable costs and expenses incurred in the course of servicing and disposing of properties. On or after the date when the aggregate principal balance of the mortgage loans and any real estate owned (REO) properties is reduced to 30% of the Cut-Off Date balance, the holder of the Trust Certificates has the option to purchase all of the outstanding loans and REO properties at a price equal to the outstanding balance plus accrued and unpaid interest, including any fees, expenses, indemnification amounts, and unpaid extraordinary trust expenses. This transaction employs a cash flow structure that is similar to many non-QM securitizations. The transaction contains a sequential-pay cash flow structure with a pro rata principal distribution among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Notes as the more senior classes are paid in full. Furthermore, excess spread can be used to cover realized losses first before being allocated to unpaid Cap Carryover Amounts. The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the CFPB's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for interest-only or higher debt-to-income ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus pandemic, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see "Global Macroeconomic Scenarios: July Update," published on July 22, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the pandemic may not occur until a few performance cycles later, DBRS Morningstar generally believes that loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinancing opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 20.7% (as of June 30, 2020) of the borrowers had been granted forbearance or deferral plans because of financial hardship related to the pandemic. As of July 28, 2020, 63.6% of those borrowers, who requested coronavirus-related financial assistance, have made required monthly payments during the related forbearance or deferral period. The Servicers, in collaboration with the Controlling Holder, are generally offering borrowers a three-month payment deferral plan or a three-month payment forbearance plan. For the payment deferral plan, the related Servicer rolls the borrower's next due date forward by three months and defers the principal and interest (P&I) payments due during the deferral period as a noninterest bearing deferred amount (such deferred amount will not be due until the maturity date, payoff of the mortgage, or the sale of the related mortgaged property). For the payment forbearance plan, the related Servicer forbears the borrower's payments due for the next three months, but such amounts are still due in month four and will be reported as delinquent during the forbearance period. Prior to the end of the applicable deferral or forbearance period, the Servicers will contact each related borrower to identify the options available to address related forborne payment amounts. As a result, the Servicers, in conjunction with or at the direction of the Controlling Holder, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid P&I amounts or a loan modification, in addition to pursuing other loss mitigation options. For these loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) no servicing advances on delinquent P&I. These assumptions include the following: (1) Increasing delinquencies on the AAA (sf) and AA (sf) rating levels for the first 12 months. (2) Increasing delinquencies on the A (sf) and below rating levels for the first nine months. (3) Assuming no voluntary prepayments for the first 12 months for the AAA (sf) and AA (sf) rating levels. (4) Delaying the receipt of liquidation proceeds during the first 12 months for the AAA (sf) and AA (sf) rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. CALIFORNIA STREET XII: Moody's Lowers Rating on F Notes to Caa2 --------------------------------------------------------------- Moody's Investors Service downgraded the rating on the following notes issued by California Street CLO XII, Ltd.: US$21,000,000 Class F Deferrable Mezzanine Floating Rate Notes due 2025 (the "Class F Notes"), Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The the Class F Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the ratings on the following notes: US$51,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes Due 2025 (the "Class D-R Notes"), Confirmed at Baa2 (sf); previously on April 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade US$34,000,000 Class E Deferrable Mezzanine Floating Rate Notes due 2025 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D-R Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-R Notes, Class E Notes and the Class F Notes issued by the CLO. The CLO, originally issued in October 2013 and partially refinanced in April 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in October 2017. RATINGS RATIONALE The downgrade on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. The action also considers the risks posed to the deal's cash flow resulting from a below-average weighted average spread, and the limited amount of time remaining to recoup credit losses until maturity. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Although offset to some extent by deleveraging, the default risk of the CLO portfolio has increased, the credit enhancement available to the junior CLO notes has declined, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the rating on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3023, compared to 2575 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2865 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 14% as of July 2020. Furthermore, Moody's calculated the Class F overcollateralization ratio (excluding haircuts) as of July 2020 at 103.34%. Nevertheless, Moody's noted that all the OC tests as well as the interest diversion test were recently reported in the July 2020 trustee report [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $481,574,100 Defaulted Securities: $15,354,051 Diversity Score: 50 Weighted Average Rating Factor (WARF): 3011 Weighted Average Life (WAL): 3.31 years Weighted Average Spread (WAS): 2.79% Weighted Average Coupon (WAC): 4.55% Weighted Average Recovery Rate (WARR): 48.17% Par haircut in OC tests and interest diversion test: 0.0% Finally, Moody's notes that it also considered the information in the August 2020 trustee report [5] which became available immediately prior to the release of this announcement. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. CATAMARAN 2014-1: Moody's Confirms Ba3 Rating on Class D-R Notes ---------------------------------------------------------------- Moody's Investors Service confirmed the ratings on the following notes issued by Catamaran CLO 2014-1 Ltd.: US$37,000,000 Class C-R Deferrable Floating Rate Notes due 2030 (the "Class C-R Notes"), Confirmed at Baa3 (sf), previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$38,500,000 Class D-R Deferrable Floating Rate Notes due 2030 (the "Class D-R Notes"), Confirmed at Ba3 (sf), previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C-R Notes, and the Class D-R Notes are referred to herein, collectively, as the "Confirmed Notes." Moody's also downgraded the rating on the following notes: US$6,500,000 Class E-R Deferrable Floating Rate Notes due 2030 (the "Class E-R Notes"), Downgraded to Caa2 (sf), previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The Class E-R Notes are referred to herein as the "Downgraded Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class C-R, Class D-R, and Class E-R Notes issued by the CLO. The CLO, originally issued in May 2014 and refinanced in October 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end on October 2022. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3097, compared to 2904 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2790 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 16.35% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $649.9 million, or $15.1 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that all the OC tests as well as the interest diversion test was recently reported as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $641,152,097 Defaulted Securities: $21,416,598 Diversity Score: 74 Weighted Average Rating Factor (WARF): 3076 Weighted Average Life (WAL): 5.8 years Weighted Average Spread (WAS): 3.37% Weighted Average Recovery Rate (WARR): 47.15% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. CBAM LTD 2017-1: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by CBAM 2017-1, Ltd.: US$75,000,000 Class D Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$53,750,000 Class E Deferrable Floating Rate Notes due 2030 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D Notes and Class E Notes issued by the CLO. The CLO, issued in June 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in July 2022. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3007, compared to 2796 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2778 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 12.33% as of July 2020. Nevertheless, Moody's noted that the OC tests for the Class D Notes and the Class E Notes, as well as the interest diversion test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $1,218,867,207 Defaulted Securities: $31,288,433 Diversity Score: 71 Weighted Average Rating Factor: 3027 Weighted Average Life: 5.9 years Weighted Average Spread: 3.57% Weighted Average Recovery Rate: 45.86% Par haircut in O/C tests and interest diversion test: 0.30% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. CEDAR FUNDING V: S&P Affirms B+ (sf) Rating on Class E-R Notes -------------------------------------------------------------- S&P Global Ratings assigned its ratings to the class A-F-RR replacement notes from Cedar Funding V CLO Ltd., a collateralized loan obligation (CLO) originally issued in 2016, managed by Aegon USA Investment Management LLC. S&P withdrew its ratings on the original class A-F-R notes following payment in full on the Aug. 25, 2020, refinancing date. At the same time, S&P affirmed its ratings on the class A-1-R, B-R, C-R, D-R, and E-R notes." On the Aug. 25, 2020, refinancing date, the proceeds from the class A-F-RR replacement note issuances were used to redeem the original class A-F-R notes as outlined in the transaction document provisions. Therefore, S&P withdrew its rating on the original notes in line with their full redemption and assigned a rating to the replacement notes. "In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest or ultimate principal, or both, to each of the rated tranches," S&P said. "The ratings reflect our opinion that the credit support available is commensurate with the associated rating levels. We will continue to review whether the ratings on the notes remain consistent with the credit enhancement available to support them, and will take rating actions as we deem necessary," the rating agency said. RATING ASSIGNED Cedar Funding V CLO Ltd. $50 million replacement class A-F-RR notes: AAA (sf) RATINGS AFFIRMED Cedar Funding V CLO Ltd. Class A-1-R: AAA (sf) Class B-R: AA (sf) Class C-R: A (sf) Class D-R: BBB- (sf) Class E-R: B+ (sf) RATING WITHDRAWN Cedar Funding V CLO Ltd. Class A-F-R To: Not rated; From: AAA (sf) CEDAR FUNDING V: S&P Affirms B+ (sf) Rating on Class E-R Notes -------------------------------------------------------------- S&P Global Ratings assigned its preliminary 'AAA (sf)' rating to the class A-F-R-R replacement notes from Cedar Funding V CLO Ltd., a CLO originally issued in 2016 that is managed by Aegon USA Investment Management LLC. The replacement notes will be issued via a proposed supplemental indenture. The class A-1-R, B-R, C-R, D-R, and E-R notes will not be refinanced. The preliminary rating reflects S&P's opinion that the credit support available is commensurate with the associated rating level. The preliminary rating is based on information as of Aug. 21, 2020. Subsequent information may result in the assignment of a final rating that differs from the preliminary rating. On the Aug. 25, 2020, refinancing date, the proceeds from the issuance of the replacement notes are expected to redeem the original notes. S&P said, "At that time, we anticipate withdrawing the rating on the original notes and assigning a rating to the replacement notes. However, if the refinancing doesn't occur, we may affirm the rating on the original notes and withdraw our preliminary rating on the replacement notes." S&P said, "In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest or ultimate principal, or both, to each of the rated tranches. "We will continue to review whether, in our view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and we will take further rating actions as we deem necessary." PRELIMINARY RATING ASSIGNED Cedar Funding V CLO Ltd. Replacement class Rating Amount (mil. $) A-F-R-R AAA (sf) 50.00 OTHER OUTSTANDING RATINGS Cedar Funding V CLO Ltd. Class Rating A-1-R AAA (sf) B-R AA (sf) C-R A (sf) D-R BBB- (sf) E-R B+ (sf) Subordinated notes NR RATING WITHDRAWN Cedar Funding V CLO Ltd. Rating Original class To From A-F-R NR AAA (sf) NR--Not rated. CIFC FUNDING 2020-II: S&P Assigns BB- (sf) Rating to Class E Notes ------------------------------------------------------------------ S&P Global Ratings assigned its ratings to CIFC Funding 2020-II Ltd./CIFC Funding 2020-II LLC's floating-rate notes. The note issuance is a CLO securitization backed by primarily broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The ratings reflect S&P view of: -- The diversification of the collateral pool. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The experience of the collateral management team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is expected to be bankruptcy remote. RATINGS ASSIGNED CIFC Funding 2020-II Ltd./CIFC Funding 2020-II LLC Class Rating Amount (mil. $) A-1 AAA (sf) 262.00 A-2 NR 21.50 B AA (sf) 55.00 C (deferrable) A (sf) 26.00 D (deferrable) BBB- (sf) 28.00 E (deferrable) BB- (sf) 14.10 Subordinated notes NR 37.20 NR--Not rated. CITIGROUP COMMERCIAL 2019-GC41:DBRS Confirms B Rating on GRR Certs ------------------------------------------------------------------ DBRS Limited confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-GC41 issued by Citigroup Commercial Mortgage Trust 2019-GC41 as follows: -- Class A-1 at AAA (sf) -- Class A-2 at AAA (sf) -- Class A-3 at AAA (sf) -- Class A-4 at AAA (sf) -- Class A-5 at AAA (sf) -- Class A-AB at AAA (sf) -- Class AS at AAA (sf) -- Class X-A at AAA (sf) -- Class B at AA (high) (sf) -- Class X-B at AA (low) (sf) -- Class C at A (high) (sf) -- Class D at BBB (high) (sf) -- Class X-D at BBB (high) (sf) -- Class E at BBB (sf) -- Class X-F at BBB (low) (sf) -- Class F at BB (high) (sf) -- Class G-RR at B (high) (sf) All trends are Stable. The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar's expectations since issuance. This transaction closed in August 2019, with an original trust balance of $1.28 billion. At issuance, the collateral consisted of 43 loans secured by commercial and multifamily properties. As of the July 2020 remittance, all loans remain in the pool with an aggregate principal balance of $1.27 billion, representing a collateral reduction of 0.1% since issuance. At issuance, the transaction had a weighted-average debt service coverage ratio of 2.48 times and a debt yield of 10.0%. The pool has a smaller concentration of loans secured by retail and lodging properties, which represent 14.3% and 10.2% of the pool, respectively. Additionally, the pool also features four loans, representing a combined 19.0% of the pool, that are shadow-rated investment grade by DBRS Morningstar: 30 Hudson Yards, Grand Canal Shoppes, Moffett Towers II Buildings 3 & 4, and The Centre. With this review, DBRS Morningstar confirmed the loans continue to perform in line with the investment-grade shadow ratings. However, the Grand Canal Shoppes loan is being monitored closely as the Coronavirus Disease (COVID-19) pandemic has been particularly hard on the Las Vegas economy and sales at the property are expected to slump through the near to medium term. Although local and international tourism is down, DBRS Morningstar believes the collateral property's prime location, historically strong performance, relatively low leverage, and tenant mix are significant mitigating factors for the near- to medium-term risks introduced by the pandemic. As of the July 2020 remittance, there are two loans in special servicing and eight loans on the servicer's watchlist, representing 2.1% and 23.6% of the pool, respectively. Six of the eight loans on the servicer's watchlist are being monitored for coronavirus relief requests, while the remaining two are on the watchlist for other performance-related events. Those loans include Summit Technology Center (Prospectus #11, 4.0% of the pool), which is being monitored for an upcoming lease expiration, and 6265 Gunbarrel Avenue (Prospectus #23, 1.3% of the pool), which is being monitored for revenue decline as a result of free rent periods related to recent lease executions. Both loans in special servicing recently transferred in June 2020 and were delinquent as of July 2020 reporting. Burbank Collection (representing 1.6% of the pool) is over 60 days delinquent, while Floridian Hotel & Suites (representing 0.6% of the pool) is over 90 days delinquent. These loans were analyzed with elevated probability of default levels with this review to increase the expected loss for each. Notes: All figures are in U.S. dollars unless otherwise noted. COMM 2012-CCRE4: S&P Lowers Class E Certs Rating to 'D (sf)' ------------------------------------------------------------ S&P Global Ratings lowered its ratings on the class B, C, D, E, and X-B commercial mortgage pass-through certificates from COMM 2012-CCRE4 Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P removed its ratings on the class D and E certificates from CreditWatch, where they were placed with negative implications on June 3, 2020. Concurrently, S&P affirmed its 'AAA (sf)' ratings on four other classes from the transaction. S&P said, "We had placed our ratings on classes D and E on CreditWatch negative because we viewed them as being at an increased risk of experiencing monthly payment disruption or reduced liquidity due to their higher exposure to loans secured by retail and lodging properties--the property types most affected by the demand disruption from the ongoing COVID-19 pandemic. Specifically, this transaction is exposed to two specially serviced or corrected mall-backed loans and a mall asset (25.2% of the pool trust balance) and four lodging-backed loans (9.2%). In addition, all of the remaining loans have anticipated repayment dates (ARDs) or final maturities in 2022. "Although we primarily focused on the lodging and retail properties in our review, we also analyzed properties that exhibited performance deterioration prior to the COVID-19 pandemic or where we believe the pandemic will result in further deterioration in the property's performance. In these cases, we revised the S&P Global Ratings net cash flow (NCF) and/or capitalization rate for the property. The downgrades on classes B, C, and D reflect our revised valuations on six loans totaling $338.4 million (39.3% of the pool trust balance), including four that are secured by retail or lodging properties: The Prince Building ($125.0 million; 14.5%), Eastview Mall and Commons ($120.0 million; 13.9%), TMI Hospitality Portfolio ($37.4 million; 4.3%), Emerald Square Mall ($34.4 million; 4.0%), Belvedere Square ($10.8 million; 1.3%), and Orlando Hotel ($10.8 million; 1.3%). We downgraded class C below the model-indicated rating because we considered the class' susceptibility to reduced liquidity support from the specially serviced assets and watchlist loans. Further, the downgrade on class D reflects our view that the risk of default and losses on the class has increased under the uncertain market conditions. "We lowered our rating on class E to 'D (sf)' because we expect the accumulated interest shortfalls to remain outstanding in the foreseeable future, as well as credit support erosion upon the eventual resolution of the Fashion Outlets of Las Vegas real estate owned (REO) asset ($62.8 million; 7.3% of the pool trust balance). According to the Aug. 17, 2020, trustee remittance report, the current monthly interest shortfalls totaled $237,675 and resulted primarily from appraisal subordinate entitlement reduction amount of $213,978 and special servicing fees totaling $23,697. The current reported monthly interest shortfalls have affected all classes subordinate to and including class E. Class E had accumulated interest shortfalls outstanding for six consecutive months. "The affirmations on classes A-SB and A-3 reflect our view that the ratings are in line with the model-indicated ratings. Further, we affirmed class A-M even though the model-indicated rating was lower than the class' current rating level because we considered the class' relative position in the waterfall, current and projected liquidity support, and high pool factor. "We affirmed our 'AAA (sf)' rating on the class X-A interest-only (IO) certificates and lowered our rating on the class X-B IO certificates based on our criteria for rating IO securities, in which the ratings on the IO securities would not be higher than those of the lowest-rated reference classes. The notional balance on class X-A references classes A-1, A-2, A-SB, A-3, and A-M, while class X-B references classes B and C." S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." TRANSACTION SUMMARY As of the Aug. 17, 2020, trustee remittance report, the collateral pool balance was $860.9 million, which is 77.5% of the pool balance at issuance. The pool currently includes 36 loans and one REO asset, down from 48 loans at issuance. Three assets are with the special servicer ($108.0 million; 12.5% of the pool trust balance), five loans ($177.8 million; 20.7%) are on the master servicer's watchlist, 11 loans ($166.0 million; 19.3%) are defeased, and one ($4.7 million; 0.5%) is a ground lease. Excluding the defeased and ground lease loans, as well as the Fashion Outlets of Las Vegas REO asset, and using adjusted servicer-reported numbers, S&P calculated an S&P Global Ratings weighted average debt service coverage (DSC) of 1.72x and an S&P Global Ratings weighted average loan-to-value (LTV) ratio of 83.6% using an S&P Global Ratings weighted average capitalization rate of 8.00% for the 24 remaining loans. The top 10 nondefeased assets have an aggregate outstanding pool trust balance of $524.1 million (60.9% of the pool trust balance). Using adjusted servicer-reported numbers, S&P calculated an S&P Global Ratings weighted average DSC and LTV of 1.64x and 91.9%, respectively, for nine of the top 10 nondefeased assets. The remaining asset is REO. To date, the pool has incurred $86,566 in principal losses. S&P expects losses to reach approximately 4.9% of the original pool trust balance in the near term, based on the losses incurred to date and the additional losses S&P expects upon the eventual resolution of the REO asset. Details on the loans with material revised S&P Global Ratings NCF and valuation: The Prince Building (14.5% of the pooled trust balance). The $200.0 million whole loan balance consists of two pari passu pieces, of which $125.0 million is in the transaction. The $75.0 million pari passu portion is in COMM 2012-CCRE3 Mortgage Trust (not rated), also a U.S. CMBS transaction. The whole loan, which matures in October 2022, is secured by the borrower's fee interest in a 12-story, 354,603-sq.-ft. mixed-use (285,257 sq. ft. is office space and 69,346 sq. ft. is retail space) building in the SoHo submarket of Manhattan. As of the April 2020 rent roll, the property was 94.3% occupied. The major tenants include Group Nine Media Inc. (26.2% of the net rentable area; 2023 expiry), ZocDoc (20.4%; 2028 expiry), and Equinox (10.3%; 2020 expiry). The servicer-reported occupancy is in the 90% area, and net operating income (NOI) has been relatively stable during the past three years (after declining from $24.9 million in 2016): $15.4 million in 2017, $13.4 million in 2018, and $15.6 million in 2019. After adjusting the 2019 servicer-reported NOI, we derived an S&P Global Ratings NCF of $9.0 million (pari passu adjusted), down from $10.8 million in our last review. Using an S&P Global Ratings capitalization rate of 6.75%, we arrived at an S&P Global Ratings value of $133.0 million or $600 per sq. ft. This yielded an S&P Global Ratings LTV of 94.0% on the loan. Eastview Mall and Commons (13.9% of the pooled trust balance). The $210.0 million whole loan consists of two pari passu pieces, of which $120.0 million is in the transaction. The $90.0 million pari passu piece is in COMM 2012-CCRE5 Mortgage Trust (not rated). The whole loan, which matures in September 2022, is secured by the borrower's fee interest in 811,671 sq. ft. of a 1.73 million-sq.-ft. regional mall and power center in Victor, N.Y., 14 miles southeast of downtown Rochester, N.Y. In connection with renovation work completed on the property in 2003, the borrower entered into a payment-in-lieu-of taxes (PILOT) agreement that expires Dec. 31, 2041, with the Ontario County Industrial Development agency, which includes a schedule of payments the borrower makes to the various taxing authorities. The loan transferred to the special servicer on May 8, 2020, due to imminent monetary default stemming from the impact of COVID-19 pandemic. The borrower was delinquent on its April, May, and June 2020 debt service payments. However, the borrower cured the delinquency and the loan was transferred back to the master servicer on July 7, 2020, without a modification or forbearance. The loan is on the master servicer's watchlist for monitoring as a corrected mortgage loan. As of the July 2020 rent roll, the property was 87.0% occupied. Some of the major tenants, all of which are still operating at the property include Macy's (168,900 sq. ft.), J.C. Penney (141,992 sq. ft.), and Von Maur (140,000 sq. ft.). Anchor Lord & Taylor (88,787 sq. ft.) recently announced that it will be closing the store at the property as part of 24 store closings. There is a vacant anchor, former Sears' space (123,000 sq. ft.), which is expected to be back-filled by Dick's Sporting Goods. The servicer-reported NOI has declined and was $20.9 million in 2017, $19.8 million in 2018, and $17.9 million in 2019. S&P said, "Accordingly, we derived an S&P Global Ratings NCF of $8.6 million (pari passu adjusted), down from $10.5 million in our last review. In addition, we increased our S&P Global Ratings capitalization rate to 8.00% (up from 7.50% in the last review) to reflect the challenges facing the mall and the overall sector, particularly the increased tenant bankruptcies and store closures during the pandemic, and added the present value of tax savings of $7.8 million to arrive at an S&P Global Ratings value of $115.5 million and an S&P Global Ratings LTV of 103.9% on the loan." TMI Hospitality Portfolio (4.3% of the pooled trust balance). The loan is secured by a portfolio of 10 limited-service and extended-stay hotels, totaling 717 guestrooms, in six U.S. states. The loan, which has an October 2022 maturity, is on the master servicer's watchlist because the borrower requested COVID-19 relief. The master servicer stated that a consent agreement was executed, which allows the borrower to use furniture, fixtures, and equipment (FF&E) reserve to cover the June through August 2020 debt service payments. The servicer-reported occupancy has been in the low-70% area, and NOI has been relatively stable in the past three years at $7.3 million in 2017, $7.4 million in 2018, $7.5 million in 2019, and $6.9 million for trailing-12-months ended March 2020. S&P derived an S&P Global Ratings NCF of $6.6 million, the same as last review, and increased the S&P Global Ratings capitalization rate to 10.30% (up from 9.80%) to better capture the disruptions to NCF and liquidity stemming from the pandemic. This yielded an S&P Global Ratings value of $63.8 million or $88,946 per guestroom and an S&P Global Ratings LTV of 58.6% on the loan. Emerald Square Mall (4.0% of the pooled trust balance). S&P had previously highlighted the loan as one worth monitoring in its research commentary, "Shop With Caution – CMBS Mall Loans Worth Watching," published Jan. 8, 2020. The $98.8 million whole loan consists of two pari passu pieces, of which $34.4 million is in the transaction. The $64.4 million pari passu piece is in COMM 2012-CCRE3 (not rated). The whole loan, which matures in August 2022, is secured by the borrower's fee interest in 564,501 sq. ft. of a 1.02 million-sq.-ft. regional mall in North Attleboro, Mass. The loan transferred to the special servicer on June 29, 2020, due to imminent default. The borrower is delinquent on its May, June, July, and August 2020 debt service payments. As of the March 2020 rent roll, the property was 87.5% occupied. Some of the major tenants include Macy's (182,070 sq. ft.), Macy's Home (120,000 sq. ft.), J.C. Penney (188,950 sq. ft.), and Sears (156,352 sq. ft.). The servicer-reported NOI has declined year-over-year since 2010 ($14.8 million) to $10.2 million in 2019. We derived an S&P Global Ratings NCF of $2.7 million (pari passu adjusted), the same as in our last review, and increased the S&P Global Ratings capitalization rate to 9.50% (up from 8.50% in the last review) to reflect the challenges facing the mall and the overall sector, particularly the increased tenant bankruptcies and store closures during the pandemic. This yielded an S&P Global Ratings value of $27.9 million and an S&P Global Ratings LTV of 122.9% on the loan. Belvedere Square (1.3% of the pooled trust balance). The loan matures in October 2022 and is secured by a 101,308-sq.-ft. mixed-use (retail/office) building in Baltimore City, Md. Servicer-reported occupancy and NOI declined from 88.0% and $1.3 million in 2017, respectively, to 86.0% and $1.0 million in 2018 and 82.0% and $966,169 in 2019. S&P said, "To account for the declining performance, we revised the S&P Global Ratings NCF to $888,875, down from $1.0 million in our last review. Using an S&P Global Ratings capitalization rate of 8.25% (the same as in the last review), we arrived at an S&P Global Ratings value of $11.1 million or $110 per sq. ft. and an S&P Global Ratings LTV of 97.5% on the loan." Orlando Hotel (1.3% of the pooled trust balance). The loan is secured by the borrower's fee interest in a 95-guestroom full-service boutique hotel in Los Angeles. The loan was transferred to special servicing on July 7, 2020, due to imminent default. According to Wells Fargo Bank N.A. (the master servicer), Rialto Capital Advisors LLC (the special servicer) and the borrower have signed a loan modification agreement effective Aug. 12, 2020. The modification terms include deferring reserve deposits from May through October 2020 and allowing funds in reserves to be applied to pay the delinquent May, June, July, and August 2020 debt service payments. The hotel closed in March 2020 due to the pandemic and is expected to reopen in September 2020. While the servicer-reported occupancy has been relatively stable in the high-80% to low-90% range, NOI has declined sharply in the past three years to $2.3 million in 2017, $2.0 million in 2018, and $1.4 million in 2019. S&P derived an S&P Global Ratings NCF of $1.2 million, down from $1.6 million in its last review, and used an S&P Global Ratings capitalization rate of 9.25%, the same as in the last review." This yielded an S&P Global Ratings value of $13.5 million or $141,611 per guestroom and an S&P Global Ratings LTV of 80.5% on the loan. CREDIT CONSIDERATIONS As of the August 2020 trustee remittance report, three assets were with the special servicer, Rialto. The Fashion Outlets of Las Vegas REO asset, the largest asset with the special servicer, is a leasehold interest in a 375,722-sq.-ft. retail outlet center in Primm, Nev., approximately 40 miles south of Las Vegas. S&P had previously highlighted this property as one worth monitoring in its research commentary, "Shop With Caution – CMBS Mall Loans Worth Watching," published Jan. 8, 2020. The loan was transferred to special servicing on Aug. 18, 2017, due to imminent default, and the property became REO on Sept. 27, 2018. According to Rialto, the outlet center, which has a reported 57.8% occupancy, closed on March 17, 2020, due to COVID-19 containment efforts and reopened on June 1, 2020. Rialto indicated that it plans to liquidate the asset by the end of this year. An appraisal reduction amount of $54.9 million is in effect against the asset with a total reported exposure of $81.5 million, based on the October 2019 appraisal value of $29.9 million. S&P expect a significant loss (over 60%) upon the eventual resolution of the asset. S&P will continue to monitor the transaction against the evolving economic backdrop, and will take rating actions as it deems necessary if there be any meaningful changes to our performance expectations. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE COMM 2012-CCRE4 Mortgage Trust Commercial mortgage pass-through certificates Rating Class To From D CCC (sf) B+ (sf)/Watch Neg E D (sf) CCC- (sf)/Watch Neg RATINGS LOWERED COMM 2012-CCRE4 Mortgage Trust Commercial mortgage pass-through certificates Rating Class To From B BBB+ (sf) A (sf) C B (sf) BBB (sf) X-B B (sf) BBB (sf) RATINGS AFFIRMED COMM 2012-CCRE4 Mortgage Trust Commercial mortgage pass-through certificates Class Rating A-SB AAA (sf) A-3 AAA (sf) A-M AAA (sf) X-A AAA (sf) CUTWATER LTD 2014-II: Moody's Lowers Rating on Class D Notes to B1 ------------------------------------------------------------------ Moody's Investors Service downgraded the rating on the following note issued by Cutwater 2014-II, Ltd.: US$22,800,000 Class D Secured Deferrable Floating Rate Notes due 2027 (current outstanding balance of $23,556,112.37) (the "Class D Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the rating on the following notes: US$23,300,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2027 (the "Class C-R Notes"), Confirmed at Baa2 (sf); previously on April 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade The Class C-R Notes are referred to herein as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class C-R and Class D Notes issued by the CLO. The CLO, originally issued in January 2015 and partially refinanced in March 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in January 2019. RATINGS RATIONALE The downgrade on the Downgraded Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the rating on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 4528, compared to 3630 reported in the March 2020 trustee report [2]. Moody's also noted that the WARF was failing the test level of 2878 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 44.68% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $235.5 million, or $164.2 million less than the deal's ramp-up target par balance. Moody's noted that the OC test for the Class D notes were recently reported [4] as failing, which could result in repayment of senior notes. Nevertheless, Moody's noted that the OC tests for the Class A, Class B, and Class C Notes were recently reported [5] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $235,477,725 Defaulted Securities: $22,392,870 Diversity Score: 50 Weighted Average Rating Factor (WARF): 4360 Weighted Average Life (WAL): 3.3 years Weighted Average Spread (WAS): 4.33% Weighted Average Recovery Rate (WARR): 46.51% Par haircut in O/C tests and interest diversion test: 9.57% Finally, Moody's notes that it also considered the information in the August 2020 trustee report [6] which became available immediately prior to the release of this announcement. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. EATON VANCE 2020-1: S&P Assigns BB- (sf) Rating on Class E Notes ---------------------------------------------------------------- S&P Global Ratings assigned its ratings to Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC's floating rate notes. The note issuance is a CLO transaction backed by primarily broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The ratings reflect: -- The diversified collateral pool; -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization; -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading; and -- The transaction's legal structure, which is expected to be bankruptcy remote. RATINGS ASSIGNED Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC Class Rating Amount (mil. $) A AAA (sf) 281.25 B AA (sf) 60.75 C A (sf) 27.00 D BBB- (sf) 22.50 E BB- (sf) 15.75 Subordinated notes NR 44.68 NR--Not rated. ELEVATION CLO 2016-5: Moody's Confirms Ba3 Rating on Cl. E-R Notes ------------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on the following notes issued by Elevation CLO 2016-5, Ltd.: US$21,350,000 Class D-R Secured Deferrable Floating Rate Notes due 2031 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$19,600,000 Class E-R Secured Deferrable Floating Rate Notes due 2031 (the "Class E-R Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D-R Notes and the Class E-R Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Confirmed Notes issued by the CLO. The CLO, originally issued in June 2016 and refinanced in October 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end on October 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3188, compared to 2756 reported in the March 2020 trustee report [2]. Moody's also noted that the WARF was failing the test level of 2860 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 15.2% as of July 2020. Nevertheless, Moody's noted that the OC tests for the Class A/B, Class C, Class D and Class E Notes were reported in the July 2020 trustee report [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $337,392,821 Defaulted Securities: $9,386,178 Diversity Score: 80 Weighted Average Rating Factor: 3104 Weighted Average Life: 5.7 years Weighted Average Spread: 3.53% Weighted Average Recovery Rate: 46.49% Par haircut in O/C tests and interest diversion test: 0.6% Finally, Moody's notes that it also considered the information in the August 2020 trustee report [5] which became available immediately prior to the release of this announcement. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. ELEVATION CLO 2017-8: Moody's Lowers Class F Notes to Caa1 ---------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Elevation CLO 2017-8, Ltd.: US$7,000,000 Class F Secured Deferrable Floating Rate Notes due 2030 (the "Class F Notes"), Downgraded to Caa1 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The Class F Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the ratings on the following notes: US$26,000,000 Class D Secured Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$19,000,000 Class E Secured Deferrable Floating Rate Notes due 2030 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Downgraded Notes and Confirmed Notes issued by the CLO. The CLO, issued in January 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end on October 2022. RATINGS RATIONALE The downgrade on the Downgraded Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3288, compared to 2818 reported in the March 2020 trustee report [2]. Moody's also noted that the WARF was failing the test level of 2926 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 16.9% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $392.0 million, or $8.0 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that the OC tests for the Class A/B, Class C, Class D and Class E Notes, as well as the interest diversion test, were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $389,006,578 Defaulted Securities: $6,943,268 Diversity Score: 80 Weighted Average Rating Factor: 3243 Weighted Average Life: 5.7 years Weighted Average Spread: 3.56% Weighted Average Recovery Rate: 46.53% Par haircut in O/C tests and interest diversion test: 1.2% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. EVANS GROVE: Moody's Lowers Rating on Class F Notes to Caa3 ----------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Evans Grove CLO, Ltd.: US$8,800,000 Class F Junior Secured Deferrable Floating Rate Notes due 2028 (current outstanding balance of $9,016,991) (the "Class F Notes"), Downgraded to Caa3 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The Class F Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the ratings on the following notes: US$25,250,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2028 (current outstanding balance of $25,553,836) (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2028 (current outstanding balance of $18,365,096) (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D, Class E, and the Class F Notes issued by the CLO. The CLO, issued in May 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in May 2020. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3491, compared to 3167 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3187 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 20.3% as of August 2020. Furthermore, Moody's calculated the OC ratios (excluding haircuts) for the Class D Notes, Class E Notes, and Class F Notes as of July 2020 at 110.79%, 105.15%, and 102.59%, respectively. Moody's noted that previous OC test failures resulted in repayment of senior notes and deferral of current interest payments on the Class D Notes, Class E Notes, and the Class F Notes. More recently, however, only the OC tests for the Class D Notes and the Class E Notes were reported [4] as failing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $374,296,411 Defaulted Securities: $11,841,045 Diversity Score: 76 Weighted Average Rating Factor (WARF): 3370 Weighted Average Life (WAL): 4.32 years Weighted Average Spread (WAS): 3.31% Weighted Average Recovery Rate (WARR): 48.3% Par haircut in O/C tests and interest diversion test: 2.2% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. FLAGSTAR MORTGAGE 2020-2: Fitch Rates Class B-5 Debt 'B+sf' ----------------------------------------------------------- Fitch Ratings has assigned final ratings to Flagstar Mortgage Trust 2020-2. FSMT 2020-2 - Class A-1; LT AAAsf New Rating - Class A-10; LT AA+sf New Rating - Class A-2; LT AAAsf New Rating - Class A-3; LT AA+sf New Rating - Class A-4; LT AA+sf New Rating - Class A-5; LT AAAsf New Rating - Class A-6; LT AAAsf New Rating - Class A-7; LT AAAsf New Rating - Class A-8; LT AAAsf New Rating - Class A-9; LT AA+sf New Rating - Class A-X-1; LT AA+sf New Rating - Class A-X-2; LT AAAsf New Rating - Class A-X-3; LT AA+sf New Rating - Class A-X-5; LT AAAsf New Rating - Class A-X-7; LT AAAsf New Rating - Class A-X-8; LT AA+sf New Rating - Class B-1; LT AAsf New Rating - Class B-1-A; LT AAsf New Rating - Class B-1-X; LT AAsf New Rating - Class B-2; LT A+sf New Rating - Class B-2-A; LT A+sf New Rating - Class B-2-X; LT A+sf New Rating - Class B-3; LT BBB+sf New Rating - Class B-3-A; LT BBB+sf New Rating - Class B-3-X; LT BBB+sf New Rating - Class B-4; LT BB+sf New Rating - Class B-5; LT B+sf New Rating - Class B-6-C; LT NRsf New Rating - Class B-X; LT BBB+sf New Rating TRANSACTION SUMMARY The certificates are supported by 720 newly originated fixed-rate prime-quality non-agency jumbo mortgage loans secured by first liens on one to four residential homes. The total balance of the loans was approximately $554.15 million as of the cutoff date. This is the twelfth post-crisis issuance from Flagstar Bank, FSB. The pool comprises loans that Flagstar originated through its retail, broker and corresponding channels. The transaction is similar to previous Fitch-rated prime transactions, with a standard senior-subordinate, shifting-interest deal structure. All the loans in the pool were underwritten to the Ability to Repay rule and qualify as Qualified Mortgages. Flagstar (RPS2-/Negative) will be the servicer and Wells Fargo Bank, NA (RMS1-/Negative) will be the master servicer. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is a 5.6% decline for 2020, down from 1.7% positive growth in 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the pandemic, an economic risk factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Expected Payment Deferrals Related to Coronavirus (Negative): The coronavirus pandemic and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruption. To account for the cash flow disruption, Fitch assumed deferred payments on a minimum of 25% 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 observations of legacy Alt-A delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Payment Forbearance (Neutral): There are no loans in the pool that are currently on or have requested a coronavirus forbearance or deferral plan as of the cut-off date. If a borrower seeks pandemic-related relief after the cut-off date, but prior to the closing date, the loan will be removed from the pool. If a borrower seeks pandemic-related relief after the closing date, it is up to the servicer, Flagstar, to determine what type of relief plan will work best for the borrower. For borrowers who request coronavirus-related relief or relief related to an FEMA Major Disaster Declaration or other nationally declared event after the closing date, the servicer will allow the related borrower to suspend or reduce the related principal and interest lowed on the mortgage loan for a limited period of an initial six months and potentially up to 12 months, or such other forbearance period as mandated by the Coronavirus Aid, Relief, and Economics Security Act or other relevant legislation (the Disaster-Related Forbearance Period). At the end of the disaster-related forbearance period, the servicer will require the borrower to pay all amounts suspended during period (potential options for eligible borrowers include repayment over a series of months, including extending the original mortgage term by a number of months equal to the disaster-related forbearance period or by capitalizing related arrearages, fees, and expenses into an unpaid principal balance of the mortgage loan and extending the loan to, at least, its original term) or enter other modification or loss mitigation processes. Loans on a disaster-related forbearance plan will be counted as delinquent until the amounts suspended under the plan are fully repaid. Flagstar will still be obligated to advance on delinquent loans even if they are on a pandemic-relief plan. If Flagstar is not able to advance, the master servicer (Wells Fargo Bank) will advance delinquent P&I payments. Servicer advancing helps to provide liquidity to the trust but may create losses if the servicer reimburses itself for advances all at once. High-Quality Mortgage Pool (Positive): The collateral pool consists primarily of 30-year, fully amortizing, non-agency jumbo fixed-rate loans to borrowers with strong credit profiles and low leverage. All of the loans are designated as Safe Harbor Qualified Mortgages. There are 83 loans that have a balance over $1.0 million with the largest loan being $2.4 million. Of the loans, 31.1% are to self-employed borrowers. The pool has a weighted-average original FICO score of 767, which is indicative of high credit-quality borrowers. Approximately 73.5% of the loans have current FICO scores at or above 750. In addition, the original combined loan/value ratio is 65.0%, which represents substantial borrower equity in the property. Only 4.4% of the loans have known subordinate financing. The loans are seasoned an average of six months. The pool's attributes, together with Flagstar's sound origination practices, support Fitch's low default risk expectations. Geographic Diversification (Neutral): The pool's primary concentration is in California, representing 41% of the pool. Approximately 28% of the pool is located in the top-three metropolitan statistical areas - San Francisco, Los Angeles, and Houston. Roughly 12% of the pool is located in the San Francisco MSA, 8.9% in Los Angeles MSA, and 6.8% in Houston MSA. The Houston MSA is one of the most overvalued MSAs, according to Fitch, with a 15.6% market value decline. The pool's regional concentration did not add to Fitch's 'AAAsf' loss expectations. Low Operational Risk (Neutral): Operational risk is well controlled for in this transaction. Flagstar is experienced in originating and securitizing prime loans and is considered an 'Average' originator by Fitch. Flagstar is also the named servicer for the transaction and is responsible for performing primary servicing functions. The platform is rated 'RPS2-' with a Negative Outlook. Fitch did not adjust its loss levels based on these operational assessments. Tier 1 Representation and Warranty Framework (Neutral): The representation and warranty framework is consistent with Fitch's tier 1 framework. The strong framework, combined with the financial condition of the R&W provider, led to neutral treatment in Fitch's loss model and did not warrant adjustments at the 'AAAsf' level. Third-Party Due Diligence Results (Positive): A third-party due diligence review was performed by SitusAMC and Consolidated Analytics, which are assessed by Fitch as 'Acceptable - Tier 1' and 'Acceptable - Tier 3' third-party review firms, respectively. The review was performed on a statistically significant random sample of 35% of the loans in the initial transaction pool (due to loan removals, the sample size was 34% of the final pool). While the results confirmed strong loan origination practices consistent with prior Flagstar transactions, the sample had a concentration of initial TILA/RESPA Integrated Disclosure exceptions considered to be material that were cured with post-closing documentation. Since due diligence was performed on a sample of the pool, Fitch extrapolated the results to the remaining loans that did not receive diligence to address potential TRID exceptions that were not cured with post-closing documentation. However, the adjustment, combined with the due diligence credit given to approximately 34% of the final loan population, decreased Fitch's loss expectations by 6bp at the 'AAAsf' rating stress. Shifting Interest Structure (Mixed): Mortgage cash flow and loss allocation are based on a senior-subordinate, shifting-interest structure, whereby the subordinate classes receive only scheduled principal and are locked out from receiving unscheduled principal or prepayments for five years. The lockout feature helps maintain subordination for a longer period should losses occur later in the life of the deal. The applicable credit support percentage feature redirects subordinate principal to classes of higher seniority if specified credit enhancement levels are not maintained. Subordination Floor (Positive): A CE or senior subordination floor of 0.90% has been considered to mitigate potential tail-end risk and loss exposure for senior tranches as pool size declines and performance volatility increases due to adverse loan selection and small loan count concentration. A junior subordination floor of 0.60% has been considered to mitigate potential tail-end risk and loss exposure for subordinate tranches as pool size declines and performance volatility increases due to adverse loan selection and small loan count concentration. Full Servicer Advancing (Mixed): Flagstar will provide full advancing for the life of the transaction. Although full P&I advancing will provide liquidity to the certificates, it will also increase the loan-level loss severity since the servicer looks to recoup P&I advances from liquidation proceeds, which results in less recoveries. Wells Fargo Bank is the master servicer in this transaction and will advance delinquent P&I on the loans if Flagstar is not able to. Extraordinary Trust Expenses (Neutral): Extraordinary trust expenses, including indemnification amounts, costs of arbitration, and fess/expenses incurred by the reviewer for a review, will reduce the net WA coupon of the loans, which does not affect the contractual interest due on the certificates. Fitch did not make any adjustment for expenses that reduce the net WA coupon. The model indicated higher ratings for the B-2-A and B-4 subordinate classes than the ratings that were assigned. The ratings were limited to one rating tick higher than the ratings typically assigned to prime shifting interest structures given each class's position in the capital structure, even though CE would allow the class to achieve a higher rating under Fitch's stresses. Specifically, the B-2-A and any notional or exchangeable class(es) associated with it was rated 'A+', rather than 'AA-', and B-4 was rated 'BB+', rather than 'BBB'. The ratings were limited due to their position in the capital structure and the thin bond sizes. RATING SENSITIVITIES 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 that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level; that is, positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes, which are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Factors that could, individually or collectively, lead to negative rating action/downgrade: The defined negative stress sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10%, 20% and 30%, in addition to the model projected 9.3%. The analysis indicates there is some potential rating migration with higher MVDs compared to the model projection. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling 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. For enhanced disclosure of Fitch's stresses and sensitivities, please refer to the transaction's presale report. 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 disruption 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 SitusAMC and Consolidated Analytics. The third-party due diligence described in Form 15E focused on compliance, credit and valuation grades, and assigned initial grades for each subcategory. Minimal exceptions and waivers were noted in the due diligence reports. Fitch considered this information in its analysis and, as a result, Fitch made the following adjustments: - Fitch applied a standard loss adjustment of $15,500 to the loss amount for material TRID exceptions, as these loans can carry an increased risk of statutory damages. However, the aggregate loss severity adjustment was negligible at the 'AAAsf' level, and Fitch did not make any further adjustments to the model output. These adjustments resulted in an increase of 1bp to the expected losses. However, the adjustment, combined with the due diligence credit given to approximately 34% of the final loan population, decreased Fitch's loss expectations by 6bp at the 'AAAsf' rating stress. DATA ADEQUACY Fitch relied on an independent third-party due diligence review performed on approximately 34% of the pool. The third-party due diligence was generally consistent with Fitch's U.S. RMBS Rating Criteria. SitusAMC and Consolidated Analytics were engaged to perform the review. Loans reviewed under this engagement were given compliance, credit and valuation grades, and assigned initial grades for each subcategory. Minimal exceptions and waivers were noted in the due diligence reports. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. Fitch received loan-level information based on the American Securitization Forum's data layout format, and the data are considered to be comprehensive. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the ASF layout data tape were reviewed by the due diligence companies, and no material discrepancies were noted. FREDDIE MAC 2020-DNA4: S&P Rates 16 Classes of Notes 'BB+ (sf)' --------------------------------------------------------------- S&P Global Ratings assigned ratings to Freddie Mac STACR REMIC Trust 2020-DNA4's notes. The note issuance is an RMBS transaction backed by a reference pool of fully amortizing first-lien fixed-rate residential mortgage loans secured by one- to four-family residences, planned-unit developments, condominiums, cooperatives, and manufactured housing to prime borrowers. The ratings reflect: -- The credit enhancement provided by the subordinated reference tranches, as well as the associated structural deal mechanics; -- The credit quality of the collateral included in the reference pool; -- A REMIC structure that reduces the counterparty exposure to Freddie Mac for periodic principal and interest payments while, at the same time, pledging the support of Freddie Mac (a highly rated counterparty) to cover shortfalls, if any, on interest payments and to make up for any investment losses; -- The issuer's aggregation experience and the alignment of interests between the issuer and noteholders in the deal's performance, which, in S&P's view, enhances the notes' strength; -- The enhanced credit risk management and quality control processes Freddie Mac uses in conjunction with the underlying representations and warranties framework; and -- The impact that COVID-19 is likely to have on the U.S. economy and the U.S. housing market, and the additional structural provisions included to address corresponding forbearance and subsequent defaults. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." RATINGS ASSIGNED Freddie Mac STACR REMIC Trust 2020-DNA4 Class Rating Amount ($) A-H(i) NR 40,254,481,853 M-1 A- (sf) 295,000,000 M-1H(i) NR 124,317,519 M-2 BB+ (sf) 368,000,000 M-2R BB+ (sf) 368,000,000 M-2S BB+ (sf) 368,000,000 M-2T BB+ (sf) 368,000,000 M-2U BB+ (sf) 368,000,000 M-2I BB+ (sf) 368,000,000 M-2A BBB+ (sf) 184,000,000 M-2AR BBB+ (sf) 184,000,000 M-2AS BBB+ (sf) 184,000,000 M-2AT BBB+ (sf) 184,000,000 M-2AU BBB+ (sf) 184,000,000 M-2AI BBB+ (sf) 184,000,000 M-2AH(i) NR 78,073,449 M-2B BB+ (sf) 184,000,000 M-2BR BB+ (sf) 184,000,000 M-2BS BB+ (sf) 184,000,000 M-2BT BB+ (sf) 184,000,000 M-2BU BB+ (sf) 184,000,000 M-2BI BB+ (sf) 184,000,000 M-2RB BB+ (sf) 184,000,000 M-2SB BB+ (sf) 184,000,000 M-2TB BB+ (sf) 184,000,000 M-2UB BB+ (sf) 184,000,000 M-2BH(i) NR 78,073,449 B-1 B (sf) 300,000,000 B-1A BB (sf) 150,000,000 B-1AR BB (sf) 150,000,000 B-1AI BB (sf) 150,000,000 B-1AH(i) NR 59,658,760 B-1B B (sf) 150,000,000 B-1BH(i) NR 59,658,760 B-2 NR 125,000,000 B-2A NR 62,500,000 B-2AR NR 62,500,000 B-2AI NR 62,500,000 B-2AH(i) NR 42,329,380 B-2B NR 62,500,000 B-2BH(i) NR 42,329,380 B-3H(i) NR 104,829,380 (i)Reference tranche only and does not have corresponding notes. Freddie Mac retains the risk of each of these tranches. NR--Not rated. GMP CAPITAL: DBRS Keeps Pfd-4(high) on Preferred Shares on Review ----------------------------------------------------------------- DBRS Limited maintained the Under Review with Developing Implications status on GMP Capital Inc.'s Cumulative Preferred Shares rating of Pfd-4 (high). DBRS Morningstar has maintained this status since June 18, 2019, given the lack of clarity on the ultimate composition and financial fundamentals of the Company. DBRS Morningstar initially placed GMP's rating Under Review with Developing Implications following the Company's announcement that it had agreed to sell substantially all of its capital markets business to Stifel Financial Corp. Subsequently, DBRS Morningstar maintained the Under Review with Developing Implications status on September 18, 2019, as the sale transaction had yet to close. The sale transaction was completed on December 6, 2019; however, DBRS Morningstar maintained the Under Review with Developing Implications status again on December 17, 2019, as the Company was still in discussions with Richardson Financial Group Limited (RFGL) to consolidate full ownership of Richardson GMP Limited (Richardson GMP). On February 26, 2020, GMP announced that it had entered into a nonbinding term sheet with RFGL to consolidate the ownership of Richardson GMP. DBRS Morningstar once again maintained the Under Review with Developing Implications status on March 17, 2020, as GMP had called a special meeting of common shareholders on April 21, 2020, to approve the consolidation. Subsequently, DBRS Morningstar maintained the Under Review with Developing Implications status on June 16, 2020, after the contractual negotiation period between GMP and RFGL was extended and GMP postponed the special meeting as a result of concerns over the Coronavirus Disease (COVID-19) pandemic. On August 13, 2020, GMP announced that it had entered into a definitive purchase agreement with RFGL to consolidate 100% ownership of RGMP under GMP. Under the terms of the agreement, GMP will acquire all common shares of Richardson GMP that it does not already own (65.9% stake) for a purchase price of 1.875 GMP common shares (originally two GMP common shares) per one common Richardson GMP share. Following the impact of the coronavirus pandemic, RBC Capital Markets, LLC (RBC) revised its valuation of Richardson GMP from $500 million to $420 million. Accordingly, they concluded that the common shares now carry a value between $3.55 to $4.50 (previously $4.25 to $5.15) while GMP common shares carry a value of between $2.00 to $2.55 (previously $2.20 to $2.90) on an en bloc basis. Furthermore, GMP will pay a special dividend of $11.3 million to the preclosing GMP shareholders and will resume paying quarterly dividends on its outstanding preferred shares following the special meeting, while $36 million in retention payments will be made to Richardson GMP's investment advisors upon closing of the transaction. Additionally, Richardson Financial will not redeem its $32 million preferred share ownership in order to invest in the growth in the new business; instead, their preferred share terms will be amended to add a right to redeem the preferred shares for cash any time following the third anniversary of closing. The DBRS Morningstar-rated Cumulative Preferred Shares will remain with the consolidated entity. GMP has called a special meeting of common shareholders on October 6, 2020, to approve the transaction, which would require a majority of the minority shareholders (excluding RFGL) to vote in favor of the proposal. GMP will subsequently require regulatory approval from the Investment Industry Regulatory Organization of Canada. The transaction is expected to close in the fourth quarter of 2020. Following the approval of the transaction, RFGL is expected to have the largest ownership interest representing 40% of the consolidated entity. GMP shareholders and the Richardson GMP investment advisors and management would retain 31.4% and 28.5%, respectively. KEY RATING CONSIDERATIONS The continued Under Review period considers that even though the transaction's parties have reached a definitive agreement the consolidation of GMP with Richardson GMP is still subject to shareholder and regulatory approval. DBRS Morningstar will assess GMP's pro forma structure once it consolidates full ownership of Richardson GMP. This assessment will review the Company's assets and liabilities composition, ownership, future strategic direction, and management's ability to execute on this plan. If the consolidation were not to occur, DBRS Morningstar would need to assess GMP's standalone intrinsic strength, including its credit fundamentals, prospects for growth, and ability to maintain debt service payments on its Cumulative Preferred Shares. RATING DRIVERS DBRS Morningstar would upgrade the rating on GMP if the Company's franchise prospects and post-transaction pro forma financials are deemed to be stronger with the consolidation of Richardson GMP. Conversely, DBRS Morningstar would downgrade the rating if GMP's credit fundamentals weaken. Additionally, negative rating pressure could emerge if the current transaction does not conclude as expected. Notes: All figures are in Canadian dollars unless otherwise noted. GNIRBES INC: Granada Capital Buying North Sebring Property ---------------------------------------------------------- Gnirbes, Inc., asks the U.S. Bankruptcy Court for the Southern District of Florida to authorize the private sale of the real and personal property located at 330 US Highway 27 North, also known as 332 & 334 US Highway 27 North, Sebring, Florida, to Granada Capital, LLC consistent with their Settlement Agreement. Prior to the Petition Date, a final judgment was entered on Sept. 23, 2009 in favor of PeoplesSouth Bank against the Debtor. On Aug. 20, 2019, PeoplesSouth Bank assigned the Final Judgment to Granada. The Assignment was recorded in the public records of Highlands County on Aug. 23, 2019. Granada is the current holder of the Final Judgment against the Debtor. On Dec. 13, 2019, Granada commenced a lawsuit against the Debtor to foreclose its secured claim against the Debtor's real property. The Debtor's initial and amended schedules scheduled value of the 330 Property was $592,255 based on tax records. On May 19, 2020, Granada filed its secured claim in the amount of $726,615. The Granada Claim is secured by, among other things, the 330 Property. On July 1, 2020, the Debtor filed its Motion to Value and Determine Secured Status of Granada's Lien on Real Property. The Motion to Value claims a $780,000 value. On July 24, 2020, the Debtor and Granada participated in a Judicial Settlement Conference with the assistance of Judge Paul G. Hyman, and entered a settlement agreement. The Settlement requires, among other things, the sale by private sale of the 330 Property to Granada including all fixtures thereon (excepting only a certain digital sign owned by tenant Boom Booms, Inc.). Through the Motion, the Debtor asks to transfer its interest in real and personal property located at the 330 Property to Granada consistent with the Settlement. Given, among other things, i) Granada's Claim in the amount of $726,615; and ii) other consideration under the Settlement of a note and mortgage in the amount of $40,000 in favor of Granada and secured by a separate piece of the Debtor's real property; the achieved value of the sale of the 330 Property to Granada is essentially $686,615. The Debtor asks that it be authorized to execute any and all documents necessary to consummate the sale of the 330 Property and all personal property (including the fixtures thereon) and evidence the conveyance of the 330 Property to Granada. The proposed sale to Granada will resolve Granada's secured claim as to the 330 Property which greatly benefits creditors of the estate and will minimize the going forward operational and administrative expenses associated therewith. The sale will be subject to any valid and existing claims in the name of Bayview Loan Servicing. However, Granada disputes the existence and validity of all claims in the name of Bayview Loan Servicing and reserves all rights to contest same. Otherwise, the sale will be free and clear of all claims, liens, encumbrances, and interests of any and all kinds. Based upon the Settlement with the Debtor, by eliminating the potentially unsecured portion of Granada's claim (which was anticipated to exceed $300,000), unsecured creditors will enjoy a considerably greater distribution. Accordingly, the private sale in accordance to Fed. R. Bankr. P. 6004(f)(1) is in the best interests of the unsecured creditors of the estate, and is the most convenient method under the circumstances. About Gnirbes Inc. Gnirbes Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 20-13992) on March 26, 2020. At the time of the filing, the Debtor was estimated to have assets of less than $50,000 and liabilities of between $100,001 and $500,000. Judge Mindy A Mora oversees the case. The Debtor is represented by Kelley, Fulton & Kaplan, P.L. GS MORTGAGE 2017-375H: S&P Lowers Class D Certs Rating to BB- (sf) ------------------------------------------------------------------ S&P Global Ratings lowered its rating on the class D commercial mortgage pass-through certificates from GS Mortgage Securities Corporation Trust 2017-375H, a U.S. commercial mortgage-backed securities CMBS transaction. At the same time, S&P affirmed its ratings on four other classes from the same transaction. The downgrade and affirmations on the principal- and interest-paying classes reflect our re-evaluation of 375 Hudson Street, an office building securing the loan in the single-asset transaction. S&P said, "Specifically, we believe the subordinate class D certificates are exposed to a more heightened level of risk than at issuance due to the re-tenanting (excluding storage space) of 87.9% of the property to a single tenant at lower rental rates than what was paid by the prior tenants, and extended free rent periods that are mainly spread out during the long lease term, as well as slightly higher operating expenses at the property. Accordingly, our net cash flow (NCF) has declined 14.5% and our expected-case value has declined 17.0% since issuance." S&P sid, "We affirmed our ratings on classes A, B, and C and tempered our downgrade on class D even though the model-indicated ratings were lower than the classes' current rating levels." This is based on qualitative considerations such as the collateral quality, the positioning of the office building in Manhattan's Hudson Square submarket, the significant market value decline that would be required before these classes experience losses, liquidity support provided in the form of servicer advancing, and the relative positions of these classes in the waterfall. S&P said, "Further, we considered that, according to the master servicer, Wells Fargo Bank N.A. (Wells Fargo), the borrowers has not requested for COVID-19 relief and is current on its debt service payments. "We affirmed our 'AAA (sf)' rating on the class X-A 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. Class X-A's notional amount references the balance of the class A certificates." TRANSACTION SUMMARY This is a stand-alone (single-borrower) transaction backed by a fixed-rate IO mortgage loan secured by a first lien on the borrowers' ground leasehold and 93-year estate-for-years interests in 375 Hudson Street. 375 Hudson Street is a 19-story, 1.1 million-sq.-ft. LEED Gold-certified class A office building, of which 15,690 sq. ft. is retail space and 46,000 sq. ft. is underground storage space, and includes a 100-space parking garage located in downtown Manhattan's Hudson Square submarket. Our property-level analysis included a re-evaluation of the office property that secures the mortgage loan using the servicer-provided operating statements from year-end 2018 through three-months ended March 31, 2020; the March 31, 2020, rent roll; the borrowers' 2020 budget; and third-party market data. In particular, we considered the stable occupancy (average occupancy of 98.4% since 2015) and declining servicer-reported NCF for the past two-plus years: $45.8 million in 2018, $38.7 million in 2019, and $27.5 million for the three months ended March 2020 (annualized). The lower servicer-reported NCF in 2019 and three months ended March 2020 is primarily attributable to lower base rent and other income and higher operating expenses. The three months ended March 2020 (annualized) servicer-reported base rent of $37.6 million represents a 21.1% decline from the 2019 base rent of $47.6 million. This figure represents a 12.2% decline from the 2018 base rent of $54.3 million. The base rent decline is mainly attributed to the re-leasing of the former Penguin Random House LLC (Penguin; 279,471 sq. ft.) and Saatchi and Saatchi North America (Saatchi; 680,752 sq. ft.) floors (excluding 17,032 sq. ft. of storage space) at lower-than-expected base rental rates. According to Wells Fargo, Penguin moved out in 2018, but continued to pay rent until July 31, 2019, when it terminated its lease in advance of its March 31, 2025 expiry, paying an initial termination fee of approximately $28.5 million. Saatchi amended and restated its lease, which originally expires on Jan. 31, 2023 (floors seven through 18, penthouse suite, and basement space totaling 697,784 sq. ft. or 63.9% of net rentable area [NRA]), with amendments to Lion Re:Sources (Lion), an affiliate of Saatchi, from July 1, 2019 to Jan. 31, 2043. Further, Lion signed a 20-plus-year direct lease with the landlord for the second-through-fifth floors (former Penguin floors; 279,471 sq. ft., or 25.6% of NRA) from Aug. 1, 2019 through Jan. 31, 2043. In total, including storage space, Lion leases 89.5% of the property's NRA. The sponsors re-leased the former Penguin floors to Lion at a base rent of $25.00 per sq. ft. (steps up to $41.50 per sq. ft. on April 1, 2025) compared to Penguin's in-place rent of $59.00 per sq. ft. at issuance, a decline of approximately 58%. The Saatchi floors were re-leased at a base rent of $46.23 per sq. ft. compared to Saatchi's in- place rent of $46.50 per sq. ft. at issuance. This compares to the second-quarter 2020 CoStar's Hudson Square 4-5 star office submarket vacancy rate and gross market rent of 7.0% and $79.40 per sq. ft., respectively. Additionally, a total of 26 months of rent abatements spread through the lease term were provided for each floor that Lion leases: floors two through five, seven through 18, the penthouse floor, and the basement space. S&P said, "Based on the March 31, 2020, rent roll, we calculated $81.2 million of free rent remaining from Sept. 1, 2020, through the end of the lease term (Jan. 31, 2043). Wells Fargo confirmed that there is no free rent reserve; instead, they would call for capital. We also noted that Lion has a one-time right to terminate (between Jan. 1, 2027, and July 31, 2031) its lease on either one or two full floors of the building." The remaining floors must be contiguous, but Lion may surrender either the top or the bottom floor(s) of the stack, including the penthouse floor (but the penthouse doesn't count as a floor for purpose of determining the number of surrendered floors), for a cancellation payment to refund landlord tenant improvements and leasing commissions (TI/LCs) and rent abatements related to the surrendered floors. According to Wells Fargo, former tenant, Penguin, paid $28.5 million in termination fees in 2019; and starting in 2020, it is required to pay $331,264 each month (approximately $4.0 million per annum) until September 2024 with a final payment of $165,973 in October 2024 for total termination fees of $47.6 million to offset the decrease in base rent. Further, per the amended and restated lease agreement, there is approximately $113.0 million of tenant allowances, of which approximately $32.1 million was paid and approximately $80.9 million is remaining, which is expected to be paid over a TI payout schedule. The tenant can elect to use 25% of the unused portion of the tenant fund to apply to fixed and escalation rent commencing on Feb. 1, 2038, through July 31, 2042, excluding any months with rent abatements. According to the loan documents, the borrowers are entitled to receive funds above $20.8 million; and as of August 2020, approximately $20.8 million is held in a Penguin reserve account for TI/LCs. Wells Fargo indicated that the funds cannot be applied to landlord rent abatement obligations; and upon satisfaction of certain conditions as defined in the loan documents, any remaining amounts in the Penguin reserve account will be disbursed to the borrowers. Wells Fargo indicated the second through fifth floors (the former Penguin floors) are under construction and near completion, and that Lion is occupying a majority of their space, subject to an ongoing COVID-19 work-from-home program. S&P said, "While Lion is currently paying base rent of $25.00 per sq. ft. for floors two through five, which is significantly below the market rate, we used the $41.50 per sq. ft. rental rate in our current analysis, which contractually begins April 1, 2025, and applied a 7.0% market vacancy rate (compared to 10.0% at issuance) to derive our long-term sustainable NCF of $32.4 million, down 14.5% since issuance. Using a 6.50% S&P Global Ratings' capitalization rate (compared to 6.75% at issuance) and deducting $32.2 million for the present value of the remaining free rent obligations from Sept. 1, 2020, through Jan. 31, 2043, we arrived at an S&P Global Ratings' expected-case value of $465.5 million, or $426 per sq. ft., down 17%.0 since issuance. This yielded an S&P Global Ratings' loan-to-value and debt service coverage (DSC) of 85.9% and 2.28x, respectively." Wells Fargo reported a 2.73x and 1.95x DSC for year-end 2019 and the three months ended March 31, 2020, respectively, and occupancy was 96.7% according to the March 31, 2020, rent roll. According to the Aug. 12, 2020, trustee remittance report, the IO mortgage loan has a trust and whole loan balance of $400.0 million (same as at issuance). The loan pays interest at a per annum fixed rate of 3.493% and matures on Sept. 6, 2027. Wells Fargo confirmed that there is no subordinate debt. To date, the trust has not incurred any principal losses. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P Said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." RATING LOWERED GS Mortgage Securities Corp. Trust 2017-375H Commercial mortgage pass-through certificates Rating Class To From D BB- (sf) BBB- (sf) RATINGS AFFIRMED GS Mortgage Securities Corp. Trust 2017-375H Commercial mortgage pass-through certificates Class Rating A AAA (sf) B AA- (sf) C A- (sf) X-A AAA (sf) GS MORTGAGE-BACKED 2020-NQM1: S&P Assigns 'B' Rating to B-2 Certs ----------------------------------------------------------------- S&P Global Ratings assigned its preliminary ratings to GS Mortgage-Backed Securities Trust 2020-NQM1's mortgage pass-through certificates. The certificate issuance is an RMBS securitization backed by first-lien, fixed- and adjustable-rate, fully amortizing residential mortgage loans (some with interest-only periods) to prime and non-prime borrowers, generally secured by single-family residential properties, planned-unit developments, condominiums, and two- to four-family residential properties. The loans are mainly nonqualified or exempt mortgage loans. The preliminary ratings are based on information as of Aug. 24, 2020. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's view of: -- The pool's collateral composition; -- The credit enhancement provided for this transaction; -- The transaction's associated structural mechanics; -- The representation and warranty (R&W) framework for this transaction; The geographic concentration, and -- The impact the COVID-19 pandemic will likely have on the performance of the mortgage borrowers in the pool and liquidity available in the transaction. S&P Global Ratings acknowledges a high degree of uncertainty about the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." PRELIMINARY RATINGS ASSIGNED GS Mortgage-Backed Securities Trust 2020-NQM1 Class Rating(i) Amount ($) A-1 AAA (sf) 216,882,000 A-2 AA+ (sf) 18,972,000 A-3 A+ (sf) 19,834,000 M-1 BBB+ (sf) 15,092,000 B-1 BB+ (sf) 7,617,000 B-2 B (sf) 5,749,000 B-3 NR 3,306,402 A-IO-S NR (ii) X NR (ii) Risk retention NR 15,129,074(iii) R NR N/A (i)The information in this report reflects the term sheet dated Aug. 21, 2020. The preliminary ratings address the ultimate payment of interest and principal. (ii)The notional amount will equal the non-retained interest percentage of the aggregate stated principal balance of the mortgage loans as of the first day of the related due period, which initially is $287,452,402. (iii)The risk retention class is sized to approximately 5.0% of the collateral balance and will be entitled to payments from the retained interest available funds. N/A--Not applicable. NR--Not rated. HALCYON LOAN 2013-2: Moody's Lowers Rating on Class E Notes to Ca ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Halcyon Loan Advisors Funding 2013-2 Ltd.: US$26,750,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2025 (the "Class D Notes"), Downgraded to Ba2 (sf); previously on June 3, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade US$22,250,000 Class E Junior Secured Deferrable Floating Rate Notes due 2025 (the "Class E Notes"), Downgraded to Ca (sf); previously on June 3, 2020 Caa1 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Downgraded Notes." These actions conclude the reviews for downgrade initiated on June 3, 2020 issued by the CLO. The CLO, issued in July 2013, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in August 2017. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses on certain notes have increased. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 4194 and was failing the test level of 2766. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 29.4% as of July 2020. Furthermore, Moody's noted that the OC tests for the Class D and Class E notes were recently reported as failing, which could result in repayment of senior notes at the next payment date should the failures continue. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $88,502,435 Defaulted Securities: $43,814,571 Diversity Score: 22 Weighted Average Rating Factor: 3773 Weighted Average Life: 2.4 years Weighted Average Spread: 3.80% Weighted Average Recovery Rate: 46.2% Par haircut in O/C tests and interest diversion test: 9.6% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. HEMPSTEAD II: Moody's Lowers Rating on Class D Notes to B1 ---------------------------------------------------------- Moody's Investors Service downgraded the rating on the following notes issued by Hempstead II CLO Ltd.: US$35,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the rating on the following notes: US$38,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2029 (the "Class C Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade The Class C Notes are referred to herein as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class C and Class D Notes issued by the CLO. The CLO, originally issued in August 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in August 2021. RATINGS RATIONALE The downgrade on the Downgraded Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased and the credit enhancement available to the CLO notes has declined. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the rating on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3060 compared to 2946 reported in February 2020 trustee report [2]. Moody's also notes that the WARF was marginally failing the test level of 3052 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 15% as of August 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $580.1 million, or $19.9 million less than the deal's ramp-up target par balance. Moody's noted that the OC tests are passing while the interest diversion test was recently reported [4] as failing, which diverted $538,959 of interest proceeds into principal proceeds based on July 2020 trustee report, and could further result in a portion of excess interest collections being diverted towards reinvestment in collateral at the next payment date should the failures continue. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $579,802,754 Defaulted Securities: $5,802,727 Diversity Score: 73 Weighted Average Rating Factor (WARF): 3059 Weighted Average Life (WAL): 4.9 years Weighted Average Spread (WAS): 3.31% Weighted Average Recovery Rate (WARR): 47.5% Par haircut in O/C tests and interest diversion test: 0.25% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. HERTZ VEHICLE II: DBRS Keeps Class D Bonds Under Review ------------------------------------------------------- DBRS, Inc., on Aug. 19, 2020, changed the Under Review with Negative Implications status to Under Review with Developing Implications on the following securities issued by Hertz Vehicle Financing II LP (HVF II LP): -- Series 2013-A, Class A rated A (high) (sf)/Under Review - Developing Implications -- Series 2013-A, Class B rated BBB (sf)/Under Review - Developing Implications -- Series 2013-A, Class C rated B (high) (sf)/Under Review - Developing Implications -- Series 2015-3, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2015-3, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2015-3, Class C rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2016-2, Class A Notes rated AA (low) (sf)/Under Review Developing Implications -- Series 2016-2, Class B Notes rated BB (high) (sf)/Under Review Developing Implications -- Series 2016-2, Class C Notes rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2016-4, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2016-4, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2016-4, Class C rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2017-1, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2017-1, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2017-1, Class C rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2017-2, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2017-2, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2017-2, Class C rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2018-1, Class A Notes rated AA (low) (sf)/Under Review Developing Implications -- Series 2018-1, Class B Notes rated BB (high) (sf)/Under Review Developing Implications -- Series 2018-1, Class C Notes rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2018-2, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2018-2, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2018-2, Class C rated B (low) (sf)/Under Review - Developing Implications -- Series 2018-3, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2018-3, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2018-3, Class C rated B (low) (sf)/Under Review - Developing Implications -- Series 2019-1, Class A rated AA (low) (sf)/Under Review - Developing Implications -- Series 2019-1, Class B rated BB (high) (sf)/Under Review - Developing Implications -- Series 2019-1, Class C rated CCC (high) (sf)/Under Review - Developing Implications -- Series 2019-2, Class A Notes rated AA (low) (sf)/Under Review - Developing Implications -- Series 2019-2, Class B Notes rated BB (high) (sf)/Under Review Developing Implications -- Series 2019-2, Class C Notes rated B (low) (sf)/Under Review - Developing Implications -- Series 2019-3, Class A Notes rated AA (low) (sf)/Under Review Developing Implications -- Series 2019-3, Class B Notes rated BB (high) (sf)/Under Review Developing Implications -- Series 2019-3, Class C Notes rated B (low) (sf)/Under Review - Developing Implications DBRS Morningstar maintained the Under Review with Negative Implications status on the following securities issued by HVF II LP: -- Series 2013-A, Class D rated B (low) (sf)/Under Review – Negative Implications -- Series 2016-2, Class D Notes rated CC (sf)/Under Review – Negative Implications -- Series 2016-4, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2017-1, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2017-2, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2018-1, Class D Notes rated CC (sf)/Under Review – Negative Implications -- Series 2018-2, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2018-3, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2019-1, Class D rated CC (sf)/Under Review – Negative Implications -- Series 2019-2, Class D Notes rated CC (sf)/Under Review – Negative Implications -- Series 2019-3, Class D Notes rated CC (sf)/Under Review – Negative Implications DBRS Morningstar initially put all of the ratings on the notes issued Under Review with Negative Implications on April 29, 2020. DBRS Morningstar subsequently downgraded all of the ratings and maintained the Under Review with Negative Implications status on May 21, 2020. For more information, please refer to the April 29, 2020, press release titled "DBRS Morningstar Places Hertz Vehicle Financing II LP Securities Under Review with Negative Implications," and to the May 21, 2020, press release titled "DBRS Morningstar Downgrades Ratings on Hertz Vehicle Financing II LP Securities, Maintains UR-Neg. Status." On August 19, 2020, DBRS Morningstar released a commentary titled "Hertz's Interim Agreement with ABS Investors Provides Roadmap for Second Half of 2020." The interim agreement discussed in the commentary provides guidance on the timing and the amount noteholders can expect regarding payments from The Hertz Corporation (Hertz) for the HVF II LP securities through December 2020. However, the actual outcome will largely depend on Hertz's ability to carry out the terms of the interim agreement. The continuing economic stress related to the Coronavirus Disease (COVID-19) pandemic poses significant challenges for the rental car industry. DBRS Morningstar cannot assess Hertz's ability to execute the terms of the interim agreement and the duration and severity of the coronavirus pandemic with a high degree of certainty. DBRS Morningstar will monitor Hertz's progress in executing the terms of the agreement to determine the impact of these actions on its current ratings. Changing the Under Review status to Under Review with Developing Implications on certain of the notes and maintaining the Under Review with Negative Implications status for the remainder considers DBRS Morningstar's set of macroeconomic scenarios for select economies related to the coronavirus, available in its commentary "Global Macroeconomic Scenarios: July Update," published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar's analysis. The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. DBRS Morningstar will seek to complete its assessment and remove the ratings from Under Review status as soon as appropriate. Upon the resolution of the Under Review with Developing Implications status, DBRS Morningstar may upgrade, confirm or downgrade the ratings on the affected classes. Upon the resolution of the Under Review with Negative Implications status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes. Notes: The principal methodology is the DBRS Morningstar Master U.S. ABS Surveillance Methodology (May 27, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. IOWA STUDENT 2012-1: Fitch Lowers Rating on Class B Notes to Bsf ---------------------------------------------------------------- Fitch Ratings has downgraded the ratings of Iowa Student Loan Liquidity Corp. (ISL), Series 2012-1. The Rating Outlooks are Stable. The downgrades are driven by increasing maturity risk of the Class A notes since the last review in September of 2019. In the past year, as a consequence of the high percentage of borrowers enrolled in Income-Based Repayment plans (IBR) and forbearance, the payment rates have decreased and the weighted average remaining term of the loans has increased by nine months (from 173 months as of June 2019 to 182 months as of June 2020). Fitch's student loan ABS cash flow model indicates that the class A notes are not paid in full on or prior to their legal final maturity in August 2033 under the 'AAAsf' through 'Bsf' stresses. The 'Bsf' ratings assigned to the bonds reflect the maturity failures in the base case stresses and no ultimate principal or interest loss; as such, in Fitch's view, a change in the future economic environment could result in full repayment of bonds by maturity dates, which is reflected in the 'Bsf' ratings. The rating of class B notes is not eligible for ratings higher than any senior tranche in the same transaction. RATING ACTIONS Iowa Student Loan Liquidity Corporation, Series 2012-1 Class A 462590JS0; LT Bsf Downgrade; previously BBsf Class B 462590JT8; LT Bsf Downgrade; previously BBsf KEY RATING DRIVERS U.S. Sovereign Risk: The trust collateral comprises 100% Federal Family Education Loan Program (FFELP) loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AAA'/Outlook Negative. Collateral Performance: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 29.00% under the base case scenario and an 87.00% default rate under the 'AAA' credit stress scenario. Fitch maintained its sustainable constant default rate (sCDR) at 4.00% and its sustainable constant prepayment rate (sCPR; voluntary and involuntary) at 12.00% in cash flow modeling. Fitch applies the standard default timing curve in its credit stress cash flow analysis. The claim reject rate is assumed to be 0.5% in the base case and 3.0% in the 'AAA' case. The TTM levels of deferment, forbearance and income-based repayment (prior to adjustment) are 4.18%, 13.68% and 49.18%, respectively, and are used as the starting point in cash flow modeling. Subsequent declines or increases are modeled as per criteria. The borrower benefit is assumed to be approximately 0.14%, based on information provided by the sponsor. Basis and Interest Rate Risk: Basis risk for this transaction arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments (SAP) and the securities. As of June 2020, approximately 99.51% of the student loans are indexed to LIBOR, 0.38% are indexed to T-Bill, and 0.12% are Heal Loans with no SAP. All notes are indexed to one-month LIBOR. Fitch applies its standard basis and interest rate stresses to this transaction as per criteria. Payment Structure: Credit enhancement (CE) is provided by excess spread, overcollateralization and for the Class A notes, subordination. As of June 2020, total and senior effective parity ratio (including the reserve) are 101.32% (1.31% CE) and 108.02% (7.42% CE), respectively. Liquidity support is provided by a reserve account sized at 0.25% of the outstanding pool balance, currently equal to the floor of $775,730. Operational Capabilities: Day-to-day servicing is provided by Aspire Resources Inc., a wholly owned subsidiary of ISL with PHEAA as the back-up servicer. Fitch considers Aspire to be an acceptable servicer of FFELP student loans due to their long servicing history. Fitch also confirmed with the servicer the availability of a business continuity plan to minimize disruptions in the collection process during the coronavirus pandemic. Coronavirus Impact: Under the coronavirus baseline 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, but personal incomes remain depressed through 2022. Fitch evaluated the sCDR and sCPR under this scenario analyzing a decline in payment rates and an increase in defaults to previous recessionary levels for two years and then a return to recent performance for the remainder of the life of the transaction. Fitch maintained the sCDR and sCPR assumptions reflecting healthy cushions from current performance. RATING SENSITIVITIES This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. 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: -- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf' -- Basis Spread decrease .25%: class A 'CCCsf'; class B 'CCCsf' Maturity Stress Sensitivity -- CPR increase 25%: class A 'Bsf'; class B 'Bsf' -- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf' -- Remaining Term decrease 25%: class A 'Bsf'; class B 'Bsf' Factors that could, individually or collectively, lead to negative rating action/downgrade: The current ratings reflect the risk the senior notes miss their legal final maturity date under Fitch's base case maturity scenario. If the margin by which these classes miss their legal final maturity date increases, or does not improve as the maturity date nears, the ratings may be downgraded further. Additional defaults, increased basis spreads beyond Fitch's published stresses, lower-than-expected payment speed or loan term extension are factors that could lead to future rating downgrades. The risk of negative rating actions will increase under Fitch's coronavirus downside scenario, which contemplates a more severe and prolonged period of stress with a halting recovery beginning in second quarter 2021. Fitch's Downside Coronavirus Scenario was not run, because the ratings are 'Bsf'. 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). JP MORGAN 2011-C3: S&P Lowers Rating to B- (sf) on Class J Notes ---------------------------------------------------------------- S&P Global Ratings lowered its ratings on the class B, C, D, E, F, G, H, and J commercial mortgage pass-through certificates from J.P. Morgan Chase Commercial Mortgage Securities Trust 2011-C3, a U.S. CMBS transaction, and removed them from CreditWatch, where they were placed with negative implications on June 3, 2020. At the same time, S&P affirmed its 'AAA (sf)' ratings on classes A-4 and X-A from the same transaction. S&P had placed its ratings on classes B through J on CreditWatch negative because it viewed them as being at an increased risk of experiencing monthly payment disruption or reduced liquidity support due to their exposure to specific outsized loans of concern secured by lodging or retail properties, the two property types most affected by the demand disruption posed by the ongoing pandemic. Specifically, this transaction is exposed to loans that have anticipated repayment dates or final maturities in 2020 and 2021, and two of the loans secured by regional malls ($234.5 million, 44.5% of the pool balance) are currently with the special servicer. While S&P primarily focused on lodging and retail-backed loans, as part of its review it also analyzed loans secured by properties that exhibited performance deterioration prior to the pandemic and where it believes the pandemic will result in further deterioration in the property's performance. In these cases, it revised the S&P Global Ratings' net cash flow (NCF) and/or capitalization rate for the property. S&P details some of the larger loans where it made such adjustments below. The downgrades on classes B through J primarily reflect S&P's revised valuations on the three largest loans in the transaction, two of which are secured by mall properties. These three loans comprise 66.2% of the remaining pooled trust balance: Holyoke Mall ($181.3 million, 34.4%), The Galleria Office Towers ($114.2 million, 21.7%), and Sangertown Square ($53.2 million, 10.1%). In addition, S&P downgraded classes E, F, G, H, and J further than the model-indicated ratings because it considered the classes' susceptibility to reduced liquidity support from the specially serviced loans. In its analysis, S&P considered the special servicing fees as well as the potential for an appraisal subordinate entitlement reduction (ASER) to be implemented on the specially serviced Holyoke Mall and Sangertown Square loans. "The affirmation on class A-4 reflects our view that the current rating is in line with the model-indicated rating," S&P said. S&P affirmed its 'AAA (sf)' rating on the class X-A interest-only (IO) certificates based on its criteria for rating IO securities, in which the rating on the IO security would not be higher than that of the lowest-rated reference class." The notional amount on class X-A references the aggregate balances of classes A-1, A-2, A-3, and A-4 regular interest. Classes A-1, A-2, and A-3 have been repaid in full. S&P acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. TRANSACTION SUMMARY As of the August 2020 trustee remittance report, the collateral pool balance was $527.6 million, which is 35.3% of the pool balance at issuance. The pool currently includes 12 loans, down from 45 loans at issuance. Two loans were with the special servicer, Midland Loan Services Inc. (Midland), three ($40.3 million, 7.6%) were defeased, and three ($135.3 million, 25.7%) were on the master servicer's watchlist. To date, the transaction has experienced $16.4 million in principal losses, or 1.1% of the original pool trust balance. Excluding the three defeased loans and using adjusted servicer-reported numbers, for the nine remaining loans in the pool S&P calculated a 1.17x S&P Global Ratings' weighted average debt service coverage (DSC) and 87.2% S&P Global Ratings' weighted average loan-to-value (LTV) ratio using an 8.81% S&P Global Ratings' weighted average capitalization rate. Some of the loans with a materially revised S&P Global Ratings' NCF and valuation are: -- Holyoke Mall (34.4% of the pooled trust balance)-- S&P had previously highlighted this loan as one worth monitoring in its research commentary " Shop With Caution - CMBS Mall Loans Worth Watching" published Jan. 8, 2020. The loan is secured by 1.3 million sq. ft. of a 1.6 million-sq.-ft. regional mall in Holyoke, Mass. The loan transferred to the special servicer in May 2020 due to imminent default. As of the March 2020 rent roll, the property was 77.5% occupied, with the majority of the vacancy due to a vacant anchor space (166,000 sq. ft.) that was previously occupied by Sears. Some of the major tenants at the property include Macy's (non-collateral anchor; 200,000 sq. ft.), Target (155,558 sq. ft.), J.C. Penney (149,146 sq. ft.), and Burlington Coat Factory (62,926 sq. ft.). The mall reopened on June 8, 2020, after closing in mid-March due to COVID-19. The servicer-reported NCF has been steadily declining in the past three years--$21.3 million in 2017, $19.8 million in 2018, and $17.6 million in 2019. Accordingly, S&P revised its NCF to $18.0 million, 13.8% lower than the last review in March 2020. S&P also increased its S&P Global Ratings' capitalization rate to 9.25% (up from 7.75% in the last review) to reflect the challenges facing the mall and the overall sector. This yields an S&P Global Ratings' value of $194.2 million and a 93.4% S&P Global Ratings' LTV ratio on the loan. In addition, $9.1 million is currently held in reserve for this loan. -- The Galleria Office Towers (21.7% of the pooled trust balance)-- The loan is secured by a portfolio of three office buildings totaling 1.1 million sq. ft. in Houston. The loan appears on the master servicer's watchlist due to a low reported DSC, which was 1.15x for year-end 2019. The servicer-reported NCF has been relatively stable historically. However, occupancy at the portfolio has declined in recent years, falling from 76.0% as of year-end 2017 to 75.2% as of year-end 2018 and 69.1% as of year-end 2019. In addition, the largest tenant is Panhandle Eastern (160,891 sq. ft.), and its lease expires in March 2022 with gross rent of $32.34 per sq. ft. According to CoStar, for the Galleria/Uptown submarket where the properties are located, the current market vacancy is 17.5% and market rent is $31.20 per sq. ft. In addition, S&P's analysis considered the $6.6 million of reserves held by the master servicer, which the rating agency believes somewhat mitigates the tenant rollover risk and weak submarket fundamentals. However, it increased the S&P Global Ratings' capitalization rate to 8.75% from 7.25% to reflect the class B nature of the properties, rollover risk, and declining occupancy. This yielded an S&P Global Ratings' value of $125.6 million, or $118 per sq. ft., and a 91.0% S&P Global Ratings' LTV ratio on the loan. -- Sangertown Square (10.1% of the pooled trust balance)—S&P had also previously highlighted this loan as one worth monitoring in its research commentary "Shop With Caution - CMBS Mall Loans Worth Watching" published Jan. 8, 2020. The loan is secured by an 894,127-sq.-ft. regional mall in New Hartford, N.Y. The loan transferred to the special servicer in May 2020 due to imminent default. As of the March 2020 rent roll, the property was 94.0% occupied. Some of the major tenants at the property include Boscov's (172,473 sq. ft.), J.C. Penney (149,662 sq. ft.), Macy's (139,634 sq. ft.), Target (126,000 sq. ft.), and Dick's Sporting Goods (51,335 sq. ft.). The mall reopened in mid-July 2020 after closing in mid-March due to COVID-19. The servicer-reported NCF has been stable at $5.7 million for 2019 and 2018. S&P increased its S&P Global Ratings' capitalization rate to 9.25% (up from 8.50% in the last review) to reflect the challenges facing the mall and the overall sector. Using an S&P Global Ratings' NCF of $5.2 million, which is 8.1% lower than the 2019 servicer-reported NCF, yielded an S&P Global Ratings' value of $56.1 million and a 94.9% S&P Global Ratings' LTV ratio on the loan. In addition, S&P noted that $1.5 million is currently held in reserve for this loan. -- Magnolia Hotel (3.6% of the pooled trust balance)--The loan is secured by the borrower's fee interest in a 329-room full-service hotel in Dallas. The loan is on the master servicer's watchlist because the borrower requested COVID-19 relief. The master servicer indicated that a forbearance agreement was consummated as of May 1, 2020. Provisions included deferring debt service payments for 90 days, using reserves held by the master servicer to make debt service payments, replenishing the reserve account over the next 12 months by the borrower, and waiving loan covenants (excluding event of default) over the next 12 months. The servicer-reported occupancy percentage was in the low 70s, and the hotel had relatively stable net operating income over the past three years. S&P used an S&P Global Ratings' NCF of $3.6 million and increased the S&P Global Ratings' capitalization rate to 10.50% from 9.25% to better capture the increased susceptibility to NCF and liquidity disruption stemming from the pandemic. This yielded an S&P Global Ratings' value of 34.1 million ($103,689 per guestroom) and a 55.2% S&P Global Ratings' LTV ratio on the loan. CREDIT CONSIDERATIONS As of the August 2020 trustee remittance report, two loans, Holyoke Mall and Sangertown Square, were reported with the special servicer, Midland. Both loans transferred to the special servicer in May 2020 due to imminent default, and the reported payment statuses were 90-plus days delinquent. Midland indicated that discussions of a possible resolution with the sponsor of the loans (Pyramid Group for both loans) are ongoing. "Although specific discussion terms are not disclosed yet, it is our understanding that the parties are close to a possible resolution. As of the August 2020 trustee remittance report, special servicing fees totaling $50,624 are impacting the trust. However, due to the decline in reported performance at both malls, our analysis considered the potential for appraisal reduction amounts to be implemented on the loans," S&P said. S&P will continue to monitor the transaction against the evolving economic backdrop and, should there be any meaningful changes to its performance expectations, will issue research- and ratings-related updates as necessary. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Rating Class To From B AA (sf) AA+ (sf)/Watch Neg C A (sf) AA- (sf)/Watch Neg D BBB (sf) A- (sf)/Watch Neg E BB- (sf) BBB+ (sf)/Watch Neg F B+ (sf) BBB (sf)/Watch Neg G B (sf) BBB- (sf)/Watch Neg H B- (sf) BB (sf)/Watch Neg J B- (sf) BB- (sf)/Watch Neg RATINGS AFFIRMED Class Rating A-4 AAA (sf) X-A AAA (sf) JP MORGAN 2012-LC9: S&P Lowers Class G Certs Rating to B- (sf) -------------------------------------------------------------- S&P Global Ratings lowered its ratings on the classes C, D, E, F, G, X-B, and EC commercial mortgage pass-through certificates from J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-LC9, a U.S. CMBS transaction. At the same time, S&P affirmed its ratings on five other classes from the same transaction. S&P also removed the ratings on classes F and G from CreditWatch, where they were placed with negative implications on June 3, 2020. S&P said, "We had placed our ratings on classes F and G on CreditWatch negative because we viewed them as being at an increased risk of experiencing monthly payment disruption or reduced liquidity due to their higher exposure to loans secured by retail and lodging properties, the two property types most impacted by the demand disruption posed by the ongoing pandemic. Specifically, this transaction is exposed to three specially serviced retail-backed loans, West County Center, The Waterfront, and Salem Center (36.9% of the pool trust balance), of which West County Center and Salem Center are regional malls. "As part of our review, while we primarily focused on the retail and lodging properties, we also analyzed properties that may have exhibited performance deterioration before the pandemic or where we believe the pandemic will result in further deterioration in the property's performance. In these cases, we revised the S&P Global Ratings' net cash flow (NCF) and/or capitalization rate for the property. We detail some of the larger loans where we made such adjustments below. "The downgrades on the principal-paying classes C, D, E, F and G reflect our revised view of S&P Global Ratings' NCF and/or capitalization rate for certain larger loans in the pool (described more below), as well as credit support erosion that we anticipate will occur upon the eventual resolution of one of the three specially serviced assets, a potential reduction in the liquidity support available to these classes due to ongoing interest shortfalls from special servicing fees, and the potential for appraisal reduction amounts (ARAs) to be implemented. The affirmations on principal-paying classes A-5, A-SB, A-S, and B reflect our view that the ratings are generally in line with the model-indicated ratings. "We affirmed our 'AAA (sf)' rating on the class X-A interest-only (IO) certificates based on our criteria for rating IO securities, in which the rating on the IO security would not be higher than that of the lowest-rated reference class. The notional balance of class X-A references the class A-1, A-2, A-3, A-4, A-5, A-SB, and A-S certificates. We downgraded our 'A+ (sf)' rating on the class X-B IO certificates to 'A (sf)' following our rating action on class C. The notional amount of class X-B references the aggregate balance of the class B and C certificate balances. "We downgraded our 'A+ (sf)' rating on the EC certificates to 'A (sf)'. Class EC are exchangeable certificates that may be exchanged and converted for a ratable portion of each class A-S, B, and C certificates. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." TRANSACTION SUMMARY As of the August 2020 trustee remittance report, the collateral pool balance was $608.5 million, which is 56.8% of the pool balance at issuance. The pool currently includes 30 loans and one real-estate-owned (REO) asset, down from 45 loans at issuance. Three of these assets ($224.7 million, 36.9%) are with the special servicer; four ($40.7 million, 6.7%) are defeased; and seven ($92.4 million, 15.2%) are on the master servicer's watchlist. S&P said, "We calculated a 1.58x S&P Global Ratings' weighted average debt service coverage (DSC) and 87.4% S&P Global Ratings' weighted average loan-to-value (LTV) ratio using a 8.22% S&P Global Ratings' weighted average capitalization rate. The DSC, LTV, and capitalization rate calculations exclude the specially serviced asset, Salem Center, and the defeased loans. The top 10 nondefeased loans have an aggregate outstanding pool trust balance of $468.3 million (77.0%). Excluding the Salem Center, which is REO, using adjusted servicer-reported numbers, we calculated an S&P Global Ratings' weighted average DSC and LTV of 1.51x and 90.6%, respectively, for the top 10 loans." Some of the larger loans with material revised S&P Global Ratings' NCFs and/or cap rates are as follows: West County Center (19.3% of the pooled trust balance): The loan is secured by 743,945 sq. ft. of a 1.2-million-sq.-ft. regional mall in Des Peres, Mo. The loan was transferred to the special servicer on April 6, 2020, and it matures in December 2022. The loan is reported as current in its payments; however, the borrower previously requested relief for COVID-19, but later rescinded the request and subsequently asked for the loan to be transferred back to the master servicer. As of the March 2020 rent roll, the property was 96.5% occupied. Some of the major tenants, all of which are still operating at the property, include Macy's (266,000 sq. ft.), J.C. Penney (199,469 sq. ft.), Nordstrom (185,000 sq. ft.), Dicks Sporting Goods (81,952 sq. ft.), and H&M (31,529 sq. ft.). The servicer-reported NCF has been declining over the past three years--$20.2 million in 2017, $18.9 million in 2018, and $17.7 million in 2019. S&P said, "Accordingly, we derived our S&P Global Ratings' NCF of $13.1 million, down 18.3% from last review. We retained our S&P Global Ratings' capitalization rate of 8.75% to yield an S&P Global Ratings' value of $102.6 million and a 114.7% S&P Global Ratings' LTV ratio on the loan." Salem Center (4.8% of the pooled trust balance): The loan is secured by 211,404 sq. ft. of an approximately 650,000-sq.-ft. regional mall in Salem, Ore. The loan was transferred to special servicing in September 2017 due to imminent maturity default, and the property was later foreclosed on in August 2018. According to the special servicer, Rialto Capital Advisors LLC, the property is currently 69% occupied. Some of the major tenants include Macy's (183,500 sq. ft.), J.C. Penney (102,500 sq. ft.), Kohl's (80,000 sq. ft.), Nordstrom (72,000 sq. ft.), and Cinnebarre (38,000 sq. ft.). Of the above tenants, only Cinnebarre is part of the collateral for the loan, and that tenant is currently closed temporarily. The most recently available appraisal from the servicer indicates a value of $17.0 million for the underlying collateral. S&P said, "We further haircut that appraisal value by 10% to account for the continued deterioration in the operating environment for malls, as well as the negative impact of the ongoing pandemic on the performance of the property. We therefore arrived at a collateral value of $15.3 million, which would result in a moderate loss upon the ultimate resolution of this asset." Embassy Suites Birmingham (3.5% of the pooled trust balance): The loan is secured by a 242-room, full-service hotel located in Birmingham, Ala. The loan was placed on the servicer's watchlist in August 2020 due to low DSC, which was 1.15x per the master servicer. The servicer-reported NCF has been declining over the past three years--$3.3 million in 2017, $2.8 million in 2018, and $2.2 million in 2019. S&P said, "Accordingly, we derived our S&P Global Ratings' NCF of $2.5 million, down 8.2% from last review. We also increased our S&P Global Ratings' capitalization rate to 10.50% (up from 9.25% at last review) to account for the increased risk to hotel properties posed by the ongoing pandemic." This yields an S&P Global Ratings' value of $24.1 million and an 87.5% S&P Global Ratings' LTV ratio on the loan. Embassy Suites Minneapolis (5.6% of the pooled trust balance): The loan is secured by a 310-room, full-service hotel located in Bloomington, Minn. S&P said, "The loan is current; and to our knowledge, the borrower has not reached out to the master servicer for relief due to COVID-19. We derived our S&P Global Ratings' NCF of $4.0 million, comparable to our last review. We also increased the S&P Global Ratings' capitalization rate to 10.00% (up from from 9.00% at last review) to account for the increased risk to hotel properties posed by the ongoing pandemic." This yields an S&P Global Ratings' value of $39.9 million and an 85.0% S&P Global Ratings' LTV ratio on the loan. CREDIT CONSIDERATIONS As of the August 2020 trustee remittance report, the West County Center, The Waterfront, and Salem Center loans were with the special servicer, Rialto Capital Advisors LLC (details on the West County Center and Salem Center above). The Waterfront loan is the second-largest loan ($77.5 million) in the pool, is with the special servicer, and has a total reported exposure of $77.5 million. The loan, which is reported as current in its payments, is secured by approximately 1.0 million sq. ft. of an approximately 1.6-million-sq.-ft. lifestyle center in Homestead, Penn. The borrower and special servicer are in ongoing discussions with regards to potential loan forbearance. S&P will continue to monitor the transaction against the evolving economic backdrop and, should there be any meaningful changes to our performance expectations, will issue research- or ratings-related updates as necessary. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-LC9 Commercial mortgage pass-through certificates Rating Class To From F BB- (sf) BB (sf)/Watch Neg G B- (sf) B+ (sf)/Watch Neg RATINGS LOWERED J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-LC9 Commercial mortgage pass-through certificates Rating Class To From C A (sf) A+ (sf) D BBB+ (sf) A- (sf) E BB+ (sf) BBB- (sf X-B A (sf) A+ (sf) EC A (sf) A+ (sf) RATINGS AFFIRMED J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-LC9 Commercial mortgage pass-through certificates Class Rating A-5 AAA (sf) A-SB AAA (sf) A-S AAA (sf) B AA (sf) X-A AAA (sf) JPMBB COMMERCIAL 2013-C12: S&P Cuts Class F Certs Rating to B-(sf) ------------------------------------------------------------------ S&P Global Ratings lowered its rating on the class F commercial mortgage pass-through certificates from JPMBB Commercial Mortgage Securities Trust 2013-C12, a U.S. CMBS transaction. At the same time, S&P affirmed its ratings on classes A-4 through E. S&P also removed its ratings on classes E and F from CreditWatch, where they were placed with negative implications on June 3, 2020. S&P said, "We had placed our ratings on classes E and F on CreditWatch with negative implications because we viewed them as being at an increased risk of experiencing monthly payment disruption or reduced liquidity due to their higher exposure to loans secured by lodging and retail properties, the two property types most impacted by the demand disruption posed by the ongoing COVID-19 pandemic. "As part of our review, while we primarily focused on the lodging and retail properties, we also analyzed properties that may have exhibited performance deterioration before the pandemic, or where we believe the pandemic will result in further deterioration in the property's performance. In these cases, we revised the S&P Global Ratings' net cash flow (NCF) and/or capitalization rate for the property. We detail some of the larger loans where we made such adjustments below. The affirmations on the principal- and interest-paying classes A-4 through A-S and class D reflect our view that the ratings are in line with the model-indicated ratings. While the model-indicated ratings for classes B, C, and E were higher than the classes' current rating levels, we considered the pool's non-defeased retail and lodging concentration (43.4% and 6.2%, respectively, of the total pool balance), as well as the classes' more subordinate positions within the trust, exposing them to the potential for further credit deterioration. "While the model-indicated rating on class F was reflective of an affirmation, we lowered the rating to 'B- (sf)' to reflect our view of the bond's susceptibility to reduced liquidity support from the three specially serviced loans ($86.7 million, 9.3%). We affirmed our 'AAA (sf)' rating on the class X-A interest-only (IO) certificates based on our criteria for rating IO securities, in which the rating on the IO security would not be higher than that of the lowest-rated reference class." The notional amount on class X-A references classes A-1 through A-S. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." TRANSACTION SUMMARY As of the August 2020, trustee remittance report, the collateral pool balance was $935.2 million, which is 69.7% of the pool balance at issuance. The pool currently includes 64 loans and one real-estate-owned (REO) asset, down from 77 loans at issuance. As of the August 2020 remittance report, three assets ($86.7 million, 9.3%) were in special servicing, two with LNR Partners, LLC (LNR) and one (Southridge Mall) with Midland Loan Services (Midland). Eleven loans ($175.1 million, 18.7%) are on the master servicer's watchlist, the majority of which appear there due to COVID-19 relief requests. There are also 13 defeased loans ($95.7 million, 10.2%) in the pool. Using adjusted servicer-reported numbers, S&P calculated a 1.71x S&P Global Ratings weighted average debt service coverage (DSC) and 71.4% S&P Global Ratings weighted average loan-to-value (LTV) ratio using a 7.87% S&P Global Ratings weighted average capitalization rate. The DSC, LTV, and capitalization rate calculations exclude two of the three specially serviced assets and defeased loans. Details on the loans with material revised S&P Global Ratings' NCF and valuation are as follows: Southridge Mall (4.8% of the pooled trust balance): This is the fourth-largest loan in the pool. The trust loan, with a balance of $45.1 million, is currently with the special servicer and has a total reported exposure of $46.0 million. The trust loan represents 40% of the total A-note balance (the other 60% is held outside of the trust in JPMBB 2013-C14 (not rated by S&PGR)). The loan is secured by an approximately 557,000-sq.-ft. regional mall in Greendale, WI. The loan transferred to the special servicer (Midland) in July 2020 due to imminent default. Recent reporting has stated that the borrower would agree to a stipulated receivership and friendly foreclosure. The loan is reported as 90-plus days delinquent in payments. As of the March 2020 rent roll, the property was 86.4% occupied. Some of the major tenants at the property include Macy's (149,374 sq. ft.), H&M (16,548 sq. ft.), Old Navy (12,860 sq. ft.), Shoe Dept. Encore (10,623 sq. ft.) and Tilly's (7,000 sq. ft.). There is also a vacant anchor space previously occupied by Kohl's (85,247 sq. ft.), as well as a non-collateral anchor in the form of JC Penney. Since recent reporting states that the borrower would agree to a friendly foreclosure and stipulated receivership, S&P increased its S&P Global Ratings' capitalization rate for the property to 11.00% (up from 7.50% in its last review) to reflect the challenges facing the mall and the overall retail sector. This yields an S&P Global Ratings value of $34.5 million and a 130.8% S&P Global Ratings LTV on the loan. Liberty Tree Mall & Strip Center (3.2% of the pooled trust balance): The loan, with a balance of $29.6 million, is the seventh-largest loan in the pool, is with the special servicer, and has a total reported exposure of $30.2 million. The loan is secured by an approximately 449,000-sq.-ft. regional mall located in Danvers, MA. The loan transferred to the special servicer (LNR)due to imminent default in July 2020. The loan is currently reported as 90-plus days delinquent in its payments. Some of the major tenants at the property include Loews (80,800 sq. ft.), Marshalls (46,898 sq. ft.), Sky Zone (43,802 sq. ft.), Total Wine & More (28,738 sq. ft.), and Michael's (27,490 sq. ft.). S&P increased its S&P Global Ratings' capitalization rate to 9.25% (up from 8.75% in its last review) to reflect the challenges facing the mall and the overall retail sector. This yields an S&P Global Ratings' value of $61.1 million and a 48.53% S&P Global Ratings LTV on the loan. It is our understanding that the lender has conditionally approved a deferral of principal payments for three months, that is expected to be repaid by March 2021. The borrower will be funding operating and interest shortfalls. To date, the transaction has not experienced any principal losses. S&P said, "We expect losses to reach approximately 1.8% of the original pool trust balance in the near term upon the eventual resolution of two of the three specially serviced assets. We did not estimate a near term resolution for Liberty Tree Mall & Strip Center given the conditional approval of a forbearance plan." CREDIT CONSIDERATIONS As of the August 2020 trustee remittance report, three assets were reported as being with the special servicers, LNR and Midland. Park 50 ($12.0 million, 1.3%) is the third-largest specially serviced asset. The total reported exposure is $14.8 million, and the asset is real estate owned after it was transferred to the special servicer in August 2017 for delinquent payments. The asset is a 424,293-sq.-ft. office in Milford, Ohio. The asset is scheduled to be sold in a general auction in September 2020. S&P will continue to monitor the transaction against the evolving economic backdrop, and should there be any meaningful changes to our performance expectations, will issue research- and/or ratings-related updates as necessary. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATING DOWNGRADED AND REMOVED FROM WATCH NEGATIVE JPMBB Commercial Mortgage Securities Trust 2013-C12 Commercial mortgage pass-through certificates Rating Class To From F B- (sf) B+ (sf)/Watch Neg RATING AFFIRMED AND REMOVED FROM WATCH NEGATIVE JPMBB Commercial Mortgage Securities Trust 2013-C12 Commercial mortgage pass-through certificates Rating Class To From E BB (sf) BB (sf)/Watch Neg RATINGS AFFIRMED JPMBB Commercial Mortgage Securities Trust 2013-C12 Commercial mortgage pass-through certificates Class Rating A-4 AAA (sf) A-5 AAA (sf) A-SB AAA (sf) A-S AAA (sf) B AA+ (sf) C A+ (sf) D BBB+ (sf) X-A AAA (sf) JPMBB COMMERCIAL 2014-C23: Fitch Cuts Class F Certs to CCCsf ------------------------------------------------------------ Fitch Ratings has downgraded two classes, affirmed 13 classes and revised the Rating Outlooks on two classes of JPMBB Commercial Mortgage Securities Trust's series 2014-C23 commercial mortgage pass-through certificates. RATING ACTIONS JPMBB 2014-C23 Class A-2 46643ABB8; LT PIFsf Paid In Full; previously AAAsf Class A-3 46643ABC6; LT AAAsf Affirmed; previously AAAsf Class A-4 46643ABD4; LT AAAsf Affirmed; previously AAAsf Class A-5 46643ABE2; LT AAAsf Affirmed; previously AAAsf Class A-S 46643ABJ1; LT AAAsf Affirmed; previously AAAsf Class A-SB 46643ABF9; LT AAAsf Affirmed; previously AAAsf Class B 46643ABK8; LT AAsf Affirmed; previously AAsf Class C 46643ABL6; LT Asf Affirmed; previously Asf Class D 46643AAG8; LT BBB-sf Affirmed; previously BBB-sf Class E 46643AAJ2; LT BBsf Affirmed; previously BBsf Class EC 46643ABM4; LT Asf Affirmed; previously Asf Class F 46643AAL7; LT CCCsf Downgrade; previously Bsf Class X-A 46643ABG7; LT AAAsf Affirmed; previously AAAsf Class X-B 46643ABH5; LT BBB-sf Affirmed; previously BBB-sf Class X-C 46643AAA1; LT BBsf Affirmed; previously BBsf Class X-D 46643AAC7; LT CCCsf Downgrade; previously Bsf KEY RATING DRIVERS Increased Loss Expectations/Specially Serviced Loans: Since Fitch's last rating action, loss expectations have increased due to the transfer of five loans (7.6% of the pool) to special servicing, increased number of Fitch Loans of Concern (FLOCs), and additional stresses applied to retail and hotel FLOCs due to the coronavirus pandemic. There have been no realized losses to date. Eleven loans (21.9% of the pool) are currently on the master servicer's watchlist, mostly for deferred maintenance issues, occupancy declines due to tenant vacancies or upcoming rollover and coronavirus relief requests. Twelve loans (24% of the pool) including the specially serviced loans are considered FLOCs. The largest specially serviced loan, Las Catalinas Mall (5.3% of the pool), is secured by a 355,385-sf collateral portion of a 494,071-sf regional mall in Caguas, Puerto Rico, approximately 20 miles south of San Juan. The loan was transferred to special servicing in June 2020 for imminent default due to the impact of the coronavirus pandemic. Anchor space includes a non-collateral Sears and former anchor tenant K-Mart (123,000 sf), which terminated their lease in January 2019 and remains vacant. Large inline tenants include Forever 21 (3.8% of NRA; through January 2026), Old Navy (3.6%; October 2029); Shoe Carnival (2.7%; January 2024) and La Nueva Era (1.8%; November 2029). Casual dining options include P.F. Chang's (2.1%) and Outback Steakhouse (1.9%), which has gone dark but continues to lease their space through May 2025. Per the special servicer, the borrower failed to make the March 2020 payment. The mall was closed in March per government order, but reopened in June with capacity restrictions. Per the special servicer, counsel has been retained and a notice of default was sent. Several tenants have requested rent relief. The borrower has made a proposal for a loan modification, which is under review, and the special servicer is dual tracking foreclosure. An appraisal has been ordered. The remaining specially serviced loans are all less than 1% of the pool and are secured by an office property located in Dover, DE which is 90+ days delinquent, and three hotel properties located in AK, OH, and WV, which are all coronavirus-related transfers. The largest non-specially serviced FLOC, Stevens Center Business Park (5.2% of the pool) is secured by a 468,373-sf office complex comprised of four single-tenant and two multitenant buildings located in Richland, WA in an area known as the Tri-Cities Research District. The loan is on the master servicer's watchlist due to decline in occupancy, revenues and expenses, which are all down roughly 10% related to the downsizing of tenant Bechtel in late 2018, which terminated about 77,000 sf, reducing their footprint from 98,000 to 22,000. The property is 85.3% occupied as of June 2020. There is limited upcoming rollover of 4.7% in 2020 until 16.2% in 2023. The YE 2019 DSCR is 1.19x down from 1.34x YE 2018, 1.32x YE 2017 and 1.65x (Issuance). The second largest non-specially serviced FLOC, Beverly Connection (4.3% of the pool) is secured by a 334,566 sf shopping center located in Los Angeles, CA. Major tenants include Target (30%), expiration January 2029; Marshalls (10%), expiration September 2021; Ross Dress for Less (9%), expiration January 2021; Saks Fifth Ave Off Fifth (8%), expiration August 2025; TJMaxx (7%), expiration May 2023. The property is 95% occupied as of March 2020 in line with 95.3% in March 2019, 94.4% in March 2018, and 97.3% at issuance. There are upcoming rollovers of 3.2% 2020, 19.1% 2021, 10.8% 2023. The property reported comparable in-line sales of $487 psf as of YE 2019, $487 psf YE 2017, $502 psf YE 2016, $516 psf YE 2015, $518 psf YE 2014, $541 psf at issuance. The loan is currently 60 days delinquent and is on the master servicer's watchlist due to the borrower's request for coronavirus relief. The third largest non-specially serviced FLOC, InterMountain Hotel Portfolio (3.3% of the pool) is secured by a portfolio of three Homewood Suites hotels located in CA, CO, NV and 1 Hyatt Place located in NV totaling 449 rooms. The loan is on the master servicer's watchlist for delinquency, as the loan has been delinquent at least three times in the last 12 months. The borrower has remitted $642,062.26 to the lender, which will satisfy the outstanding June and July 2020 payments once processed. Per the June 2020 STR reports: Homewood Suites Palm Desert - occupancy, average daily rate (ADR), revenue per available room (RevPAR) were 61%, $120, $74 vs 59%, $119, $71 for comp set; Homewood Suites Fort Collins - occ, ADR, RevPAR were 61%, $122, $74 vs 54%, $111, $61 for comp set; Homewood Suites Reno, NV - occ, ADR, RevPAR were 72%, $136, $98 vs 63%, $126, $79 for comp set; Hyatt Place Reno - occ, ADR, RevPAR were 68%, $121, $82 vs 58%, $110, $64 for comp set. The most recent reported DSCR for the portfolio as of YE 2019 is 2.09x; compared to YE 2018 at 2.22x; and YE 2017 at 2.14x. The remaining non-specially serviced FLOCs are 1% of the pool or below and are on the master servicer's watchlist for declines in occupancy and performance, deferred maintenance and/or coronavirus relief requests. Increased Credit Enhancement: Credit Enhancement has improved since issuance given loan amortization, payoffs, and defeasance. An additional two loans (3.9%of the pool) have defeased since Fitch's last rating action. In total, nine loans (11.7%) are currently defeased. The pool has paid down approximately 24.3% since issuance. Approximately 26.7% of the pool is full-term, interest only and 50.4% of the pool is partial interest-only. Since the last rating action, two loans (previously 5% of the pool) paid off post maturity, including the ninth largest, Renaissance Inn Midtown East. Alternative Loss Considerations: Fitch ran an additional sensitivity, which assumes the seven defeased loans pay in full as well as a 50% assumed outsize loss on Las Catalinas Mall due to the loss of Kmart, possible co-tenancy clauses, declining cash flow, and secondary market. This sensitivity also contributed to the downgrade of classes F and X-D and the revision of the Outlooks to Negative from Stable on classes E and X-C. Coronavirus Exposure: Eight loans (14%) are secured by hotel properties, including three loans (11%) in the top 15. The WA NOI DSCR for the non-defeased hotel loans is 2.36x; these hotel loans could sustain a decline in NOI of 57.7% before NOI DSCR falls below 1.0x. Nine loans (22%) are secured by retail properties, including four loans (20%) in the top 15. The WA NOI DSCR for the non-defeased retail loans is 2.50x; these retail loans could sustain a decline in NOI of 59.9% before DSCR falls below 1.0x. Fifteen loans (16.3%) are secured by multifamily properties. The WA NOI DSCR for the non-defeased multifamily loans is 1.61x; these multifamily loans could sustain a decline in NOI of 31.2% before DSCR falls below 1.0x. Fitch applied additional stresses to three hotel loans, three retail loans and two multifamily loans to account for potential cash flow disruptions due to the coronavirus pandemic; these additional stresses contributed to downgrades of classes F and X- D and the revision of the Outlooks to Negative from Stable on classes E and X-C. ADDITIONAL CONSIDERATIONS Property Type Concentration: Nine loans (22%) are secured by retail properties. Four (20%) of the top 10 loans are collateralized by (two regional malls and two shopping centers) located in Grapevine, TX; Caguas, PR; Los Angeles, CA; and Northville, MI. The Las Catalinas Mall (5.3%) loan in Puerto Rico is in special servicing and has a dark Kmart and exposure to Sears amid challenging economic conditions. Eight loans (14%) are secured by hotel properties, of which three (11%) are in the top 15 loan Pool Concentrations: The top 10 loans represent (58.8%) of the total pool balance and the top three loans (27.8%) of the total pool balance. Maturity Schedule: One loan (3.7%) matures in August 2021, 51 loans (94.8%) in 2024; and one loan (1.5%) in 2034. RATING SENSITIVITIES The downgrade of classes F and X-D reflects increased loss expectations associated with the specially serviced loans and FLOCs. The Negative Rating Outlooks on classes E and X-C reflect the potential for further downgrades due to concerns surrounding the ultimate impact of the coronavirus pandemic and the performance concerns associated with the FLOCs and specially serviced loans. The Stable Rating Outlooks on classes A-3 through D and classes X-A and X-B reflect the increasing credit enhancement, continued amortization, defeasance and relatively stable performance of the majority of the pool. Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with pay down and/or defeasance. Upgrades of the 'Asf' and 'AAsf' categories would likely occur with significant improvement in credit enhancement and/or defeasance; however, adverse selection, increased concentrations and further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. An upgrade to 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 were likelihood for interest shortfalls. Upgrades to the 'CCCsf' and 'BBsf' categories are not likely until the later years in a 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 credit enhancement to the classes. Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade: Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades of the super-senior A-3, A-4, A-5, and A-SB classes, rated 'AAAsf', are not considered likely due to the position in the capital structure, but may occur should interest shortfalls affect these classes. Downgrades of classes A-S, B, C, X-A, X-B and X-C may occur if the larger FLOCs realize outsized losses. Downgrades to the 'BBsf' and 'BBBsf' categories, both of which currently have Negative Outlooks, would occur should loss expectations increase significantly, the FLOCs experience outsized losses and/or the loans vulnerable to the coronavirus pandemic not stabilize. A downgrade to the distressed 'CCCsf'-rated classes would occur with increased certainty of losses or as losses are realized. 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 further negative rating actions, including downgrades or additional Negative Rating Outlook revisions. 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). LOCKWOOD GROVE: Moody's Confirms Ba3 Rating on Class E-RR Notes --------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Lockwood Grove CLO, Ltd.: US$23,500,000 Class D-RR Mezzanine Secured Deferrable Floating Rate Notes due 2030 (the "Class D-RR Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$24,000,000 Class E-RR Junior Secured Deferrable Floating Rate Notes due 2030 (the "Class E-RR Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D-RR Notes and the Class E-RR Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-RR Notes and the Class E-RR Notes issued by the CLO. The CLO, originally issued in December 2014 and refinanced in October 2016 and February 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in January 2022. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3558, compared to 3139 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3157 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 20.9% as of July 2020. Furthermore, Moody's calculated the OC ratios (excluding haircuts) for the Class D-RR and Class E-RR Notes as of July 2020 at 114.45% and 106.85, respectively. Moody's noted that previous OC tests failures resulted in repayment of senior notes and deferral of current interest payments on the Class E-RR Notes. More recently, however, Moody's noted that the Class D-RR OC test was reported [4] as passing, and all deferred interest on the Class E-RR Notes were subsequently paid in full in July 2020. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $380,864,600 Defaulted Securities: $12,279,197 Diversity Score: 78 Weighted Average Rating Factor (WARF): 3424 Weighted Average Life (WAL): 5.28 years Weighted Average Spread (WAS): 3.34% Weighted Average Recovery Rate (WARR): 48.1% Par haircut in OC tests and interest diversion test: 1.9% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. MADISON PARK XLVI: S&P Assigns Prelim BB- (sf) Rating to E Notes ---------------------------------------------------------------- S&P Global Ratings assigned its preliminary ratings to Madison Park Funding XLVI Ltd.'s fixed-and floating-rate notes. The note issuance is a CLO transaction backed by broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The notes are managed by Credit Suisse Asset Management LLC. The preliminary ratings are based on information as of Aug. 25, 2020. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The diversification of the collateral pool. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The experience of the collateral manager's team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is expected to be bankruptcy remote. PRELIMINARY RATINGS ASSIGNED Madison Park Funding XLVI Ltd./Madison Park Funding XLVI LLC Class Rating Amount (mil. $) A AAA (sf) 360.00 B-1 AA (sf) 81.00 B-2 AA (sf) 15.00 C (deferrable) A (sf) 36.00 D (deferrable) BBB- (sf) 30.00 E (deferrable) BB- (sf) 21.00 Subordinated notes NR 53.20 NR--Not rated. MIDOCEAN CREDIT V: Moody's Lowers Class F Notes to Caa2 ------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by MidOcean Credit CLO V: US$8,000,000 Class F Deferrable Floating Rate Notes due 2028 (the "Class F Notes"), Downgraded to Caa2 (sf); previously on June 3, 2020 Caa1 (sf) Placed Under Review for Possible Downgrade The Class F Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the ratings on the following notes: US$16,750,000 Class D Deferrable Floating Rate Notes Due 2028 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$23,250,000 Class E-R Deferrable Floating Rate Notes due 2028 (the "Class E-R Notes"), Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and Class E-R Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D Notes, Class E-R Notes, and Class F Notes issued by the CLO. The CLO, originally issued in June 2016 and partially refinanced in September 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in July 2020. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3504 compared to 2946 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2956 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 23.36% as of August 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $391.1 million, or $8.9 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that the OC tests for the Class D Notes, Class E-R Notes, and Class F Notes were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $390,079,509 Defaulted Securities: $1,630,152 Diversity Score: 63 Weighted Average Rating Factor: 3498 Weighted Average Life: 4.5 years Weighted Average Spread: 3.31% Weighted Average Recovery Rate: 48.6% Finally, Moody's notes that it also considered the information in the August 2020 trustee report [5] which became available immediately prior to the release of this announcement. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. MONARCH GROVE: Moody's Lowers Rating on Class E Notes to B1 ----------------------------------------------------------- Moody's Investors Service downgraded the rating on the following notes issued by Monarch Grove CLO, Ltd.: US$26,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2028 (current outstanding balance of $26,441,571) (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class E Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the rating on the following notes: US$22,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the "Class D Notes"), Confirmed at Baa2 (sf); previously on April 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade The Class D Notes are referred to herein as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D and the Class E Notes issued by the CLO. The CLO, issued in February 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in January 2020. RATINGS RATIONALE The downgrade on the Downgraded Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to most CLO notes has declined, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the rating on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3689, compared to 3212 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3174 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 24.0% as of August 2020. Furthermore, Moody's calculated the OC ratios (excluding haircuts) for the Class D Notes and Class E Notes as of July 2020 at 114.00% and 104.62%, respectively. Moody's noted that previous OC tests failures resulted in repayment of senior notes and deferral of current interest payments on the Class D Notes and Class E Notes. More recently, however, only the Class E OC test was reported [4] as failing, and all deferred interest on the Class D Notes were subsequently paid in full in July 2020. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $331,883,165 Defaulted Securities: $11,225,749 Diversity Score: 75 Weighted Average Rating Factor (WARF): 3559 Weighted Average Life (WAL): 4.1 years Weighted Average Spread (WAS): 3.36% Weighted Average Recovery Rate (WARR): 48.1% Par haircut in OC tests and interest diversion test: 3.0% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes, and dependent Combination Securities, secured notes, and repackaged securities is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. MONROE CAPITAL X: Moody's Gives Ba3 Rating on Class E Notes ----------------------------------------------------------- Moody's Investors Service assigned ratings to five classes of notes issued by Monroe Capital MML CLO X, Ltd. Moody's rating action is as follows: US$212,000,000 Class A Senior Floating Rate Notes Due 2031 (the "Class A Notes"), Definitive Rating Assigned Aaa (sf) US$38,000,000 Class B Floating Rate Notes Due 2031 (the "Class B Notes"), Definitive Rating Assigned Aa2 (sf) US$29,600,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2031 (the "Class C Notes"), Definitive Rating Assigned A2 (sf) US$26,400,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2031 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf) US$22,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due 2031 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf) The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." RATINGS RATIONALE The rationale for the ratings is based on its methodology and considers all relevant risks, particularly those associated with the CLO's portfolio and structure. Monroe Capital MML CLO X, Ltd. is a managed cash flow CLO. The issued notes will be collateralized primarily by middle market loans. At least 95.0% of the portfolio must consist of senior secured loans and eligible investments, and up to 5.0% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is approximately 50% ramped as of the closing date. Monroe Capital CLO Manager LLC will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's three-year reinvestment period. Thereafter, the Manager may not reinvest in new assets and all principal proceeds, including sale proceeds, will be used to amortize the notes in accordance with the priority of payments. In addition to the Rated Notes, the Issuer issued subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2020. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 42 Weighted Average Rating Factor (WARF): 3900 Weighted Average Spread (WAS): 4.50% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 46.0% Weighted Average Life (WAL): 7.0 years The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in U.S. economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. The CLO permits the manager to determine RiskCalc-derived rating factors, based on modifications to certain pre-qualifying conditions applicable to the use of RiskCalc, for obligors temporarily ineligible to receive Moody's credit estimates. Such determinations are limited to a small portion of the portfolio and permit certain modifications for a limited time. Its rating analysis included rating factor stress scenarios. Factors That Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. MP CLO IV: Moody's Lowers Rating on Class E-R Notes to B2 --------------------------------------------------------- Moody's Investors Service downgraded the rating on the following note issued by MP CLO IV, Ltd.: US$24,000,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2029 (the "Class E-R Notes"), Downgraded to B2 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class E-R Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the rating on the following note: US$24,600,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2029 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade The Class D-R Notes are referred to herein as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-R and Class E-R Notes issued by the CLO. The CLO, originally issued in September 2013 refinanced in July 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in July 2021. RATINGS RATIONALE The downgrade on the Downgraded Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, and expected losses (ELs) on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the rating on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3183, compared to 2992 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2953 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 12.4% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $380.0 million, or $19.8 million less than the deal's ramp-up target par balance. Moody's noted that the interest diversion test was recently reported [4] as failing, which could result in repayment of a portion of excess interest collections being diverted towards reinvestment in collateral at the next payment date should the failures continue. Nevertheless, Moody's noted that the OC tests for the Class D-R Notes and Class E-R Notes were reported [5] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $377,661,001 Defaulted Securities: $6,302,542 Diversity Score: 63 Weighted Average Rating Factor (WARF): 3105 Weighted Average Life (WAL): 4.6 years Weighted Average Spread (WAS): 3.48% Weighted Average Recovery Rate (WARR): 47.4% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. OCEAN TRAILS IX: S&P Assigns BB- (sf) Rating to Class E Notes ------------------------------------------------------------- S&P Global Ratings assigned its ratings to Ocean Trails CLO IX/Ocean Trails CLO IX LLC's floating- and fixed-rate notes. The note issuance is a CLO transaction backed by at least 92.5% senior secured loans, cash, and eligible investments. The ratings reflect S&P's view of: -- The diversification of the collateral pool, which consists primarily of broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests; -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization ; -- The experience of the collateral manager's team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading; and -- The transaction's legal structure, which is expected to be bankruptcy remote. RATINGS ASSIGNED Ocean Trails CLO IX/Ocean Trails CLO IX LLC Class Rating Amount (mil. $) A-1 AAA (sf) 180.00 A-2 NR 12.00 B-1 AA (sf) 27.50 B-2 AA (sf) 5.50 C (deferrable) A (sf) 19.50 D (deferrable) BBB- (sf) 15.00 E (deferrable) BB- (sf) 10.50 Subordinated notes NR 34.15 NR--Not rated. OCTAGON INVESTMENT 30: Moody's Confirms Ba3 Rating on Class D Notes ------------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Octagon Investment Partners 30, Ltd.: US$34,200,000 Class C Secured Deferrable Floating Rate Notes due 2030 (the "Class C Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$25,800,000 Class D Secured Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C Notes and the Class D Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D and E Notes issued by the CLO. The CLO, issued in March 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in April 2022. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3116, compared to 2737 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2809 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 15.4% as of August 2020. Nevertheless, Moody's noted that the OC tests for the Class D Notes, Class E Notes, as well as the interest diversion test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $ 584,588,327 Defaulted Securities: $ 8,228,321 Diversity Score: 79 Weighted Average Rating Factor: 3083 Weighted Average Life: 5.93 years Weighted Average Spread: 3.56% Weighted Average Recovery Rate: 46.99% Par haircut in O/C tests and interest diversion test: 0.49% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. OCTAGON INVESTMENT 42: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Octagon Investment Partners 42, Ltd.: US$30,000,000 Class D Secured Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class E Secured Deferrable Floating Rate Notes due 2031 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D and E Notes issued by the CLO. The CLO, issued in May 2019, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in April 2024. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 2990, compared to 2650 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2878 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 12.4% as of August 2020. Nevertheless, Moody's noted that the OC tests for the Class D Notes, Class E Notes, as well as the interest diversion test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $490,872,437 Defaulted Securities: $6,599,463 Diversity Score: 73 Weighted Average Rating Factor: 2942 Weighted Average Life: 6.05 years Weighted Average Spread: 3.53% Weighted Average Recovery Rate: 47.26% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. PALMER SQUARE 2020-2: S&P Assigns BB- (sf) Rating to Class D Notes ------------------------------------------------------------------ S&P Global Ratings assigned its ratings to Palmer Square CLO 2020-2 Ltd./Palmer Square CLO 2020-2 LLC's floating-rate notes. The note issuance is a CLO securitization backed by broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The ratings reflect S&P's view of: -- The diversification of the collateral pool. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The experience of the collateral manager's team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is expected to be bankruptcy remote. S&P acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. RATINGS ASSIGNED Palmer Square CLO 2020-2 Ltd./Palmer Square CLO 2020-2 LLC Class Rating Amount (mil. $) A-1a AAA (sf) 244.00 A-1b NR 16.00 A-2 AA (sf) 44.00 B (deferrable) A (sf) 24.00 C (deferrable) BBB- (sf) 20.00 D (deferrable) BB- (sf) 14.00 Subordinated notes NR 33.90 NR--Not rated. SHACKLETON 2017-XI: Moody's Cuts Rating on Class F Notes to Caa2 ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings on the following notes issued by Shackleton 2017-XI CLO, Ltd.: US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,500,000 Class E Junior Secured Deferrable Floating Rate Notes due 2030 (the "Class E Notes"), Downgraded to B1 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$7,500,000 Class F Junior Secured Deferrable Floating Rate Notes due 2030 (the "Class F Notes"), Downgraded to Caa2 (sf); previously on June 3, 2020 B2 (sf) Placed Under Review for Possible Downgrade The Class D Notes, Class E Notes, and Class F Notes are referred to herein, collectively, as the "Downgraded Notes." These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D, Class E, and Class F Notes issued by the CLO. The CLO, originally issued in August 2017 and partially refinanced in March 2020, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in August 2022. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the CLO notes has declined, and expected losses (ELs) on certain notes have increased. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3384, compared to 2917 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2839 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 18.58% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $485.1 million, or $14.9 million less than the deal's ramp-up target par balance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $482,382,120.66 Defaulted Securities: $9,750,686.98 Diversity Score: 72 Weighted Average Rating Factor (WARF): 3340 Weighted Average Life (WAL): 5.79 years Weighted Average Spread (WAS): 3.41% Weighted Average Recovery Rate (WARR): 48.03% Finally, Moody's notes that it also considered the information in the August 2020 trustee report [4] which became available immediately prior to the release of this announcement. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. SOUND POINT XX: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on the following notes issued by Sound Point CLO XX, Ltd.: US$44,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$40,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Confirmed Notes issued by the CLO. The CLO, originally issued in June 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in July 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3101, compared to 2694 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2886 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 16.3% as of July 2020. Nevertheless, Moody's noted that all the OC tests, as well as the interest reinvestment test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $780,286,224 Defaulted Securites: $4,924,242 Diversity Score: 78 Weighted Average Rating Factor: 3133 Weighted Average Life: 6.2 years Weighted Average Spread: 3.60% Weighted Average Recovery Rate: 47.34% Par haircut in OC tests and interest diversion test: 0.7% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. SOUND POINT XXI: Moody's Confirms Ba3 Rating on Class D Notes ------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Sound Point CLO XXI, Ltd.: US$27,500,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class C Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,500,000 Class D Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C Notes and the Class D Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Confirmed Notes issued by the CLO. The CLO, originally issued in October 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in October 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3129, compared to 2675 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2791 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 16.9% as of July 2020. Nevertheless, Moody's noted that all the OC tests, as well as the interest reinvestment test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $487,316,716 Defaulted Securites: $3,941,887 Diversity Score: 76 Weighted Average Rating Factor: 3158 Weighted Average Life: 6.25 years Weighted Average Spread: 3.60% Weighted Average Recovery Rate: 47.67% Par haircut in OC tests and interest diversion test: 0.0% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. STEELE CREEK 2014-1R: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------------ Moody's Investors Service confirmed the ratings on the following notes issued by Steele Creek CLO 2014-1R, Ltd.: US$26,400,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due April 2031 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,900,000 Class E Mezzanine Secured Deferrable Floating Rate Notes Due April 2031 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the Confirmed Notes. This action concludes the review for downgrades initiated on April 17, 2020 on the Class D and the Class E Notes issued by the CLO. The CLO, originally issued in March 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in April 2022. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3272, compared to 2899 reported in the February 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2890 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 23.0% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $408.6 million. Moody's noted that the interest diversion test was recently reported [4] as failing, which could result in a portion of excess interest collections being diverted towards reinvestment in collateral at the next payment date should the failures continue. Nevertheless, Moody's noted that the OC tests for the Class A/B, Class C, Class D and the Class E Notes were recently reported [5] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $404,525,458 Defaulted Securities: $10,276,784 Diversity Score: 75 Weighted Average Rating Factor (WARF): 3224 Weighted Average Life (WAL): 5.71 years Weighted Average Spread (WAS): 3.52% Weighted Average Recovery Rate (WARR): 46.85% Par haircut in O/C tests and interest diversion test: 1.52% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. WELLFLEET CLO 2020-2: S&P Rates Class E Notes 'BB- (sf)' -------------------------------------------------------- S&P Global Ratings assigned its ratings to Wellfleet CLO 2020-2 Ltd./Wellfleet CLO 2020-2 LLC's floating- and fixed-rate notes. The note issuance is a CLO transaction backed primarily by broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The notes are managed by Wellfleet Credit Partners LLC. The ratings reflect S&P's view of: -- The diversification of the collateral pool. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The experience of the collateral manager's team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is expected to be bankruptcy remote. RATINGS ASSIGNED Wellfleet CLO 2020-2 Ltd./Wellfleet CLO 2020-2 LLC Class Rating Amount (mil. $) A AAA (sf) 240.00 B-1 AA (sf) 52.00 B-2 AA (sf) 8.00 C (deferrable) A (sf) 24.00 D (deferrable) BBB- (sf) 24.00 E (deferrable) BB- (sf) 14.00 Subordinated notes NR 34.00 NR--Not rated. WIND RIVER 2016-2: Moody's Confirms Ba3 Rating on Class E-R Notes ----------------------------------------------------------------- Moody's Investors Service confirmed the ratings on the following notes issued by Wind River 2016-2 CLO Ltd.: US$41,275,000 Class D-R Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$35,100,000 Class E-R Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class E-R Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D-R Notes and the Class E-R Notes are referred to herein as the Confirmed Notes. These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-R Notes and the Class E-R Notes issued by the CLO. The CLO, originally issued in November 2016 and refinanced in November 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in November 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 3383, compared to 3015 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3008 reported in the July 2020 trustee report [3]. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 19.75% as of August 2020. Nevertheless, Moody's noted that the OC tests for the Class D-R Notes and the Class E-R Notes, as well as the interest diversion test were recently reported [4] as passing. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $635,593,055 Defaulted Securities: $10,710,561 Diversity Score: 77 Weighted Average Rating Factor (WARF): 3383 Weighted Average Life (WAL): 5.61 years Weighted Average Spread (WAS): 3.57% Weighted Average Recovery Rate (WARR): 47.58% Par haircut in O/C tests and interest diversion test: 1.48% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. ZAIS CLO 2: Moody's Lowers Rating on Class D Notes to Caa1 ---------------------------------------------------------- Moody's Investors Service downgraded the ratings on the following notes issued by ZAIS CLO 2, Limited: US$20,000,000 Class D Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Downgraded to Caa1 (sf); previously on April 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade US$4,400,000 Class E Secured Deferrable Floating Rate Notes due 2026 (current outstanding balance of $4,577,316.83) (the "Class E Notes"), Downgraded to Ca (sf); previously on April 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade The Class D and E Notes are referred to herein, collectively, as the "Downgraded Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D Notes and E Notes issued by the CLO. The CLO, originally issued in September 2014 and partially refinanced in April 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in October 2018. RATINGS RATIONALE The downgrades on the Downgraded Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March 2020, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased, the credit enhancement available to the Downgraded Notes has declined, and expected losses (ELs) on certain notes have increased. According to the July 2020 trustee report [1], the weighted average rating factor (WARF) was reported at 4386, compared to 3601 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2875 reported in the July 2020 trustee report. Based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 37% as of July 2020. Furthermore, Moody's calculated the OC ratios (excluding haircuts) for the Class D Notes and Class E Notes as of July 2020 at 103.10% and 99.33%, respectively. Moody's noted that the OC tests for the Class D Notes and Class E Notes, were recently reported [3] as failing, which has resulted in repayment of senior notes and deferral of current interest payments on the Class E Notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: $101,156,367 Defaulted Securities: $23,036,984 Diversity Score: 37 Weighted Average Rating Factor (WARF): 3944 Weighted Average Life (WAL): 3.4 years Weighted Average Spread (WAS): 4.00% Weighted Average Recovery Rate (WARR): 46.4% Par haircut in OC tests and interest diversion test: 3.7% In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2020. ********* 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. 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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 ***