/raid1/www/Hosts/bankrupt/TCR_Public/201122.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 22, 2020, Vol. 24, No. 326
Headlines
AIRCRAFT CERTIFICATE 2003-A: S&P Lowers E Notes Rating to BB+ (sf)
AMERICREDIT AUTOMOBILE 2019-2: Fitch Affirms BB on Cl. E Debt
AMERICREDIT AUTOMOBILE 2020-3: Moody's Rates Cl. E Notes (P)Ba2
APEX CREDIT 2020: S&P Assigns BB- (sf) Rating to Class E-2 Notes
APIDOS CLO XXXIV: S&P Assigns B- (sf) Rating to $6MM Class F Notes
BBCMS MORTGAGE 2018-C2: Fitch Affirms B-sf Rating on 2 Tranches
CHASE AUTO 2020-2: Fitch to Rate Class F Notes 'B(EXP)sf'
CITIGROUP COMMERCIAL 2020-420K: Moody's Gives (P)Ba3 on Cl. E Certs
FORTRESS CREDIT IX: S&P Assigns BB- (sf) Rating to Class E Notes
FREDDIE MAC 2020-HQA5: Moody's Gives (P)B3 Rating on B-1B Notes
GSR MORTGAGE 2007-3F: Moody's Rates 2 Tranches 'Caa3'
JP MORGAN 2020-9: S&P Assigns Prelim B (sf) Rating to B-5 Certs
LANSDOWNE MORTGAGE 1: Fitch Affirms CC Rating on 3 Tranches
OCTAGON INVESTMENT 50: S&P Rates Class E Notes 'BB- (sf)'
REALT 2015-1: Fitch Affirms Bsf Rating on Class G Certs
REESE PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
SBMS VII 1997-HUD1: Moody's Assigns Caa3 Rating on Cl. A-4 Debt
SDART 2020-4: Moody's Gives (P)B2 Rating on Class E Notes
SYMPHONY CLO XXIII: S&P Assigns Prelim BB- (sf) Rating to E Notes
TCW CLO 2020-1: S&P Assigns BB- (sf) Rating to Class ER Notes
THUNDERBOLT II: Fitch Lowers Rating on Series B Notes to BBsf
UBS COMMERCIAL 2017-C7: Fitch Affirms B- Rating on Cl. G-RR Certs
VENTURE 40 CLO: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
VISIO 2020-1R: S&P Assigns Prelim B (sf) Rating to Class B-2 Notes
WELLS FARGO 2015-C26: Fitch Lowers Rating on 2 Tranches to B-sf
YORK CLO-8: S&P Assigns Prelim BB- (sf) Rating to Class E Notes
*********
AIRCRAFT CERTIFICATE 2003-A: S&P Lowers E Notes Rating to BB+ (sf)
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S&P Global Ratings lowered its rating on the class E notes from
Aircraft Certificate Owner Trust 2003-A (ACO) to 'BB+ (sf)' from
'BBB (sf)'. ACO is secured by U.S. Airways series 2001-1G class G
pass-through certificates.
The rating on the class E notes is linked to the rating on the
underlying U.S. Airways series 2001-1G class G pass-through
certificates. On Nov. 9, 2020, the rating on the underlying U.S.
Airways certificates was lowered to 'BB+ (sf)' from 'BBB- (sf)'.
Therefore, the downgrade of the class E notes reflects the
downgrade of this underlying certificates.
The transaction pays on a semi-annual basis. After the September
2020 payment date, the class E notes had $9.02 million outstanding,
and the total outstanding balance of the underlying certificate was
$9.315 million.
S&P will continue to monitor the transaction and take rating
actions as appropriate.
AMERICREDIT AUTOMOBILE 2019-2: Fitch Affirms BB on Cl. E Debt
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As a part of its ongoing surveillance, Fitch Ratings has taken
various rating actions on AmeriCredit Automobiles Receivables
Trusts (AMCAR) 2016-3, 2016-4, 2017-1, 2017-2, 2018-1, 2018-2,
2019-1, 2019-2, and 2020-1. The market disruption caused by the
coronavirus pandemic and related containment measures did not
negatively affect the ratings, because there is sufficient credit
enhancement (CE) to cover higher cumulative net losses (CNL)
projected after more severe assumptions were applied. The
sensitivity of the ratings to scenarios more severe than currently
expected is provided in the Rating Sensitivities section.
RATING ACTIONS
AmeriCredit Automobile Receivables Trust 2016-3
Class C 03065DAF4; LT AAAsf Affirmed; previously AAAsf
Class D 03065DAG2; LT AAAsf Affirmed; previously AAAsf
AmeriCredit Automobile Receivables Trust 2016-4
Class C 03065TAF9; LT AAAsf Affirmed; previously AAAsf
Class D 03065TAG7; LT AAAsf Upgrade; previously AAsf
AmeriCredit Automobile Receivables Trust 2017-1
Class C 03065FAF9; LT AAAsf Affirmed; previously AAAsf
Class D 03065FAG7; LT AAsf Affirmed; previously AAsf
Americredit Automobile Receivables Trust 2017-2
Class B 03065GAE0; LT AAAsf Affirmed; previously AAAsf
Class C 03065GAF7; LT AAAsf Affirmed; previously AAAsf
Class D 03065GAG5; LT AAsf Upgrade; previously Asf
AmeriCredit Automobile Receivables Trust 2018-1
Class A-3 03066HAD9; LT AAAsf Affirmed; previously AAAsf
Class B 03066HAE7; LT AAAsf Affirmed; previously AAAsf
Class C 03066HAF4; LT AAAsf Upgrade; previously AAsf
Class D 03066HAG2; LT Asf Affirmed; previously Asf
Class E 03066HAH0; LT BBBsf Affirmed; previously BBBsf
AmeriCredit Automobile Receivables Trust 2018-2
Class A-3 03066LAD0; LT AAAsf Affirmed; previously AAAsf
Class B 03066LAE8; LT AAAsf Affirmed; previously AAAsf
Class C 03066LAF5; LT AAAsf Affirmed; previously AAAsf
Class D 03066LAG3; LT Asf Affirmed; previously Asf
Class E 03066LAH1; LT BBBsf Affirmed; previously BBBsf
AmeriCredit Automobile Receivables Trust 2019-1
Class A-2-A 03066GAB5; LT AAAsf Affirmed; previously AAAsf
Class A-2-B 03066GAC3; LT AAAsf Affirmed; previously AAAsf
Class A-3 03066GAD1; LT AAAsf Affirmed; previously AAAsf
Class B 03066GAE9; LT AAAsf Affirmed; previously AAAsf
Class C 03066GAF6; LT AAsf Affirmed; previously AAsf
Class D 03066GAG4; LT Asf Affirmed; previously Asf
Class E 03066GAH2; LT BBBsf Affirmed; previously BBBsf
AmeriCredit Automobile Receivables Trust 2019-2
Class A-2-A 03066KAC4; LT AAAsf Affirmed; previously AAAsf
Class A-2-B 03066KAD2; LT AAAsf Affirmed; previously AAAsf
Class A-3 03066KAE0; LT AAAsf Affirmed; previously AAAsf
Class B 03066KAF7; LT AAAsf Upgrade; previously AAsf
Class C 03066KAG5; LT Asf Affirmed; previously Asf
Class D 03066KAH3; LT BBBsf Affirmed; previously BBBsf
Class E 03066KAA8; LT BBsf Affirmed; previously BBsf
AmeriCredit Automobile Receivables Trust 2020-1
Class A-2-A 03067DAB1; LT AAAsf Affirmed; previously AAAsf
Class A-2-B 03067DAC9; LT AAAsf Affirmed; previously AAAsf
Class A-3 03067DAD7; LT AAAsf Affirmed; previously AAAsf
Class B 03067DAE5; LT AAsf Affirmed; previously AAsf
Class C 03067DAF2; LT Asf Affirmed; previously Asf
Class D 03067DAG0; LT BBBsf Affirmed; previously BBBsf
KEY RATING DRIVERS
The rating actions are based on available credit enhancement (CE)
and cumulative net loss (CNL) performance to date. The collateral
pools continue to perform within Fitch's expectations, and hard CE
is building for the notes. The securities are able to withstand
stress scenarios consistent with or higher than their current
ratings, and make full payments to investors in accordance with the
terms of the documents.
The Stable Outlooks reflect Fitch's expectation that the classes
have sufficient levels of credit protection to withstand potential
deterioration in the portfolios' credit quality in stress
scenarios, and loss coverage will continue to increase as the
transaction amortizes. The Positive Outlooks on the subordinate
notes reflect the possibility of an upgrade in the next one to two
years as a result of building CE.
As of the October 2020 distribution period, 60+ day delinquencies
were 4.03%, 3.58%, 3.47%, 3.22%, 2.43%, 2.24%, 2.06%, 2.21%, and
1.13% of the remaining collateral balance for 2016-3, 2016-4,
2017-1, 2017-2, 2018-1, 2018-2, 2019-1, 2019-2, and 2020-1,
respectively. CNLs were 8.59%, 8.53%, 7.75%, 7.74%, 4.80%, 4.47%,
3.37%, 2.93%, and 0.62%, tracking below Fitch's initial base cases
of 11.35%, 11.10%, 11.10%, 11.20%, 10.50%, 10.50%, 10.75%, 11.00%,
and 10.75%. Further, hard CE has grown for all transactions since
close.
Fitch has made assumptions about the spread of coronavirus and the
economic impact of the related containment measures. As a base-case
scenario, Fitch assumes that the global recession that took hold in
1H20 and subsequent activity bounce in 3Q20 is followed by a slower
recovery trajectory from 4Q2020 onward with GDP remaining below its
4Q19 level for 18-30 months. As a downside (sensitivity) scenario
provided in the Rating Sensitivities section, Fitch considers a
more severe and prolonged period of stress with recovery to
pre-crisis GDP levels delayed until around the middle of the
decade.
To account for potential increases in delinquencies and losses,
utilizing the base case coronavirus ratings scenario detailed,
Fitch applied conservative assumptions in deriving the updated base
case proxy. The base case proxies used were 10.00%, 10.00%, 9.75%,
10.00%, 9.50%, 9.75%, 10.25%, 10.75%, and 11.00% for 2016-3,
2016-4, 2017-1, 2017-2, 2018-1, 2018-2, 2019-1, 2019-2, and 2020-1,
respectively.
For 2016-3, 2017-1, 2017-2, 2018-1, the proxies were maintained
from the prior review. For 2016-4, 2018-2, 2019-1, and 2020-1, the
proxies were increased. The proxy for 2019-2 was decreased from the
prior review. All proxies already reflected or have been adjusted
to reflect the coronavirus base-case scenario.
The base case proxies utilize recessionary static managed portfolio
performance along with projections based on current performance.
Given the current economic environment, Fitch deemed it
appropriately conservative to utilize this approach for all of the
transactions.
For all outstanding transactions, loss coverage multiples for the
rated notes are consistent with or in excess of 3.25x, 2.75x,
2.25x, 1.75x and 1.50x for 'AAAsf', 'AAsf', 'Asf', 'BBBsf', and
'BBsf' ratings, respectively. Some of the subordinate notes showed
multiples slightly short of the current ratings, which Fitch
considers to be immaterial given the conservatism in the proxies
and transaction performance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If CNL is 20% less than projected CNL
proxy, the ratings could be upgraded one to two categories.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Conversely, unanticipated increases in the frequency of defaults
could produce default levels higher than the current projected base
case default proxies and impact available loss coverage and
multiples levels for the transactions. Weakening asset performance
is strongly correlated to increasing levels of delinquencies and
defaults that could negatively impact CE levels. Lower loss
coverage could impact ratings and Rating Outlooks, depending on the
extent of the decline in coverage.
In Fitch's initial review, the notes were found to have some
sensitivity to a 1.5x and 2.0x increase of Fitch's base case loss
expectation for each transaction. The 2.0x scenario was updated and
is considered Fitch's coronavirus downside rating sensitivity. For
outstanding transactions, this scenario suggests consistent ratings
for the senior notes and a possible downgrade of one to two
categories for the subordinate notes. To date, the transactions
have strong performance with losses within Fitch's initial
expectations with adequate loss coverage and multiple levels.
Therefore, a material deterioration in performance would have to
occur within the asset collateral to have potential negative impact
on the outstanding ratings.
Due to the uncertainty surrounding the coronavirus outbreak, Fitch
ran additional sensitivities to account for potential increases in
delinquencies. The transactions are able to withstand the added
stresses with loss coverage consistent with or in excess of the
ratings in their respective notes. Fitch acknowledges that lower
prepayments and longer recovery lag times due to delayed ability to
repossess and recover on vehicles may result from the pandemic.
However, changes in these assumptions, all else equal, would not
have an adverse impact on modeled loss coverage, and Fitch has
maintained its stressed assumptions.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
AMERICREDIT AUTOMOBILE 2020-3: Moody's Rates Cl. E Notes (P)Ba2
---------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to the notes
to be issued by AmeriCredit Automobile Receivables Trust 2020-3.
This is the third AMCAR auto loan transaction of the year for
AmeriCredit Financial Services, Inc. (AFS; Unrated), wholly owned
subsidiary of General Motors Financial Company, Inc. (Baa3). The
notes will be backed by a pool of retail automobile loan contracts
originated by AFS, who is also the servicer and administrator for
the transaction.
The complete rating actions are as follows:
Issuer: AmeriCredit Automobile Receivables Trust 2020-3
Class A-1 Notes, Assigned (P)P-1 (sf)
Class A-2 Notes, Assigned (P)Aaa (sf)
Class A-3 Notes, Assigned (P)Aaa (sf)
Class B Notes, Assigned (P)Aa1 (sf)
Class C Notes, Assigned (P)A1 (sf)
Class D Notes, Assigned (P)Baa2 (sf)
Class E Notes, Assigned (P)Ba2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of AFS as the servicer
and administrator.
Moody's median cumulative net loss expectation for the 2020-3 pool
is 11.5% and the loss at a Aaa stress is 38.0%. Moody's based its
cumulative net loss expectation and loss at a Aaa stress 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 AFS to perform the 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, Class
D, and Class E notes are expected to benefit from 34.35%, 27.10%,
18.10%, 11.24%, and 8.40% of hard credit enhancement, respectively.
Hard credit enhancement for the notes consists of a combination of
overcollateralization, a non-declining reserve account, and
subordination, except for Class E notes which do not benefit from
subordination. The notes may also benefit from excess spread.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
consumer assets from the current weak US economic activity and a
gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. Specifically, for auto
loan ABS, loan performance will weaken due to the unprecedented
spike in the unemployment rate that may limit the borrower's income
and their ability to service debt. The softening of used vehicle
prices due to lower demand will reduce recoveries on defaulted auto
loans, also a credit negative. Furthermore, borrower assistance
programs to affected borrowers, such as extensions, may adversely
impact scheduled cash flows to bondholders. 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.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
July 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the subordinate notes if, given current
expectations of portfolio losses, levels of credit enhancement are
consistent with higher ratings. In sequential pay structures, such
as the one in this transaction, credit enhancement grows as a
percentage of the collateral balance as collections pay down senior
notes. Prepayments and interest collections directed toward note
principal payments will accelerate this build of enhancement.
Moody's expectation of pool losses could decline as a result of a
lower number of obligor defaults or appreciation in the value of
the vehicles securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US job market, the market for
used vehicles, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US job market, the market for used
vehicles, and poor servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties,
inadequate transaction governance, and fraud. Additionally, Moody's
could downgrade the Class A-1 short-term rating following a
significant slowdown in principal collections that could result
from, among other things, high delinquencies or a servicer
disruption that impacts obligor's payments.
APEX CREDIT 2020: S&P Assigns BB- (sf) Rating to Class E-2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Apex Credit CLO 2020
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 Apex Credit Partners LLC.
The 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.
Ratings Assigned
Apex Credit CLO 2020 Ltd./Apex Credit CLO 2020 LLC
Class A-1N, $158.250 million: AAA (sf)
Class A-1F, $40.000 million: AAA (sf)
Class A-2, $16.250 million: AAA (sf)
Class B-1, $21.500 million: AA (sf)
Class B-F, $11.000 million: AA (sf)
Class C (deferrable), $19.500 million: A (sf)
Class D (deferrable), $16.250 million: BBB- (sf)
Class E-1 (deferrable), $9.750 million: BB (sf)
Class E-2 (deferrable), $5.000 million: BB- (sf)
Subordinated notes, $28.625 million: Not rated
APIDOS CLO XXXIV: S&P Assigns B- (sf) Rating to $6MM Class F Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Apidos CLO XXXIV/Apidos
CLO XXXIV LLC's floating- and fixed-rate, and delayed draw 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'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; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Apidos CLO XXXIV/Apidos CLO XXXIV LLC
$221.00 mil. class A-1: AAA (sf)
$35.00 mil. class A-2: AAA (sf)
$48.00 mil. class B: AA (sf)
$24.00 mil. class C (deferrable): A (sf)
$20.00 mil. class D (deferrable): BBB- (sf)
$14.00 mil. class E (deferrable): BB- (sf)
$6.00 mil. class F (delayed draw): B- (sf)
$40.50 mil. subordinated notes: NR
NR--Not rated.
BBCMS MORTGAGE 2018-C2: Fitch Affirms B-sf Rating on 2 Tranches
---------------------------------------------------------------
Fitch Ratings has affirmed 18 classes of BBCMS Mortgage Trust
2018-C2, commercial mortgage pass-through certificates, series
2018-C2 (BBCMS 2018-C2). In addition, Fitch has revised the Rating
Outlooks on two classes to Negative from Stable.
RATING ACTIONS
BBCMS 2018-C2
Class A-1 05491UAY4; LT AAAsf Affirmed; previously AAAsf
Class A-2 05491UAZ1; LT AAAsf Affirmed; previously AAAsf
Class A-3 05491UBB3; LT AAAsf Affirmed; previously AAAsf
Class A-4 05491UBC1; LT AAAsf Affirmed; previously AAAsf
Class A-5 05491UBD9; LT AAAsf Affirmed; previously AAAsf
Class A-S 05491UBG2; LT AAAsf Affirmed; previously AAAsf
Class A-SB 05491UBA5; LT AAAsf Affirmed; previously AAAsf
Class B 05491UBH0; LT AA-sf Affirmed; previously AA-sf
Class C 05491UBJ6; LT A-sf Affirmed; previously A-sf
Class D 05491UAG3; LT BBBsf Affirmed; previously BBBsf
Class E 05491UAJ7; LT BBB-sf Affirmed; previously BBB-sf
Class F 05491UAL2; LT BB-sf Affirmed; previously BB-sf
Class G 05491UAN8; LT B-sf Affirmed; previously B-sf
Class X-A 05491UBE7; LT AAAsf Affirmed; previously AAAsf
Class X-B 05491UBF4; LT AA-sf Affirmed; previously AA-sf
Class X-D 05491UAA6; LT BBB-sf Affirmed; previously BBB-sf
Class X-F 05491UAC2; LT BB-sf Affirmed; previously BB-sf
Class X-G 05491UAE8; LT B-sf Affirmed; previously B-sf
KEY RATING DRIVERS
Increased Loss Expectations: While overall pool performance remains
stable from issuance, loss expectations have increased, driven
primarily by a greater number of Fitch loans of concern (FLOCs)
that have been impacted by the slowdown in economic activity
related to the coronavirus pandemic. Eleven loans (33.8% of the
pool) were identified as FLOCs. No loans have transferred to
special servicing and all loans remain current as of the October
2020 remittance reporting.
The largest contributor to Fitch's loss expectation is the eighth
largest loan, AVR Embassy Suites Fort Worth (4.0%), which is
secured by a 156-key, full-service hotel located in Fort Worth, TX.
Performance has been negatively impacted by the coronavirus
pandemic. The servicer-reported TTM June 2020 NOI debt service
coverage ratio (DSCR) fell to 0.75x from 1.90x at YE 2019. As of
TTM June 2020, occupancy, ADR and RevPAR were 47%, $180 and $84,
respectively, compared with 83%, $189 and $156 for YE 2019 and 82%,
$179 and $147 around the time of issuance (as of TTM August 2018).
The borrower was granted debt relief in the form of a consent
agreement, which allows borrowers to utilize reserve funds to cover
debt service payments for June through December 2020.
The next largest contributor to losses is the Southern Highlands
Corporate Center loan (1.4%), which is secured by a 69,000-sf
office property located in Las Vegas, NV. The largest tenant,
Lightspeed VT (39.6% of net rentable area), has an upcoming lease
expiration on Jan. 1, 2021. Excess cash has been trapped since July
2019 when Lightspeed VT did not provide notice of renewal 18 months
prior to lease expiration; the current excess cash reserve balance
is $530,389 as of October 2020.
The third-largest contributor to losses is the Residence Inn by
Marriott Phoenix Desert View at Mayo Clinic loan (3.4%), which is
secured by the leasehold interest of a 208-key, extended-stay hotel
located on the Mayo Clinic Arizona Campus in Phoenix, AZ.
Performance has tracked Fitch's initial expectation; Fitch's
loan-to-value at issuance for this loan was high at 118.8%.
Property performance has remained relatively stable during the
pandemic; TTM June 2020 NOI was in line with YE 2019. The loan
converted to P&I payments in June 2020; the implied TTM June 2020
P&I NOI DSCR would be approximately 1.90x. As of TTM March 2020,
occupancy, ADR and RevPAR were 67%, $181 and $142, respectively,
compared with 74%, $166, and $123 for YE 2019 and 73%, $161 and
$117 around the time of issuance (as of TTM July 2018). The
borrower was granted debt relief in the form of a consent
agreement, which allows borrowers to utilize reserve funds to cover
debt service payments for June and July. In addition, all FF&E
monthly deposits have been deferred for April through September.
Coronavirus Exposure: Seven loans (19.1% of the pool) are secured
by hotel properties and eleven loans (24.7%) are secured by retail
properties. The hotel loans have a weighted average (WA) NOI DSCR
of 2.41x. On average, the hotel loans can sustain a 57.0% decline
in NOI before the NOI DSCR would fall below 1.0x. The retail loans
have a WA NOI DSCR of 2.07x. On average, the retail loans can
sustain a 50.6% decline in NOI before the DSCR would fall below
1.0x. Fitch applied additional coronavirus-related stresses to six
hotel loans and two retail loans to account for potential cash flow
disruptions due to the coronavirus pandemic; these additional
stresses contributed to the Negative Outlook revision on classes G
and X-G.
Minimal Changes to Credit Enhancement: As of the October 2020
remittance, the pool's aggregate principal balance has been paid
down by 0.35% to $888.7 million from $891.9 million at issuance.
All 44 loans remain in the pool. The pool is scheduled to amortize
by 5.8% of the initial pool balance prior to maturity. Seventeen
loans (51.1% of the pool) are interest-only for the full loan term,
including nine loans (40.4%) in the top 15. Nineteen loans (36.3%)
have a partial interest-only component, three of these loans have
begun to amortize. Loan maturities are concentrated in 2028
(95.4%), with 1.2% in 2023 and 3.4% in 2025.
Investment-Grade Credit Opinion Loans: At issuance, four loans
(12.7% of the pool) received investment-grade credit opinions: The
Christiana Mall (6.2%) received a standalone credit opinion of
'AA-sf'; Moffett Towers - Buildings E,F,G (2.8%) received a
standalone credit opinion of 'BBB-sf'; Moffett Towers II - Building
1 (2.5%) received a standalone credit opinion of 'BBB-sf'; and Fair
Oaks Mall (1.2%) received a standalone credit opinion of 'BBB-sf'.
RATING SENSITIVITIES
The Stable Rating Outlooks on classes A-1 through F, X-A, X-B, X-D
and X-F reflect the overall stable performance of the majority of
the pool and expected continued amortization. The Negative Rating
Outlooks on classes G and X-G reflect the potential for downgrade
due to concerns surrounding the ultimate impact of the coronavirus
pandemic and the performance concerns associated with the FLOCs.
Factors that could, individually or collectively, lead to 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 to the 'Asf' and 'AAsf' rated categories are not expected
but would likely occur with significant improvement in credit
enhancement (CE) and/or defeasance and/or the stabilization to the
properties affected by the coronavirus pandemic. Upgrades to the
'BBBsf' rated category would also take into account these factors,
but would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if interest shortfalls are likely. Upgrades to the
'Bsf' 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 negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades of the 'Asf', 'AAsf' and 'AAAsf' rated
categories are not considered likely due to the position in the
capital structure, but may occur at 'AAsf' and 'AAAsf' should
interest shortfalls affect these classes. Downgrades of the 'BBBsf'
category would occur should loss expectations increase
significantly and the performance of the FLOCs fail to stabilize or
decline further. Downgrades to the 'Bsf' and 'BBsf' categories
would occur should the loans vulnerable to the coronavirus pandemic
not stabilize and/or additional loans transfer to special
servicing.
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
additional negative rating actions, including downgrades of a
category or more and Negative Outlook revisions.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CHASE AUTO 2020-2: Fitch to Rate Class F Notes 'B(EXP)sf'
---------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
the notes issued by JPMorgan Chase Bank, National Association,
Chase Auto Credit Linked Notes, Series 2020-2 (Chase Auto 2020-2).
RATING ACTIONS
Chase Auto Credit Linked Notes, Series 2020-2
Class A; LT NR(EXP)sf Expected Rating; previously
Class B; LT AA(EXP)sf Expected Rating; previously
Class C; LT A(EXP)sf Expected Rating; previously
Class D; LT BBB(EXP)sf Expected Rating; previously
Class E; LT BB(EXP)sf Expected Rating; previously
Class F; LT B(EXP)sf Expected Rating; previously
Class R; LT NR(EXP)sf Expected Rating; previously
KEY RATING DRIVERS
Collateral - Strong Prime Credit Quality: The 2020-2 statistical
referenced pool has a weighted average (WA) FICO score of 772, and
scores above 750 total 63.3%. The WA LTV is low at 95.8%, WA APR is
4.9%, WA seasoning is 18.3 months, and the pool has strong vehicle
brand, model and geographic diversification. Original terms greater
than 60 months total 91.4%, 73- to 84-month loans, 35.2%, and used
vehicles, 39.5%, consistent with JPMCB's historical originations.
Forward-Looking Approach to Base Case Loss Proxy - Stable
Portfolio/Securitization Performance: JPMCB's managed portfolio
performance had been strong from 2013 through mid-2020, with low
losses and delinquencies. Normalizing trends have been observed
recently, including slowly rising losses, consistent with the
broader auto market. Fitch considered current market conditions
amid the coronavirus pandemic and included recessionary and peer
prime auto loan static portfolio proxy performance, along with
prior JPMCB and peer proxy ABS performance, to derive a cumulative
net loss (CNL) proxy of 1.10%.
Coronavirus Pressure Continues: Fitch made assumptions about the
spread of coronavirus and the economic impact of the related
containment measures. As a base case scenario, Fitch assumes that
the global recession that took hold in 1H20 and subsequent activity
bounce in 3Q20 is followed by a slower recovery trajectory from
4Q20 onward, with GDP remaining below its 4Q19 level for 18-30
months. Under this scenario, Fitch's initial base case CNL was
derived utilizing 2006-2008 recessionary static mangled portfolio
and prior ABS performance.
As a downside (sensitivity) scenario provided in the Expected
Rating Sensitivity section, Fitch considers a more severe and
prolonged period of stress with recovery to pre-crisis GDP levels
delayed until around the middle of the decade. Under the downside
case, Fitch also completed a rating sensitivity by doubling the
initial base case loss proxy. Under this scenario, the notes could
be downgraded by up to two categories.
Payment Structure - Only Note Subordination for CE: Initial hard CE
totals 4.67%, 3.57%, 2.48%, 1.93% and 1.54% for classes B, C, D, E
and F, respectively, entirely consisting of subordinated note
balances. There is no additional enhancement provided, including no
excess spread. Initial CE is sufficient to withstand Fitch's base
case CNL proxy of 1.10% at the applicable rating loss multiples.
Seller/Servicer Operational Review - Stable
Origination/Underwriting/Servicing: JPMCB (including Chase Auto)
demonstrate adequate abilities as originator, underwriter and
servicer, as evidenced by historical portfolio delinquency, loss
experience and prior securitization performance. Fitch deems JPMCB
(and, thus, Chase Auto) capable to service this series.
Pro-Rata Pay Structure: Auto loan cash flows are allocated among
the class B through E notes based on a pro-rata pay structure, with
the retained class A certificates (retained by JPMCB) receiving a
pro-rata allocation payment and the subordinate class F and R notes
to remain unpaid until all other classes are paid in full.
In addition, lower-rated subordinated classes will be locked out of
principal entirely if the transaction CNL exceeds a set CNL
schedule. The lockout feature helps maintain subordination for a
longer period should CNL occur earlier in the life of the deal.
This feature redirects subordinate principal to classes of higher
seniority sequentially, except class A certificates. Further, if
the pool CNL exceeds 2.50%, the transaction switches from pro-rata
and pays fully sequentially, including for the class A
certificates.
CE Floor: To mitigate tail risk, which arises as the pool seasons
and fewer loans are outstanding, class F and R notes are locked out
of payments until other classes of notes are paid in full, leading
to a floor amount of subordination of 1.93% below the class E notes
at issuance.
Excessive Counterparty Exposure: The excessive exposure in the
transaction arises due to JPMCB's role providing a material degree
of credit support to the transaction. Noteholders will not have
recourse to the reference portfolio or to the cash generated by the
assets. Instead, the transaction relies on JPMCB to make interest
payments based on the note rate and principal payments based on the
performance of the reference pool. The monthly payment due will be
deposited by JPMCB into a segregated trust account held at U.S.
Bank N.A. (AA-/F1+/Negative), the securities administrator, for the
benefit of the notes. If JPMCB fails to make a payment to
noteholders, it is deemed an event of default. JPMCB is also the
servicer and will retain the class A certificates. Given this
dependence on the bank, ratings on the notes are directly linked
to, and capped by, the Issuer Default Rating of the counterparty,
JPMCB (AA/F1+/Negative).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Changes in expected loss timing for the transaction may affect the
transaction structure over time, leading to impairments in the
payment of the outstanding notes. In the event that losses suddenly
increase near the end of the transaction, which has primarily paid
down pro rata with no increase in CE at that time, significant
losses may be incurred to the outstanding notes, which will not
have entered sequential payment, per the performance triggers
outlined herein.
In addition, unanticipated increases in the frequency of defaults
could produce CNL levels higher than the base case and would likely
result in declines of CE and remaining net loss coverage levels
available to the notes. Weakening asset performance is strongly
correlated to increasing levels of delinquencies and defaults that
could negatively affect CE levels. Additionally, unanticipated
declines in recoveries could also result in lower net loss
coverage, which may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
For this transaction, Fitch conducted sensitivity analyses by
stressing the transaction's assumed loss timing, the transaction's
initial base case CNL and recovery rate assumptions, examining the
rating implications on all rated classes of issued notes. The loss
timing sensitivity modifies the base case loss timing curve to
delay the sequential payment triggers to the middle of the
transaction's life while maintaining overall loss levels.
The CNL sensitivity stresses the CNL proxy to the level necessary
to reduce each rating by one full category, to non-investment grade
(BBsf) and to 'CCCsf', based on the break-even loss coverage
provided by the CE structure.
Additionally, Fitch conducts a 1.5x and 2.0x increase to the CNL
proxy, representing both moderate and severe stresses,
respectively. Fitch also evaluates the impact of stressed recovery
rates on an auto loan ABS structure and rating impact with a 50%
haircut. These analyses are intended to provide an indication of
the rating sensitivity of notes to unexpected deterioration of a
trust's performance. A more prolonged disruption from the pandemic
is accounted for in the severe downside stress of 2.0x and could
result in downgrades of up to two rating categories for the
subordinate notes.
Due to the coronavirus pandemic, the U.S. and the broader global
economy remains under stress, with surging unemployment and
pressure on businesses stemming from federal social distancing
guidelines. Unemployment pressure on the consumer base may result
in increased delinquencies. For sensitivity purposes, Fitch assumed
a 2.0x increase in delinquency stress. The results indicate no
adverse rating impact to the notes. Fitch acknowledges that lower
prepayments and longer recovery lag times due to delayed ability to
repossess and recover on vehicles may result from the pandemic.
However, changes in these assumptions, all else equal, would not
have an adverse impact on modeled loss coverage, and Fitch has
maintained its stressed assumptions.
Loss Timing Sensitivity
As mentioned, prior to the triggering of a sequential payment event
through the CNL schedule, the class B through E notes are paid pro
rata until paid in full. This pro rata paydown presents a risk to
the notes, which may share in any losses incurred and not receive
adequate principal paydown over time. In Fitch's mid-loaded primary
scenario, this trigger activates almost immediately, leading to
higher loss coverage. While Fitch believes a more back-loaded
scenario is less likely, to evaluate the potential structural
challenge, an additional timing scenario was considered in which
20% of the CNL expected to occur in the first two years of the
transaction's life were delayed to the second two years, in a
25%/35%/30%/10% loss curve.
The delayed loss curve leads to the sequential order event
occurring later in the life of the transaction in the class B, C
and D stress scenarios, causing a significant drop in break-even
loss coverage for these rated classes of notes. Class E and F notes
are supported regardless of timing scenario due to their relative
size and the locked-out nature of the class F and R notes, which do
not receive payments until all other notes are paid in full,
regardless of any events being triggered. In this scenario, class
B, C and D notes would each potentially drop two notches in their
ratings.
The second sensitivity also focuses on stressing the impact of CNLs
outside of base case expectations by a 1.5x and 2.0x multiple
relative to available loss coverage. This analysis provides a good
indication of the rating sensitivity of notes to unexpected
deterioration of a trust's performance. In this example, under the
1.5x scenario, the base case proxy increases to 1.65% and an
implied loss multiple of 2.83x, which would suggest a downgrade to
the 'Asf' range. Under the more severe 2.0x stress, the base case
proxy increases to 2.20%, which results in an implied multiple of
2.12x or downgrade to the 'BBBsf' range.
Due to de-levering and structural features, a typical auto loan ABS
transaction tends to build CE and loss coverage levels over time,
absent any increase to projected defaults/losses beyond
expectations. However, the current transaction, which is based on a
reference pool and is not a standard auto loan ABS transaction,
sees only limited increases in enhancement over the life of the
deal as classes B through E pay down pro rata. The greatest risk of
losses to an auto loan ABS transaction is over the first one to two
years of the transaction, where the benefit of de-levering may be
muted. This analysis does not give explicit credit to the
de-levering and building CE afforded in auto loan ABS
transactions.
Recovery Rate Sensitivity
Recoveries can have a material impact on auto loan pool
performance, particularly in stressed economic environments where
default frequency is higher. This sensitivity analysis evaluates
the impact of stressed recovery rates on the considered structure
and rating impact.
Historically, recovery rates on auto loan collateral have ranged
from 40%-70%. Utilizing the base case of 1.10% detailed in the CNL
sensitivities, recovery rate credit under Fitch's primary scenario
is 50%, resulting in a CGD base case proxy of 2.20%. Applying a 50%
haircut to the 50% recovery rate results in a stressed recovery
rate of 25% and a base case CNL proxy of 1.65% (2.20% x 75% =
1.65%). Under this stressed scenario, the implied multiple declines
to 2.83x (4.67%/1.65% = 2.83x), resulting in an implied rating of
'Asf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Conversely, stable to improved asset performance driven by stable
delinquencies and defaults would lead to marginally increasing CE
levels and consideration for potential upgrades. If CNL is 20% less
than the projected proxy, the expected ratings for the subordinate
notes could be maintained for class B (which are capped at the
originator's ratings) and upgraded by one category for class C, D,
E and F notes. However, this upgrade potential is very remote, as
low losses will mean the transaction remains pro rata for longer,
leading to less enhancement build over time.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CITIGROUP COMMERCIAL 2020-420K: Moody's Gives (P)Ba3 on Cl. E Certs
-------------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to six
classes of CMBS securities, issued by Citigroup Commercial Mortgage
Trust 2020-420K, Commercial Mortgage Pass-Through Certificates,
Series 2020-420K:
Cl. A, Assigned (P)Aaa (sf)
Cl. X*, Assigned (P)Aa3 (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by a single loan secured by the
borrower's fee simple interest in a 857 unit multifamily property
known as 416-420 Kent Avenue ("the property") located in Brooklyn,
NY. Its ratings are based on the credit quality of the loan and the
strength of the securitization structure.
Moody's approach to rating this transaction involved the
application of both its Large Loan and Single Asset/Single Borrower
CMBS methodology and its IO Rating methodology. The rating approach
for securities backed by a single loan compares the credit risk
inherent in the underlying collateral with the credit protection
offered by the structure. The structure's credit enhancement is
quantified by the maximum deterioration in property value that the
securities are able to withstand under various stress scenarios
without causing an increase in the expected loss for various rating
levels. In assigning single borrower ratings, Moody's also
considers a range of qualitative issues as well as the
transaction's structural and legal aspects.
The collateral for the loan consists of two newly-constructed
luxury residential towers totaling 857 units, with approximately
18,872 square feet of ground floor commercial space, and two
parking garages of 429 total parking spaces. The property features
views of the East River and an amenity package that includes
rooftop pools, resident lounges, a fitness center, yoga studios,
landscaped roof decks with outdoor lounges, wellness spa, lobby
coffee bar, billiard and gaming lounge, co-working lounges, common
dining areas with professional grade kitchens, library/quiet room,
concierge services, shuttle bus services, and bicycle storage.
The residential unit mix consists of 468 studio units (54.6% of
total units), 202 one-bedroom units (23.6% of total units), and 187
two-bedroom units (21.8% of total units). As of the October rent
roll, residential units were 83.8% occupied, with average monthly
rent of $3,399. There are 670 market rate units (79.4% occupied;
average monthly rent of $4,238), 186 affordable units (99.5%
occupied; average monthly rent of $985) and one resident manager
unit (not generating revenue).
416 Kent contains a total of 252 residential units, including 187
market rate units and 65 affordable units. As of the October rent
roll, market rate units were 85.6% occupied and affordable units
were 98.5% occupied. The building began initial lease-up in January
2019 and achieved stabilization by September 2019. 416 Kent
benefits from a 35-year tax abatement program, whereby the building
is 100% exempt from taxes on the increases in the prior assessed
value of the building for the first 25 years and 25.8% exempt for
the last 10 years.
420 Kent contains a total of 605 residential units, including 483
market rate units, 121 affordable units, and one resident manager
unit (not generating revenue). As of the October rent roll, market
rate units were 77.0% occupied and affordable units were 100.0%
occupied. The building began initial lease-up in September 2019 and
is currently in the process of being stabilized. 420 Kent benefits
from a 25-year tax abatement program, whereby the building is 100%
exempt from taxes on the increases in the prior assessed value of
the building for the first 21 years of the abatement period, with a
20% annual phase-in of the fully assessed taxes for the last 4
years of the abatement period.
As of September 2020, the 18,872 square feet of commercial space
was 37.3% leased to four tenants. Two tenants are open and current
on rents, and the remaining two tenants are still in their free
rent period.
The property is located on the East River waterfront within the
Williamsburg neighborhood of Brooklyn, NY. Williamsburg is a dense
in-fill neighborhood heavily favored by young professionals,
attracted by the area's retail amenities, relatively more
affordable rents than Manhattan, and proximity to nearby job
centers. Williamsburg is connected to Manhattan via the
Williamsburg Bridge and several subway lines including the L, G, J,
M and Z. Additional transportation includes the East River Ferry,
which is located adjacent to the property, that provides service to
Manhattan, Queens and other parts of Brooklyn.
The securitization is expected to consist of a $238,000,000 portion
of a ten-year, interest-only, first lien mortgage loan with an
outstanding principal balance of $298,000,000.
The credit risk of commercial real estate loans is determined
primarily by two factors: 1) the probability of default, which is
largely driven by the DSCR, and 2) the severity of loss in the
event of default, which is largely driven by the LTV of the
underlying loan.
The Moody's whole loan actual DSCR is 1.94x and Moody's whole loan
stressed DSCR at a 9.25% constant is 0.70x. Moody's DSCR is based
on its assessment of the property's stabilized NCF.
The whole loan balance of $298,000,000 represents a Moody's LTV of
107.5%, taking in to consideration the additional $90,000,000 of
total mezzanine loans the total debt Moody's LTV would increase to
140.0%.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The property's quality
grade is 0.50.
Notable strengths of the transaction include: the property's strong
location, high-quality new construction with strong amenity
offerings, submarket strength and low operating expense load.
Notable concerns of the transaction include: the effects of the
coronavirus pandemic, limited operating history, interest-only
mortgage loan profile, additional debt, the lack of asset
diversification, and credit-negative legal features.
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating Large Loan
and Single Asset/Single Borrower CMBS" published in September 2020.
The methodologies used in rating interest-only classes were
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020, and "Moody's Approach
to Rating Structured Finance Interest-Only (IO) Securities"
published in February 2019.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from its
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
commercial real estate from the current weak US economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. 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.
FORTRESS CREDIT IX: S&P Assigns BB- (sf) Rating to Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fortress Credit BSL IX
Ltd./Fortress Credit BSL IX LLC's fixed- and floating-rate notes.
The note issuance is CLO backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests.
The 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.
RATINGS ASSIGNED
Fortress Credit BSL IX Ltd./Fortress Credit BSL IX LLC
$215.00 mil. class A-1A: AAA (sf)
$25.00 mil. class A-1F: AAA (sf)
$8.00 mil. class A-2: not rated
$48.00 mil. class B: AA (sf)
$26.00 mil. class C: A (sf)
$24.00 mil. class D: BBB- (sf)
$14.00 mil. class E: BB- (sf)
$37.42 mil. subordinated notes: not rated
FREDDIE MAC 2020-HQA5: Moody's Gives (P)B3 Rating on B-1B Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 28
classes of credit risk transfer notes issued by Freddie Mac STACR
REMIC TRUST 2020-HQA5. The ratings range from (P)Baa1 (sf) to (P)B3
(sf).
Freddie Mac STACR REMIC TRUST 2020-HQA5 (STACR 2020-HQA5) is the
fifth transaction of 2020 in the HQA series issued by the Federal
Home Loan Mortgage Corporation (Freddie Mac) to share the credit
risk on a reference pool of mortgages with the capital markets. The
transaction is structured as a real estate mortgage investment
conduit (REMIC). Class coupons of floating rate notes are based on
secured overnight financing rate (SOFR) and their respective fixed
margin.
The notes in STACR 2020-HQA5 receive principal payments as the
loans in the reference pool amortize or prepay. Principal payments
to the notes are paid from assets in the trust account established
from proceeds of the note's issuance. Interest payments to the
notes are paid from a combination of investment income from trust
assets, an asset of the trust known as the interest-only (IO)
Q-REMIC interest, and Freddie Mac. Freddie Mac is responsible to
cover (1) any interest owed on the notes not covered by the
investment income from the trust assets and the yield on the IO
Q-REMIC interest and (2) to reimburse the trust for any investment
losses from sales of the trust assets.
Investors have no recourse to the underlying reference pool. The
credit risk exposure of the notes depends on the actual realized
losses and modification losses incurred by the reference pool.
Freddie Mac is obligated to pay off the notes in November 2050 if
any balances remain outstanding.
The complete rating actions are as follows:
Issuer: Freddie Mac STACR REMIC TRUST 2020-HQA5
Cl. M-1, Assigned (P)Baa1 (sf)
Cl. M-2, Assigned (P)Ba1 (sf)
Cl. M-2A, Assigned (P)Baa3 (sf)
Cl. M-2B, Assigned (P)Ba1 (sf)
Cl. M-2R, Assigned (P)Ba1 (sf)
Cl. M-2S, Assigned (P)Ba1 (sf)
Cl. M-2T, Assigned (P)Ba1 (sf)
Cl. M-2U, Assigned (P)Ba1 (sf)
Cl. M-2I*, Assigned (P)Ba1 (sf)
Cl. M-2AR, Assigned (P)Baa3 (sf)
Cl. M-2AS, Assigned (P)Baa3 (sf)
Cl. M-2AT, Assigned (P)Baa3 (sf)
Cl. M-2AU, Assigned (P)Baa3 (sf)
Cl. M-2AI*, Assigned (P)Baa3 (sf)
Cl. M-2BR, Assigned (P)Ba1 (sf)
Cl. M-2BS, Assigned (P)Ba1 (sf)
Cl. M-2BT, Assigned (P)Ba1 (sf)
Cl. M-2BU, Assigned (P)Ba1 (sf)
Cl. M-2BI*, Assigned (P)Ba1 (sf)
Cl. M-2RB, Assigned (P)Ba1 (sf)
Cl. M-2SB, Assigned (P)Ba1 (sf)
Cl. M-2TB, Assigned (P)Ba1 (sf)
Cl. M-2UB, Assigned (P)Ba1 (sf)
Cl. B-1, Assigned (P)B2 (sf)
Cl. B-1A, Assigned (P)Ba3 (sf)
Cl. B-1AR, Assigned (P)Ba3 (sf)
Cl. B-1AI*, Assigned (P)Ba3 (sf)
Cl. B-1B, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.81%, in a baseline scenario-median is 0.58%, and reaches 5.45% at
a stress level consistent with its Aaa ratings.
Moody's calculated losses on the pool using its US Moody's
Individual Loan Analysis (MILAN) GSE 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,
qualitative adjustments for origination quality and third-party
review (TPR) scope.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
residential mortgage loans from the current weak US economic
activity and a gradual recovery for the coming months. Although an
economic recovery is underway, it is tenuous and its continuation
will be closely tied to containment of the virus. 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.
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%, 11.86%
for the mean) and its Aaa losses by 5% to reflect the likely
performance deterioration resulting from a slowdown in US economic
activity in 2020 due to the coronavirus outbreak
Moody's increased its model-derived median expected losses by 15%
(11.86% for the mean) 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 coronavirus outbreak.
Servicing practices, including tracking coronavirus 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 and the
amount of modification losses.
Moody's may infer and extrapolate from the information provided
based on this or other transactions or industry information, or
make stressed assumptions.
Collateral Description
The reference pool consists of over one hundred and forty-eight
thousand prime, fixed-rate, one- to four-unit, first-lien
conforming mortgage loans acquired by Freddie Mac. The loans were
originated on or after February 1, 2015 with a weighted average
seasoning of five months. Each of the loans in the reference pool
had a loan-to-value (LTV) ratio at origination that was greater
than 80% and less than or equal to 97%. 8.9% of the pool are loans
underwritten through Freddie Mac's Home Possible program and 99.3%
of loans in the pool are covered by mortgage insurance as of the
cut-off date.
About 7.9% of loans in this transaction were underwritten through
Freddie Mac's Automated Collateral Evaluation (ACE) program. Under
ACE program, Freddie Mac assesses whether the estimate of value or
sales price of a mortgaged property, as submitted by the seller, is
acceptable as the basis for the underwriting of the mortgage loan.
If a loan is assessed as eligible for appraisal waiver, the seller
will not be required to obtain an appraisal and will be relieved
from R&Ws related to value, condition and marketability of the
property. A loan originated without a full appraisal will lack
details about the property's condition. Moody's considers ACE loans
weaker than loans with full appraisal. Specifically, for refinance
loans, seller estimated value, which is the basis for calculating
LTV, may be biased where there is no arms-length transaction
information. Although such value is validated against Freddie Mac's
in-house HVE model, there's still possibility for over valuations
subject to Freddie Mac's tolerance levels. All ACE loans in this
transaction are either rate or term refinance loans where Moody's
made haircuts to property values to account for overvaluation
risk.
Aggregation/Origination Quality
Moody's considers Freddie Mac's overall seller management and
aggregation practices to be adequate and Moody's did not apply a
separate loss-level adjustment for aggregation quality.
Underwriting
Freddie Mac uses a delegated underwriting process to purchase
loans. Sellers are required to represent and warrant that loans are
made in accordance with negotiated terms or Freddie Mac's guide.
Numerous checks in the selling system ensures that loans with the
correct characteristics are delivered to Freddie Mac. Sellers are
required to cure, make an indemnification payment or repurchase the
loans if a material underwriting defect is discovered subject to
certain limits. In certain cases, Freddie Mac may elect to waive
the enforcements of the repurchase if an alternative such as an
indemnification payment is provided.
Quality control
Freddie Mac monitors each seller's risk exposure both on an
aggregated basis as well as by product lines. A surveillance team
reviews sellers' financials at least on an annual basis, monitors
exposure limits, risk ratings, lenders QC reports and internal
audit results and may adjust credit limits, require additional
loan/operational reviews or put the seller on a watch list, as
needed.
Home Possible program
Approximately 8.9% of the loans by cut-off date balance were
originated under the Home Possible program. The program is designed
to make responsible homeownership accessible to low- to
moderate-income homebuyers, by requiring low down payments, lower
risk-adjusted pricing, flexibility in sources of income, and, in
certain circumstances, lower than standard mortgage insurance
coverage.
Home Possible loans in STACR 2020-HQA5's reference pool have a WA
FICO of 746 and WA LTV of 93.8%, versus a WA FICO of 753 and a WA
LTV of 90.7% for the rest of the loans in the pool. While its MILAN
model takes into account characteristics listed on the loan tape,
such as lower FICOs and higher LTVs, there may be risks not
captured by its model due to less stringent underwriting, including
allowing more flexible sources of funds for down payment and lower
risk-adjusted pricing. Moody's applied an adjustment to the loss
levels to address the additional risks that Home Possible loans may
add to the reference pool.
Enhanced Relief Refinance (ERR)
The ERR program is designed to provide refinance opportunities to
borrowers with existing Freddie Mac's mortgage loans who are
current on their mortgage payments but whose LTV ratios exceed the
maximum permitted for standard refinance products. The program is
intended to offer refinance opportunities to borrowers so they can
reduce their monthly payment. STACR 2020-HQA5's reference pool does
not include ERR loans at closing, however, transaction documents
allow for the replacement of loans in the reference pool with ERR
loans in the future. The replacement will not constitute a
prepayment on the replaced loan, credit event or a modification
event.
At closing, Moody's did not make any adjustment to its collateral
losses due to the existence of the ERR program. Moody's believes
the programs are beneficial for loans in the pool, especially
during an economic downturn when limited refinancing opportunities
would be available to borrowers with low or negative equity in
their properties. However, since such refinanced loans are likely
to have later maturities and slower prepayment rates than the rest
of the loans, the reference pool is at risk of having a high
concentration of high LTV loans at the tail of the transaction's
life. Moody's will monitor ERR loans in the reference pool and may
make an adjustment in the future if the percentage of them becomes
significant after closing.
Mortgage insurance
99.3% of the loans in the pool were originated with mortgage
insurance. 97.2% of the loans benefit from BPMI which is usually
terminated when LTV falls below 78% under scheduled amortization,
and 1.9% of the loans benefit from LPMI which lasts through the
life of the loan.
Freddie Mac will cover proceeds that are not received due to a
mortgage insurer insolvency or due to a settlement between the
mortgage insurer and Freddie Mac. The servicer is required to
reimburse Freddie Mac for claim curtailments rejections due to the
servicer's violation of the mortgage insurance policy.
The MILAN model output accounts for the presence of mortgage
insurance backed by Freddie Mac. Its rejection rate assumption is
0% under base case and 1% under Aaa scenario.
Servicing arrangement
As master servicer, Freddie Mac has strong servicer oversight and
monitoring processes. Generally, Freddie Mac does not itself
conduct servicing activities. When a mortgage loan is sold to
Freddie Mac, the seller enters into an agreement to service the
mortgage loan for Freddie Mac in accordance with a comprehensive
servicing guide for servicers to follow. Freddie Mac monitors
primary servicer performance and compliance through its Servicer
Success Program, scorecard and servicing quality assurance group.
Freddie Mac also reviews individual loan files to identify
servicing performance gaps and trends.
Moody's considers the servicing arrangement to be adequate and
Moody's did not make any adjustments to its loss levels based on
Freddie Mac's servicer management.
Third-party Review
Moody's considers the scope of the TPR based on Freddie Mac's
acquisition and QC framework to be adequate. Moody's assessed an
adjustment to loss at a Aaa stress level due to lack of compliance
review on TILA-RESPA Integrated Disclosure (TRID) violations.
The results and scope of the pre-securitization third-party,
loan-level review (due diligence) suggest a heavier reliance on
sellers' representations and warranties (R&Ws) compared with
private label securitizations. The scope of the TPR, for example,
is weaker because the sample size is small (only 0.28% of the loans
in reference pool are included in the sample). To the extent that
the TPR firm classifies certain credit or valuation discrepancies
as 'findings', Freddie Mac will review and may provide rebuttals to
those findings, which could result in the change of event grades by
the review firm.
The third-party due diligence scope focuses on the following:
Compliance: The diligence firm reviewed 333 loans for compliance
with federal, state and local high cost Home Ownership and Equity
Protection Act (HOEPA) regulations (301 loans were reviewed for
compliance plus 32 loans were reviewed for both credit/valuation
and compliance). None were determined to be noncompliant.
Appraisals: The third-party diligence provider also reviewed
property valuation on 1,148 loans in the sample pool (1,116 loans
were reviewed for credit/valuation plus 32 loans were reviewed for
both credit/valuation and compliance). 36 loans received final
valuation grades of "C". The third-party diligence provider was not
able to obtain property appraisal risk reviews on eight loans. The
remaining 28 loans are ACE loans and had Appraisal Desktop with
Inspections (ADI) which did not support the original appraised
value within the 10% tolerance. The valuation result is much weaker
than prior transactions largely due to a higher concentration of
ACE loans in the TPR sample. Moody's didn't make additional
adjustment based on this result given Moody's has already made
property value haircuts to all ACE loans in the reference pool.
Credit: The third-party diligence provider reviewed credit on 1,148
loans in the sample pool. Three loans had final grades of "D" and
ten loans had final grades of "C" due to underwriting defects.
These loans were removed from the transaction. The results were
slightly weaker than prior STACR transactions Moody's rated.
Data integrity: The third-party review firm analyzed the sample
pool for data calculation and comparison to the imaged file
documents. The review revealed 81 data discrepancies on 78 loans.
Unlike private label RMBS transactions, a review of TRID violation
was not part of Freddie Mac's due diligence scope. A lack of
transparency regarding how many loans in the transaction contain
material violations of the TRID rule is a credit negative. However,
since Moody's expects overall losses on STACR transactions owing to
TRID violations to be fairly minimal, Moody's only made a slight
qualitative adjustment to losses under a Aaa scenario. Furthermore,
lender R&Ws and the GSEs' ability to remove defective loans from
the transactions will likely mitigate some of aforementioned
concerns.
Reps & Warranties Framework
Freddie Mac is not providing loan level (R&Ws for this transaction
because the notes are a direct obligation of Freddie Mac. The
reference obligations are subject to R&Ws made by the sellers. As
such, Freddie Mac commands robust R&Ws from its seller/servicers
pertaining to all facets of the loan, including but not limited to
compliance with laws, compliance with all underwriting guidelines,
enforceability, good property condition and appraisal procedures.
Freddie Mac will be responsible for enforcing the R&Ws made by the
sellers/lenders in the reference pool. To the extent that Freddie
Mac discovers a confirmed underwriting defect or a major servicing
defect, the respective loan will be removed from the reference
pool. Since Freddie Mac retains a significant portion of the risk
in the transaction, it will likely take necessary steps to address
any breaches of R&Ws. For example, Freddie Mac undertakes quality
control reviews and servicing quality assurance reviews of small
samples of the mortgage loans that sellers deliver to Freddie Mac.
These processes are intended to determine, among other things, the
accuracy of the R&Ws made by the sellers in respect of the mortgage
loans that are sold to Freddie Mac. Moody's made no adjustments to
the transaction regarding the R&W framework.
The notes
Moody's refers to the M-1, M-2A, M-2B, B-1A, B-1B, B-2A and B-2B
notes as the original notes, and the M-2, M-2R, M-2S, M-2T, M-2U,
M-2I, M-2AR, M-2AS, M-2AT, M-2AU, M-2AI, M-2BR, M-2BS, M-2BT,
M-2BU, M-2BI, M-2RB, M-2SB, M-2TB, M-2UB, B-1, B-2, B-1AR, B-1AI,
B-2AR and B-2AI notes as the Modifiable and Combinable REMICs
(MACR) notes; together Moody's refers to them as the notes.
The M-2 notes can be exchanged for M-2A and M-2B notes, M-2R and
M-2I notes, M-2S and M-2I, M-2T and M-2I, and M-2U and M-2I notes.
The M-2A notes can be exchanged for M-2AR and M-2AI notes, M-2AS
and M-2AI notes, M-2AT and M-2AI, and M-2AU and M-2AI notes.
The M-2B notes can be exchanged for M-2BR and M-2BI notes, M-2BS
and M-2BI notes, M-2BT and M-2BI notes, and M-2BU and M-2BI notes.
Classes M-2I, M-2AI, M-2BI, B-1AI and B-2AI are interest only
tranches referencing to the notional balances of Classes M-2, M-2A,
M-2B, B-1A and B-2A, respectively.
Classes M-2RB, M-2SB, M-2TB and M-2UB are each an exchangeable for
two classes that are initially offered at closing. Its ratings of
M-2RB, M-2SB, M-2TB and M-2UB reference the rating of Class M-2B
only, disregarding the rating of M-2AI. This is the case because
Class M-2AI's cash flow represents an insignificant portion of the
overall promise. In the event Class M-2B gets written down through
losses and Class M-2AI is still outstanding, Moody's would continue
to rate Classes M-2RB, M-2SB, M-2TB and M-2UB consistent with Class
M-2B's last outstanding rating so long as Classes M-2RB, M-2SB,
M-2TB and M-2UB are still outstanding.
Transaction Structure
Credit enhancement in this transaction is comprised of
subordination provided by mezzanine and junior tranches. Realized
losses are allocated in a reverse sequential order starting with
the Class B-3H reference tranche.
Interest due on the notes is determined by the outstanding
principal balance and the interest rate of the notes. The interest
payment amount is the interest accrual amount of a class of notes
minus any modification loss amount allocated to such class on each
payment date, plus any modification gain amount. The modification
loss and gain amounts are calculated by taking the respective
positive and negative difference between the original accrual rate
of the loans, multiplied by the unpaid balance of the loans, and
the current accrual rate of the loans, multiplied by the interest
bearing unpaid balance.
So long as the senior reference tranche 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.
The STACR 2020-HQA5 transaction allows for principal distribution
to subordinate notes by the supplemental subordinate reduction
amount even if performance triggers fail. The supplemental
subordinate reduction amount equals the excess of the offered
reference tranche percentage over 6.15%. The distribution of the
supplemental subordinated reduction amount would reduce principal
balances of the offered reference tranche and correspondingly limit
the credit enhancement of class A note to be always below 6.15%
plus the note balance of B-3H. This feature is beneficial to the
offered certificates.
Credit Events and Modification Events
Reference tranche write-downs occur as a result of loan level
credit events. A credit event with respect to any loan means any of
the following events: (i) a short sale with respect to the related
mortgaged property is settled, (ii) a related seriously delinquent
mortgage note is sold prior to foreclosure, (iii) the mortgaged
property that secured the related mortgage note is sold to a third
party at a foreclosure sale, (iv) an REO disposition occurs, or (v)
the related mortgage note is charged-off. As a result, the
frequency of credit events will be the same as actual loan default
frequency, and losses will impact the notes similar to that of a
typical RMBS deal.
Loans that experience credit events that are subsequently found to
have an underwriting defect, a major servicing defect or are deemed
ineligible will be subject to a reverse credit event. Reference
tranche balances will be written up for all reverse credit events
in sequential order, beginning with the most senior tranche that
has been subject to a previous write-down. In addition, the amount
of the tranche write-up will be treated as an additional principal
recovery, and will be paid to noteholders in accordance with the
cash flow waterfall.
If a loan experiences a forbearance or mortgage rate modification,
the difference between the original mortgage rate and the current
mortgage rate will be allocated to the reference tranches as a
modification loss. The Class B-3H reference tranche, which
represents 0.25% of the pool, will absorb modification losses
first. The final coupons on the notes will have an impact on the
amount of interest available to absorb modification losses from the
reference pool.
Tail Risk
Similar to prior STACR transactions, the initial subordination
level of 3.75% is lower than the deal's minimum credit enhancement
trigger level of 4.00%. The transaction begins by failing the
minimum credit enhancement test, leaving the subordinate tranches
locked out of unscheduled principal payments until the deal builds
an additional 0.25% subordination. STACR 2020-HQA5 does not have a
subordination floor. This is mitigated by the sequential principal
payment structure of the deal, which ensures that the credit
enhancement of the subordinate tranches is not eroded early in the
life of the transaction.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020. The methodologies
used in rating interest-only classes were "Moody's Approach to
Rating US RMBS Using the MILAN Framework" published in April 2020,
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019.
GSR MORTGAGE 2007-3F: Moody's Rates 2 Tranches 'Caa3'
-----------------------------------------------------
Moody's Investors Service assigned ratings to six bonds from three
US residential mortgage backed transactions (RMBS), backed by Prime
Jumbo mortgages issued by GSR Mortgage Loan Trust.
Complete rating actions are as follows:
Issuer: GSR Mortgage Loan Trust 2006-6F
Cl. 3A-1, Assigned Caa2 (sf); previously on Jan 5, 2017 Withdrawn
Issuer: GSR Mortgage Loan Trust 2006-8F
Cl. 3A-10, Assigned Caa2 (sf); previously on Jan 5, 2017 Withdrawn
Issuer: GSR Mortgage Loan Trust 2007-3F
Cl. 2A-2, Assigned Caa1 (sf); previously on Feb 9, 2017 Withdrawn
Cl. 2A-5, Assigned Caa1 (sf); previously on Jan 5, 2017 Withdrawn
Cl. 3A-2, Assigned Caa3 (sf); previously on Feb 9, 2017 Withdrawn
Cl. 3A-5, Assigned Caa3 (sf); previously on Feb 9, 2017 Withdrawn
RATINGS RATIONALE
The assignment of the ratings reflects the correction of a prior
error. The ratings on these exchangeable tranches were previously
withdrawn due to an administrative error. This error has now been
corrected and the ratings have been reassigned to the tranches.
The rating actions also reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. In light
of the current macroeconomic environment, Moody's revised loss
expectations based on the extent of performance deterioration of
the underlying mortgage loans, resulting from a slowdown in
economic activity and increased unemployment due to the coronavirus
outbreak. Specifically, Moody's has observed an increase in
delinquencies, payment forbearance, and payment deferrals since the
start of pandemic, which could result in higher realized losses.
Its analysis considers the current proportion of loans granted
payment relief in each individual transaction. Moody's identified
these loans based on a review of loan level cashflows over the last
few months. In cases where loan level data is not available,
Moody's assumed that the proportion of borrowers enrolled in
payment relief programs would be equal to levels observed in
transactions of comparable asset quality. Based on its analysis,
the proportion of borrowers that are currently enrolled in payment
relief plans varied greatly, ranging between approximately 4% and
25% among RMBS transactions issued before 2009. In its analysis,
Moody's assumes these loans to experience lifetime default rates
that are 50% higher than default rates on the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Its analysis considered
the impact of six months of scheduled principal payments on the
loans enrolled in payment relief programs being passed to the trust
as a loss. The magnitude of this loss will depend on the proportion
of the borrowers in the pool subject to principal deferral and the
number of months of such deferral. The treatment of deferred
principal as a loss is credit negative, which could incur
write-downs on bonds when missed payments are deferred.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
residential mortgage loans from the current weak US economic
activity and a gradual recovery for the coming months. Although an
economic recovery is underway, it is tenuous, and its continuation
will be closely tied to containment of the virus. As a result, the
degree of uncertainty around its forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2020.
In addition, Moody's publishes a weekly summary of structured
finance credit ratings.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
JP MORGAN 2020-9: S&P Assigns Prelim B (sf) Rating to B-5 Certs
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to J.P. Morgan
Mortgage Trust 2020-9's mortgage pass-through certificates.
The note issuance is an RMBS transaction backed by residential
mortgage loans.
The preliminary ratings are based on information as of Nov. 19,
2020. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The high-quality collateral in the pool;
-- The available credit enhancement;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework (R&W) for this
transaction;
-- The geographic concentration;
-- The experienced aggregator;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- The impact that the economic stress brought on by the COVID-19
pandemic is likely to have on the performance of the mortgage
borrowers in the pool and liquidity available in the transaction.
PRELIMINARY RATINGS ASSIGNED
J.P. Morgan Mortgage Trust 2020-9
$295,376,000 class A-1: AAA (sf)
$295,376,000 class A-2: AAA (sf)
$295,376,000 class A-2-A: AAA (sf)
$295,376,000(i) class A-2-X: AAA (sf)
$279,830,000 class A-3: AAA (sf)
$279,830,000 class A-3-A: AAA (sf)
$279,830,000(i) class A-3-X: AAA (sf)
$209,873,000 class A-4: AAA (sf)
$209,873,000 class A-4-A: AAA (sf)
$209,873,000(i) class A-4-X: AAA (sf)
$69,957,000 class A-5: AAA (sf)
$69,957,000 class A-5-A: AAA (sf)
$69,957,000(i) class A-5-X: AAA (sf)
$166,484,000 class A-6: AAA (sf)
$166,484,000 class A-6-A: AAA (sf)
$166,484,000(i) class A-6-X: AAA (sf)
$113,346,000 class A-7: AAA (sf)
$113,346,000 class A-7-A: AAA (sf)
$113,346,000(i) class A-7-X: AAA (sf)
$43,389,000 class A-8: AAA (sf)
$43,389,000 class A-8-A: AAA (sf)
$43,389,000(i) class A-8-X: AAA (sf)
$34,979,000 class A-9: AAA (sf)
$34,979,000 class A-9-A: AAA (sf)
$34,979,000(i) class A-9-X: AAA (sf)
$34,978,000 class A-10: AAA (sf)
$34,978,000 class A-10-A: AAA (sf)
$34,978,000(i) class A-10-X: AAA (sf)
$15,546,000 class A-M: AAA (sf)
$15,546,000 class A-M-A: AAA (sf)
$15,546,000(i) class A-M-X: AAA (sf)
$295,376,000(i) class A-X-1: AAA (sf)
$6,218,000 class B-1: AA (sf)
$2,954,000 class B-2: A (sf)
$2,954,000 class B-3: BBB (sf)
$933,000 class B-4: BB (sf)
$1,399,000 class B-5: B (sf)
$1,088,480 class B-6: not rated
$0 class A-R: not rated
(i)Notional balance.
LANSDOWNE MORTGAGE 1: Fitch Affirms CC Rating on 3 Tranches
-----------------------------------------------------------
Fitch Ratings has affirmed Lansdowne Mortgage Securities No. 1 Plc
(LMS1) and Lansdowne Mortgage Securities No. 2 Plc (LMS2), as
follows:
RATING ACTIONS
Lansdowne Mortgage Securities No. 1 Plc
Class A2 XS0250832614; LT B+sf Affirmed; previously B+sf
Class M1 XS0250833695; LT Bsf Affirmed; previously Bsf
Class M2 XS0250834073; LT CCsf Affirmed; previously CCsf
Class B1 XS0250834404; LT CCsf Affirmed; previously CCsf
Class B2 XS0250835120; LT CCsf Affirmed; previously CCsf
Lansdowne Mortgage Securities No. 2 Plc
Class A2 XS0277482286; LT Bsf Affirmed; previously Bsf
Class M1 XS0277482526; LT B-sf Affirmed; previously B-sf
Class M2 XS0277482955; LT CCsf Affirmed; previously CCsf
Class B XS0277483417; LT CCsf Affirmed; previously CCsf
TRANSACTION SUMMARY
The transactions are securitisations of Irish non-conforming
residential mortgage loans originated by Start Mortgages Ltd.
KEY RATING DRIVERS
High Arrears, Delayed Foreclosures
In LMS1, 39% of the portfolio is in arrears over 90 days, while in
LMS2 they represented 37% as at September 2020 payment date. The
majority of borrowers in arrears have been subject to restructuring
measures. The provisioning mechanism is defined on losses rather
than defaults. As foreclosure timing in Ireland is often long,
crystallisation of losses and subsequent provisioning in the
revenue waterfall is being delayed. This leads to the transactions'
high sensitivity to a longer foreclosure timing and is particularly
relevant for the ratings of the class M1 notes in LMS1, and class
A2 and M1 notes in LMS2.
Payment Interruption Risk Constrains Ratings
The transactions' reserve funds may be drawn to cover losses. If
the high arrears translate into foreclosures and then losses within
a short period of time, reserves could be depleted imminently. As a
result, in Fitch's view, payment interruption risk is not
adequately addressed and the ratings are capped at 'B+sf', which
limits the rating for LMS1's class A2 notes.
The class B1 and B2 notes in LMS1 and class M2 and B notes in LMS2
are expected to experience interest deferrals in the expected case
scenario. Fitch considers this is adequately reflected in the
notes' 'CCsf' ratings.
Resilience to COVID-19 Additional Stress
Fitch has identified additional stress scenarios to be applied in
conjunction with its European RMBS Rating Criteria in response to
the coronavirus outbreak (see: EMEA RMBS: Criteria Assumptions
Updated due to Impact of the Coronavirus Pandemic). The agency
considered these additional stresses to Irish country assumptions
for the rating analysis and found the notes are able to withstand
the increased stresses at the respective ratings. Fitch did not
perform an arrears adjustment to the steady-state level, primarily
based on the elevated level of arrears in the portfolio.
Payment Holidays, Distressed Portfolio
Since the outbreak of COVID-19 in March 2020, the special servicer
Start Mortgages has offered COVID-19-related payment deferrals to
the borrowers in portfolio in addition to the conventional
restructuring measures. The share of COVID-19-related payment
deferrals was around 10%-15% as of the end of October 2020,
according to information from Start Mortgages.
There is an increased default risk in case the borrowers do not
perform on their payments after the expiry of the deferral period.
Should this be the case, arrears will increase in the coming
months. Fitch will continue to monitor the arrears levels in both
transactions. At present, Fitch considers the risk of payment
holidays as sufficiently addressed by the applied COVID-19 stress
assumptions.
Credit Enhancement (CE) Build-up Supports Senior Notes
The sequential amortisation of the notes has led to an increase in
CE, in particular for the senior notes. As arrears remain elevated,
the transactions will continue paying sequentially, due to the
arrear's triggers breach. CE may continue to increase further as
long as losses continue to be limited.
The Key Rating Drivers listed in the applicable sector criteria,
but not mentioned, are not material to this rating action.
Elevated ESG Score
LMS 1 and LMS 2 have an ESG Relevance Score of 5 for Governance
(Rule of Law, Institutional and Regulatory Quality) due to exposure
to jurisdictional legal risks; regulatory effectiveness;
supervisory oversight; foreclosure laws; government support and
intervention, which has a negative impact on the credit profile,
and is highly relevant to the rating. The current foreclosure
practice is negatively affecting the ratings.
RATING SENSITIVITIES
The text provides insight into the model-implied sensitivities the
transaction faces when some assumptions are 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.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
If the transactions continue to make timely payments while
withstanding negative carry and losses from delinquencies and
foreclosures, leading to a decrease in late stage arrears, Fitch
may reduce its foreclosure frequency assumptions and perceive the
risk delayed foreclosures as reduced. This could result in upgrades
of the notes.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The majority of the loans in the portfolios have been subject to
restructuring arrangements as opposed to foreclosures taking place.
Increased foreclosure frequency, lower recovery proceeds on their
own or in combination with longer foreclosure timing could result
in downgrades of the notes.
Coronavirus Downside Scenario Sensitivity
As outlined in "Fitch Ratings Coronavirus Scenarios: Baseline and
Downside Cases", we consider a more severe downside coronavirus
scenario for sensitivity. Under this scenario, Fitch's analysis
uses a 15% weighted average foreclosure frequency increase and a
15% decrease in the weighted average recovery rate. This will
likely lead to lower model-implied ratings for most of the notes,
but may leave the actual rating of some of the senior notes
unchanged due to the constraints limiting the notes' ratings below
the current model-implied ratings.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. There were no findings that affected
the rating analysis. Fitch has not reviewed the results of any
third- party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided about
the underlying asset pools ahead of the transactions' initial
closing. The subsequent performance of the transactions over the
years is consistent with the agency's expectations given the
operating environment and Fitch is therefore satisfied that the
asset pool information relied upon for its initial rating analysis
was adequately reliable.
Overall and together, Fitch's assessment of the information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
LMS1: Rule of Law, Institutional and Regulatory Quality: '5'
LMS2: Rule of Law, Institutional and Regulatory Quality: '5'
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
OCTAGON INVESTMENT 50: S&P Rates Class E Notes 'BB- (sf)'
---------------------------------------------------------
S&P Global Ratings assigned its ratings to Octagon Investment
Partners 50 Ltd./Octagon Investment Partners 50 LLC's floating- and
fixed-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'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 management 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
Octagon Investment Partners 50 Ltd./Octagon Investment Partners
50 LLC
Class A-1, $156.00 million: AAA (sf)
Class A-2, $100.00 million: AAA (sf)
Class B, $48.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Class subordinated notes, $41.20 million: Not rated
REALT 2015-1: Fitch Affirms Bsf Rating on Class G Certs
-------------------------------------------------------
Fitch Ratings has affirmed eight classes of Real Estate Asset
Liquidity Trust's (REAL-T) commercial mortgage pass-through
certificates, series 2015-1. All currencies are in Canadian dollars
(CAD).
RATING ACTIONS
REAL-T 2015-1
Class A-1 75585RMA0; LT AAAsf Affirmed; previously AAAsf
Class A-2 75585RMB8; LT AAAsf Affirmed; previously AAAsf
Class B 75585RMD4; LT AAsf Affirmed; previously AAsf
Class C 75585RME2; LT Asf Affirmed; previously Asf
Class D 75585RMF9; LT BBBsf Affirmed; previously BBBsf
Class E 75585RMG7; LT BBB-sf Affirmed; previously BBB-sf
Class F 75585RMH5; LT BBsf Affirmed; previously BBsf
Class G 75585RMJ1; LT Bsf Affirmed; previously Bsf
KEY RATING DRIVERS
Increased Loss Expectations/Fitch Loans of Concern: Overall
performance for the majority of the pool has remained stable, but
loss expectations have increased slightly since Fitch's last rating
action. The largest loan in the pool, Alta Vista Manor Retirement
Ottawa (10.2%), remains a Fitch Loan of Concern (FLOC). The loan is
secured by a 174-unit independent living property located in
Ottawa, ON. The year-end (YE) 2019 NOI represents a 28% decline
from YE 2017 but has increased 83% from YE 2018. As of YE 2019,
occupancy was reported to be 77%, down from 97% at issuance. The
servicer reports that competition and other economic factors have
caused the drop in occupancy.
Fitch expects the senior housing sector to exhibit greater
performance volatility than traditional multifamily and to be prone
to occupancy declines during the pandemic until facilities are
willing to or allow to accept new residents. The loan, however,
remains current and is fully guaranteed by the sponsor, which is a
joint venture (JV) between Welltower, Inc. and Revera, Inc., two
leading owner/operators in the senior housing sector. The JV
acquired the original sponsor, Regal Lifestyle Communities, Inc.,
in October 2015. Fitch considered the significant recourse of the
borrowers/sponsors in its analysis and recommendations.
The Hilton Mississauga Meadowdale loan (4.7%) has also been
designated as a FLOC due to the impact to the hotel industry from
the coronavirus pandemic. In addition, the property has
historically had approximately 45% of its total revenue from food
and beverage due to its large meeting/conference space
(approximately 45,000sf). Prior to the pandemic, property
performance had been relatively stable. The YE 2019 DSCR and
occupancy were reported to be 4.13x and 75%, respectively. The
borrower has been granted forbearance due to economic hardship
sustained from the ongoing coronavirus pandemic. Fitch applied
additional base case stresses in its analysis due to the
significant impact on the hotel industry from the pandemic. This
analysis includes a 26% haircut to the servicer provided year-end
2019 NOI.
Increasing Credit Enhancement: Credit enhancement has increased
since issuance due to continued amortization. As of the October
2020 distribution date, the pool's aggregate principal balance has
paid down by 23.5% to $256.1 million from $334.8 million at
issuance. Of the remaining 36 loans in the pool, there are no full
or partial interest-only loans. One loan (10%) has been defeased.
Coronavirus Exposure: Eight loans (28.9%) are secured by retail
properties, including four loans in the top 15 (21.2%). The
weighted average (WA) NOI DSCR for the retail loans is 1.64x. Four
loans (16.3%) are secured by multifamily properties and the WA NOI
DSCR for these loans is 1.05x. Of the multifamily exposure, one
loan is the Alta Vista Manor Retirement Ottawa; Fitch applied
additional coronavirus-related stresses to three retail loans and
two hotel loans to account for potential cash flow disruptions due
to the coronavirus pandemic.
Canadian Loan Attributes: The ratings reflect strong Canadian
commercial real estate loan performance, including a low
delinquency rate and low historical losses of less than 0.1%, as
well as positive loan attributes such as short amortization
schedules, recourse to the borrower and additional guarantors.
Approximately 76% of the loans feature full or partial recourse to
the borrowers and/or sponsors.
RATING SENSITIVITIES
The Stable Outlooks on classes A-1 through F reflect the overall
stable performance of the majority of the pool and expected
continued amortization. The Negative Outlook on class G reflects
Fitch's concerns with the performance of the Alta Vista Manor
Retirement Ottawa loan, as occupancy and NOI has declined since
issuance.
Factors that could, individually or collectively, lead to 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 to 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. Upgrades to the 'BBBsf' category would also consider these
factors, but would be limited based on sensitivity to
concentrations or the potential for future concentration. Classes
would not be upgraded above 'Asf' if there were likelihood for
interest shortfalls. Upgrades to the 'Bsf' 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 (CE) to the classes.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced loans.
Downgrades to the 'Asf', 'AAsf' and 'AAAsf' categories are not
likely due to the position in the capital structure but may occur
at the 'AAsf' and 'AAAsf' categories should interest shortfalls
occur. Downgrades to the 'BBBsf' category would occur should
overall pool losses increase and/or one or more of the FLOCs have
an outsized loss, which would erode CE. Downgrades to the 'Bsf' and
'BBsf' categories would occur should loss expectations increase due
to an increase in specially serviced loans and/or the loans
vulnerable to the coronavirus pandemic not stabilize.
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
negative rating actions, including downgrades or Negative Outlook
revisions.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
REESE PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Reese Park
CLO Ltd.'s fixed- and 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 preliminary ratings are based on information as of Nov. 17,
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
Reese Park CLO Ltd.
$4.00 mil. class X: AAA (sf)
$244.00 mil. class A: AAA (sf)
$55.18 mil. class B-1: AA (sf)
$4.82 mil. class B-2: AA (sf)
$24.00 mil. class C: A (sf)
$24.00 mil. class D: BBB- (sf)
$12.00 mil. class E: BB- (sf)
$40.00 mil. subordinated notes: not rated
SBMS VII 1997-HUD1: Moody's Assigns Caa3 Rating on Cl. A-4 Debt
---------------------------------------------------------------
Moody's Investors Service assigned a rating on Class A-4 from one
US residential mortgage backed transactions (RMBS), backed by
Scratch and Dent mortgages issued by SBMS VII 1997-HUD1.
Complete rating actions are as follows:
Issuer: SBMS VII 1997-HUD1
Cl. A-4, Assigned Caa3 (sf); previously on Feb 12, 2020 Withdrawn
(sf)
RATINGS RATIONALE
The assignment of the rating for Class A-4 reflects the correction
of a prior error. The rating on Class A-4 was previously withdrawn
due to an internal data error. The error has now been corrected,
and a rating has been reassigned to Class A-4.
The rating action also reflects the recent performance as well as
Moody's updated loss expectations on the underlying pools. In light
of the current macroeconomic environment, Moody's revised loss
expectations based on the extent of performance deterioration of
the underlying mortgage loans, resulting from a slowdown in
economic activity and increased unemployment due to the coronavirus
outbreak.
Its analysis considers the current proportion of loans granted
payment relief in each individual transaction. Moody's identified
these loans based on a review of loan level cashflows over the last
few months. Based on its analysis, the proportion of borrowers that
are currently enrolled in payment relief plans varied greatly,
ranging between approximately 4% and 25% among RMBS transactions
issued before 2009. In its analysis, Moody's assumes these loans to
experience lifetime default rates that are 50% higher than default
rates on the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Its analysis considered
the impact of six months of scheduled principal payments on the
loans enrolled in payment relief programs being passed to the trust
as a loss. The magnitude of this loss will depend on the proportion
of the borrowers in the pool subject to principal deferral and the
number of months of such deferral. The treatment of deferred
principal as a loss is credit negative, which could incur
write-downs on bonds when missed payments are deferred.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
residential mortgage loans from the current weak US economic
activity and a gradual recovery for the coming months. Although an
economic recovery is underway, it is tenuous, and its continuation
will be closely tied to containment of the virus. As a result, the
degree of uncertainty around its forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Principal Methodology
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in July 2020.
In addition, Moody's publishes a weekly summary of structured
finance credit ratings and methodologies.
Factors that would lead to an upgrade or downgrade of the rating:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
SDART 2020-4: Moody's Gives (P)B2 Rating on Class E Notes
---------------------------------------------------------
Moody's Investors Service assigned provisional ratings to the notes
to be issued by Santander Drive Auto Receivables Trust 2020-4
(SDART 2020-4). This is the fourth SDART auto loan transaction of
the year for Santander Consumer USA Inc. (SC; unrated). The notes
will be backed by a pool of retail automobile loan contracts
originated by SC, who is also the servicer and administrator for
the transaction.
The complete rating actions are as follows:
Issuer: Santander Drive Auto Receivables Trust 2020-4
Class A-1 Notes, Assigned (P)P-1 (sf)
Class A-2-A Notes, Assigned (P)Aaa (sf)
Class A-2-B Notes, Assigned (P)Aaa (sf)
Class A-3 Notes, Assigned (P)Aaa (sf)
Class B Notes, Assigned (P)Aa1 (sf)
Class C Notes, Assigned (P)Aa2 (sf)
Class D Notes, Assigned (P)Baa2 (sf)
Class E Notes, Assigned (P)B2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of SC as the servicer.
Moody's median cumulative net loss expectation for SDART 2020-4 is
18.0% and loss at a Aaa stress is 47.0%, unchanged from SDART
2020-3, the last transaction Moody's rated. Moody's based its
cumulative net loss expectation and loss at a Aaa stress 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 SC to perform the 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, Class D
notes and Class E notes are expected to benefit from 53.25%,
43.60%, 29.00%, 16.75% and 9.75% 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.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Its analysis has considered the effect on the performance of
consumer assets from the current weak US economic activity and a
gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. Specifically, for auto
loan ABS, loan performance will weaken due to the unprecedented
spike in the unemployment rate that may limit the borrower's income
and their ability to service debt. The softening of used vehicle
prices due to lower demand will reduce recoveries on defaulted auto
loans, also a credit negative. Furthermore, borrower assistance
programs to affected borrowers, such as extensions, may adversely
impact scheduled cash flows to bondholders. As a result, the degree
of uncertainty around its forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
July 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the subordinate notes if, given current
expectations of portfolio losses, levels of credit enhancement are
consistent with higher ratings. In sequential pay structures, such
as the one in this transaction, credit enhancement grows as a
percentage of the collateral balance as collections pay down senior
notes. Prepayments and interest collections directed toward note
principal payments will accelerate this build of enhancement.
Moody's expectation of pool losses could decline as a result of a
lower number of obligor defaults or appreciation in the value of
the vehicles securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US job market, the market for
used vehicles, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US job market, the market for used
vehicles, and poor servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties,
inadequate transaction governance, and fraud. In its analysis of
the Class A-1 money market tranche, Moody's applied incremental
stresses to its typcial cash flow assumptions in consideration of a
likely slowdown in borrower payments brought on by the economic
impact of the COVID-19 pandemic. Additionally, Moody's could
downgrade the Class A-1 short-term rating following a significant
slowdown in principal collections that could result from, among
other things, high delinquencies, high usage of borrower relief
programs or a servicer disruption that impacts obligor's payments.
SYMPHONY CLO XXIII: S&P Assigns Prelim BB- (sf) Rating to E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Symphony CLO
XXIII Ltd./Symphony CLO XXIII LLC's floating-rate and MASCOT
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 preliminary ratings are based on information as of Nov. 19,
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 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; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Symphony CLO XXIII Ltd./Symphony CLO XXIII LLC
Class Rating Amount
(mil. $)
X AAA (sf) 1.00
A(i) AAA (sf) 248.00
B(i) AA (sf) 56.00
C (deferrable)(i) A (sf) 24.00
D (deferrable)(i) BBB- (sf) 24.00
E (deferrable) BB- (sf) 13.00
Subordinated notes NR 37.53
Symphony CLO XXIII Ltd./Symphony CLO XXIII LLC
Exchangeable note combinations
Class Rating Max. principal
amount (mil. $)
Combination 1(ii)
A-1(iii) AAA (sf) 248.00
A-1X(iv) AAA (sf) N/A
Combination 2(ii)
A-2(iii) AAA (sf) 248.00
A-2X(iv) AAA (sf) N/A
Combination 3(ii)
A-3(iii) AAA (sf) 248.00
A-3X(iv) AAA (sf) N/A
Combination 4(ii)
A-4(iii) AAA (sf) 248.00
A-4X(iv) AAA (sf) N/A
Combination 5(ii)
B-1(iii) AA (sf) 56.00
B-1X(iv) AA (sf) N/A
Combination 6(ii)
B-2(iii) AA (sf) 56.00
B-2X(iv) AA (sf) N/A
Combination 7(ii)
B-3(iii) AA (sf) 56.00
B-3X(iv) AA (sf) N/A
Combination 8(ii)
B-4(iii) AA (sf) 56.00
B-4X(iv) AA (sf) N/A
Combination 9(ii)
C-1(iii) A (sf) 24.00
C-1X(iv) A (sf) N/A
Combination 10(ii)
C-2(iii) A (sf) 24.00
C-2X(iv) A (sf) N/A
Combination 11(ii)
C-3(iii) A (sf) 24.00
C-3X(iv) A (sf) N/A
Combination 12(ii)
C-4(iii) A (sf) 24.00
C-4X(iv) A (sf) N/A
Combination 13(ii)
D-1(iii) BBB- (sf) 24.00
D-1X(iv) BBB- (sf) N/A
Combination 14(ii)
D-2(iii) BBB- (sf) 24.00
D-2X(iv) BBB- (sf) N/A
Combination 15(ii)
D-3(iii) BBB- (sf) 24.00
D-3X(iv) BBB- (sf) N/A
Combination 16(ii)
D-4(iii) BBB- (sf) 24.00
D-4X(iv) BBB- (sf) N/A
(i)The class A, B, C, and D notes will be exchangeable for
proportionate interest in combinations of MASCOT P&I notes and
interest-only notes of their respective classes. In aggregate, the
cost of debt, outstanding balance, stated maturity, subordination
levels, and payment priority following that exchange would remain
the same. See the exchangeable note combinations section above for
the combinations.
(ii)The applicable combinations will have an aggregate interest
rate equal to that of the exchanged note.
(iii)MASCOT P&I notes will have the same principal balance as the
class A, B, C, and D notes, as applicable, surrendered in the
exchange.
(iv)The interest-only notes will earn a fixed rate of interest on
their notional balance and are not entitled to any payments of
principal. The notional balance will equal the principal balance of
the corresponding MASCOT P&I note of that combination.
NR--Not rated.
N/A--Not applicable.
P&I--Principal and interest.
TCW CLO 2020-1: S&P Assigns BB- (sf) Rating to Class ER Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class AR, BR, CR,
DR, and ER replacement notes from TCW CLO 2020-1 Ltd./TCW CLO
2020-1 LLC, a CLO originally issued in April 2020 that is managed
by TCW Asset Management Co. LLC. S&P withdrew its ratings on the
original class A-1, A-F, B, C, and D notes following payment in
full on the Nov. 19, 2020, refinancing date. The replacement notes
were issued via a supplemental indenture.
On Nov. 19, 2020, the refinancing date, the proceeds from the
issuance of the replacement notes were used to redeem the original
notes. As a result, S&P has withdrawn the ratings on the original
notes and assigned ratings to the replacement notes.
The replacement notes are being issued via a supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, also:
-- Issued the replacement class BR, CR, and DR notes at a lower
spread than the original notes.
-- Issued new class ER notes.
-- Issued the replacement class AR notes at a floating spread,
replacing the current class A-1 and A-F notes, which were paying at
a floating spread and fixed coupon, respectively.
-- Extended the stated maturity and non-call period by
approximately 3.5 and 0.5 years, respectively.
"Our review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the trustee
report, to estimate future performance. In line with our criteria,
our cash flow scenarios applied forward-looking assumptions on the
expected timing and pattern of defaults, and recoveries upon
default, under various interest rate and macroeconomic scenarios.
In addition, our analysis considered the transaction's ability to
pay timely interest or ultimate principal, or both, to each of the
rated tranches," S&P said.
The assigned ratings reflect S&P's opinion that the credit support
available is commensurate with the associated rating levels.
Ratings Assigned
TCW CLO 2020-1 Ltd./TCW CLO 2020-1 LLC
Class AR, $260.00 mil.: AAA (sf)
Class BR, $50.00 mil.: AA (sf)
Class CR, $25.00 mil.: A (sf)
Class DR, $17.00 mil.: BBB- (sf)
Class ER, $14.00 mil.: BB- (sf)
Subordinated notes, $53.00 mil.: not rated
Ratings Withdrawn
TCW CLO 2020-1 Ltd./TCW CLO 2020-1 LLC
Class A-1, $142.00 mil.: AAA (sf)
Class A-F, $20.00 mil.: AAA (sf)
Class B, $37.50 mil.: AA (sf)
Class C, $17.50 mil.: A (sf)
Class D, $15.00 mil.: BBB- (sf)
THUNDERBOLT II: Fitch Lowers Rating on Series B Notes to BBsf
-------------------------------------------------------------
Fitch Ratings has downgraded the ratings on Thunderbolt II Aircraft
Lease Limited (TBOLT II) series A and B fixed rate notes. The
Rating Outlook on each series remains Negative. Fitch has also
affirmed the ratings on Thunderbolt III Aircraft Lease Limited
(TBOLT III) series A and B fixed rate notes, removed the notes from
Rating Watch Negative (RWN) and assigned each series a Negative
Outlook.
RATING ACTIONS
Thunderbolt III Aircraft Lease Limited
Class A 88607AAA7; LT Asf Affirmed; previously Asf
Class B 88607AAB5; LT BBBsf Affirmed; previously BBBsf
Thunderbolt II Aircraft Lease Limited
Series A 886065AA9; LT BBBsf Downgrade; previously Asf
Series B 886065AB7; LT BBsf Downgrade; previously BBBsf
TRANSACTION SUMMARY
The rating actions reflect ongoing stress on and deterioration of
airline lessee credits backing the leases in each transaction pool,
downward pressure on aircraft values, Fitch's updated assumptions
and stresses, and resulting impairments to modeled cash flows and
coverage levels. The prior transaction reviews were in June 2020.
The Negative Outlook on all series of notes reflects Fitch's base
case expectation for the structures to withstand immediate and
near-term stresses at the updated assumptions and stressed
scenarios commensurate with their respective ratings. Furthermore,
additional global travel restrictions/shutdowns and overall
start/stop travel/airline recovery with recent regional spikes in
coronavirus cases, as currently seen in European countries and
across many U.S. states, could result in additional delays in
recovery of the airline industry.
This is a further credit negative for aircraft ABS and will only
place greater pressure on airlines globally and may lead to
additional near-term lease deferrals, airline defaults, lower
aircraft demand and value impairments. Ultimately, these negative
factors could manifest in the transactions, resulting in lower cash
flows and pressure on ratings.
Fitch updated rating assumptions for both rated and non-rated
airlines with a vast majority of ratings moving lower, which was a
key driver of these rating actions along with modeled cash flows.
This was driven by the current global recessionary environment,
ongoing sector stress with a slow recovery, and resulting impact on
airline lessees in each pool. Recessionary timing was assumed to
start immediately, consistent with the prior review. This scenario
stresses airline credits, asset values and lease rates while
incurring remarketing and repossession costs and downtime at each
relevant rating stress level.
Air Lease Corporation (ALC, 'BBB'/Negative) and certain
third-parties are the sellers of the initial assets, and ALC acts
as servicer for both transactions. Fitch deems ALC to be an
adequate servicer to service these transactions based on their
capabilities and prior experience, including prior experience
servicing ABS.
KEY RATING DRIVERS
Deteriorating Airline Lessee Credit
The credit profiles of the airline lessees in the pools remain
under stress or have deteriorated further due to the
coronavirus-related impact on all global airlines in 2020,
resulting in lower rating assumptions for certain lessees. The
proportion of TBOLT II lessees assumed at a 'CCC' Issuer Default
Rate (IDR) and below increased to 70.5% for this review, versus
48.8% in the prior review (4.0% at closing). For TBOLT III, the
'CCC' and below airlines was steady at 81.8% versus 83.2% in the
prior review (52.0% at closing).
The assumptions are reflective of these airlines' ongoing credit
profiles and fleets in the current operating environment, due to
the continued coronavirus-related impact on the sector. Any
publicly rated airlines in the pool whose ratings have shifted have
been updated.
Asset Quality and Appraised Pool Value:
Both pools feature mostly liquid narrowbody (NB) aircraft, which
Fitch views positively. Widebody (WB) aircraft total 12.3% in TBOLT
II, and 5.2% in TBOLT III. The initial WB aircraft concentration
declined in TBOLT III as one aircraft failed to novate and transfer
into the trust. There is one off-lease aircraft in TBOLT II
currently. There continues to be elevated uncertainty and ongoing
pressure on aircraft market values (MV) and about how the current
environment will impact near-term lease maturities in 2020-2021.
The appraisers for both transactions include Acumen Appraisals,
Inc. and IBA Group Ltd. (IBA). Collateral Verifications, LLC (CV)
is the third appraiser for TBOLT II, and Morten Beyer & Agnew Inc.
(mba) for TBOLT III. TBOLT II was last appraised in December 2019
and TBOLT III in June 2020. The transaction document value is
$503.2 million for TBOLT II (as of December 2019) and $434.9
million for TBOLT III (as of June 2020).
Fitch utilized conservative asset values for both transactions as
there is continued pressure and weaker market values for certain
aircraft variants, particularly WBs.
For WB aircraft in TBOLT II, minimum MA market values (MV) were
utilized, and minimum MABV for TBOLT III, with an additional 5%
haircut applied thereon. This resulted in modeled values of $437.4
million for TBOLT II and $404.4 million for TBOLT III,
approximately 13% and 7% haircuts down from the transaction value.
Transaction Performance:
Lease collections have fluctuated since March trending notably
lower for both transactions. As of the October servicing report,
TBOLT II received $5.9 million in basic rent compared to average
monthly collections of $3.1 million over the past six months. TBOLT
III received $3.4 million in basic rent compared to an average
monthly receipt of $2.9 million over the last six months.
Loan-to-values (LTV) have continued to increase since closing,
based on Fitch's updated LTVs.
All notes continue to receive interest payments to date. However,
principal was not paid since July 2020 and March 2020 for TBOLT II
and III, respectively. The debt-service coverage ratios (DSCRs)
remain below the respective cash trap and early amortization event
triggers for TBOLT III.
Fitch Modeling Assumptions:
Nearly all servicer-driven assumptions are consistent from closing
for each transaction. These include costs and certain downtime
assumptions relating to aircraft repossessions and remarketing,
terms of new leases, and extension terms.
TBOLT II has six upcoming lease maturities into and during 2021,
and TBOLT III has two lease maturities. For any leases whose
maturities are up in two years or have lessee credit ratings below
'CCC', Fitch assumed an additional three-month downtime for NBs at
lease end, on top of lessor-specific remarketing downtime
assumptions, to account for potential remarketing challenges.
Near-term lease maturities are a credit negative given the
challenging environment, and selling aircraft (particularly older
aircraft) may result in highly stressed, lower values, and Fitch
took these factors into account in its analysis.
With the grounding of global fleets and significant reduction in
air travel, maintenance revenue and costs will be impacted and are
expected to decline due to airline lessee credit issues and
grounded aircraft. Maintenance revenues were reduced by 50% over
the next immediate 12 months, and such missed payments were assumed
to be recouped in the following 12 months thereafter, starting in
November 2021.
Maintenance costs over the immediate next six months were assumed
to be incurred as reported. Costs in the following months were
reduced by 50% and assumed to increase straight line to 100% over a
12-month period. Any deferred costs were incurred in the following
12 months.
RATING SENSITIVITIES
The Negative Outlooks on all series of notes reflect the potential
for further negative rating actions due to concerns over the
ultimate impact of the coronavirus pandemic, the resulting concerns
associated with airline performance and aircraft values and other
assumptions across the aviation industry due to the severe decline
in travel and grounding of airlines.
At close, Fitch conducted multiple rating sensitivity analyses to
evaluate the impact of changes to a number of the variables in the
analysis. The performance of aircraft operating lease
securitizations is affected by various factors, which could have an
impact on the ratings. Due to the correlation between global
economic conditions and the airline industry, the ratings can be
affected by the strength of the macro-environment over the
remaining terms of these transactions.
In the initial analysis, Fitch found the transactions to exhibit
sensitivity to the timing and severity of assumed recessions. Fitch
also found that greater default probability of the leases has a
material impact on the ratings. Furthermore, the timing and degree
of technological advancement in the commercial aviation space, and
the resulting impact on aircraft values, lease rates and
utilization would have a moderate impact on the ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Up: Base Assumptions with Stronger Asset Values:
The aircraft ABS sector has a rating cap of 'Asf'. All subordinate
tranches carry one category of ratings lower than the senior
tranche and below the ratings at close. However, if the assets in
this pool display stronger asset values than Fitch modeled and
therefore stronger lease collections than Fitch's stressed
scenarios, the transaction could perform better than expected.
In this scenario, Fitch utilized a less conservative asset value
for the pools, consistent with the approach that Fitch utilized at
close. Under this scenario, both transactions experience in
improvement to cash flows. TBOLT II class A and B notes could
experience an upgrade to 'Asf' and 'BBBsf'. For TBOLT III, classes
A and B remain at their current ratings of 'Asf' and 'BBBsf'.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Down: Apply Immediate Deferrals to 'CCC' and below lessees:
The pools contain large concentrations of 'CCC' and below lessees,
at approximately 70.5% and 81.8% for TBOLT II and III,
respectively. Due to macroeconomic conditions, continued pressure
on airlines going into the winter months and worsening supply and
demand dynamics, Fitch explored the potential cash flow decline if
all lessees assumed at 'CCC' and below made no payments for three
months with deferral repayment period following.
For both transactions, the notes experience weaker cash flows.
TBOLT II experienced $3.6m decrease to cash flows and TBOLT III
experienced $3.0 million decrease to cash flows. Under this
scenario, TBOLT II would remain at 'BBBsf' and 'BBsf'. TBOLT III
class A and B show sensitivity for possible downgrades under this
scenario.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
UBS COMMERCIAL 2017-C7: Fitch Affirms B- Rating on Cl. G-RR Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of UBS Commercial Mortgage
Trust 2017-C7 commercial mortgage pass-through certificates series
2017-C7.
RATING ACTIONS
UBS 2017-C7
Class A-1 90276WAN7; LT AAAsf Affirmed; previously AAAsf
Class A-2 90276WAP2; LT AAAsf Affirmed; previously AAAsf
Class A-3 90276WAR8; LT AAAsf Affirmed; previously AAAsf
Class A-4 90276WAS6; LT AAAsf Affirmed; previously AAAsf
Class A-S 90276WAV9; LT AAAsf Affirmed; previously AAAsf
Class A-SB 90276WAQ0; LT AAAsf Affirmed; previously AAAsf
Class B 90276WAW7; LT AA-sf Affirmed; previously AA-sf
Class C 90276WAX5; LT A-sf Affirmed; previously A-sf
Class D-RR 90276WAA5; LT BBBsf Affirmed; previously BBBsf
Class E-RR 90276WAC1; LT BBB-sf Affirmed; previously BBB-sf
Class F-RR 90276WAE7; LT BB-sf Affirmed; previously BB-sf
Class G-RR 90276WAG2; LT B-sf Affirmed; previously B-sf
Class X-A 90276WAT4; LT AAAsf Affirmed; previously AAAsf
Class X-B 90276WAU1; LT AA-sf Affirmed; previously AA-sf
KEY RATING DRIVERS
Increased Loss Expectations: Despite a majority of the pool
exhibiting relatively stable performance, loss expectations have
increased. This is primarily attributable to the social and market
disruption caused by the effects of the coronavirus pandemic and
related containment measures. Fitch has designated six loans
(15.65%) as Fitch Loans of Concern (FLOCs), including two specially
serviced loans (2.38% of the pool). Two of the top-15 loans are
FLOCs (11.46% of the pool). For each of the loans flagged as a
FLOC, Fitch applied an additional haircut to net operating income
(NOI) or a stress to the most recent appraisal value which
contributes to the Negative Outlook on class G-RR.
Fitch Loans of Concern: HRC Hotels Portfolio (4.62% of the pool) is
the largest contributor to Fitch's projected losses, the sixth
largest loan in the pool, and the second largest FLOC. The
collateral is an eight-property, 694-key hotel portfolio located in
Michigan and Indiana. As of YE 2019, the loan was performing at a
1.71x NOI DSCR compared to 2.03x at YE 2018. Per the December 2019
and March 2020 STR reports, the portfolio reported a
weighted-average occupancy rate of 70.0%, ADR of $135, and RevPAR
of $93. At issuance, the portfolio reported weighted-average
in-place RevPAR of $98. Although the loan remains current and there
has not yet been a request for debt service payment relief, Fitch
expects the loan's performance will decline as a result of the
pandemic.
The second largest contributor to modeled losses is South Coast
Plaza (1.21% of the pool). The collateral is a 101,171-sf shopping
center located in Corpus Christi, TX. The YE 2019 NOI declined by
36% from the prior year due to a decline in occupancy to 70% from
90% at YE 2018 after the second largest tenant, Kaplan College,
vacated. The loan transferred to special servicing in June 2020 for
imminent default and is now delinquent. According to the special
servicer, the borrower has requested debt service relief but is
unable to cure the past due payments. The two largest tenants, Big
Lots (22.7% NRA) and Dollar Tree (8.1% NRA) have upcoming lease
expirations in January 2021. A modification of the loan has been
conditionally approved, the terms of which are unclear at this
time.
Eagle Multifamily Portfolio (6.84% of the pool) is the third
largest loan in the pool and the largest FLOC. The portfolio is
comprised of six garden-style multifamily properties located across
Daytona Beach, Orlando, and New Smyrna Beach, Florida and totaling
1,242 units. The properties were constructed between 1964 and 1984,
and all were renovated in. As of YE 2019, the subject was 95%
occupied with an NOI DSCR of 2.27x. The loan has been behind on
debt service payments since April 2020, and the borrower has
requested relief, citing hardships due to the pandemic. The
remaining FLOCs are outside of the top 15 and represent 2.98% of
the pool combined.
Coronavirus Exposure: Loans secured by retail properties comprise
20.72% of the pool, including two in the top 15 (9.65%). The pool's
retail component has a weighted average debt-service coverage ratio
(DSCR) of 1.99x. Loans secured by hotel properties comprise 12.05%
of the pool, including one in the top 15 (4.62%). The pool's hotel
component has a weighted average DSCR of 2.06x. The majority of the
pool exhibited stable performance prior to the pandemic. Additional
pandemic-related stresses were applied to seven hotel loans (10.0%)
and four retail loans (5.6%); these additional stresses contributed
to the Negative Outlook on class G-RR.
Minimal Changes to Credit Enhancement: As of the October 2020
distribution date, the pool's aggregate principal balance has been
paid down by 2.30%, to $869.8 million from $891 million at
issuance. No loans have paid off or defeased since issuance. There
have been no realized losses to date. Cumulative interest
shortfalls totaling $50,288 are affecting the nonrated class NR-RR
due to delinquent loans. Eleven loans representing 34.7% of the
pool balance are interest-only for the full term. An additional
fourteen loans representing 28.4% of the pool were structured with
partial interest-only periods, eight of which (18.73% of the pool)
have not yet begun amortizing as of the October 2020 distribution.
Four loans representing 5.6% of the pool are scheduled to mature in
2022, and all remaining loans are scheduled to mature between 2027
and 2033.
Investment-Grade Credit Opinion: Two loans, representing 11.45% of
the pool, have investment-grade credit opinions. At issuance, One
State Street (7.15% of the pool), the largest loan in the pool,
received an investment-grade credit opinion of 'BBB+sf' on a
stand-alone basis and General Motors Building (4.30% of the pool)
received an investment-grade credit opinion of 'AAAsf' on a
stand-alone basis.
RATING SENSITIVITIES
The Outlooks on classes A-1 through F-RR as well as X-A and X-B
remain Stable.
The Outlook on class G-RR remains Negative.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
Upgrades could be triggered by significantly improved performance
coupled with paydown and/or defeasance. An upgrade to classes B and
C could occur with stabilization of the FLOCs, but would be limited
as concentrations increase. Classes would not be upgraded above
'Asf' if there is likelihood of interest shortfalls. Upgrades of
classes D, D-RR and E-RR would only occur with significant
improvement in credit enhancement and stabilization of the FLOCs.
An upgrade to classes F-RR and G-RR is not likely unless
performance of the FLOCs improves, and if performance of the
remaining pool is stable.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
Downgrades could be triggered by an increase in pool-level losses
from underperforming or specially serviced loans. Downgrades to the
classes rated 'AAAsf' are not considered likely due to position in
the capital structure, but may occur at 'AAAsf' or 'AA-sf' should
interest shortfalls occur. Downgrades to classes C and D may occur
if overall pool performance declines or loss expectations increase.
Downgrades to classes D-RR and E-RR may occur if loans in special
servicing remain unresolved, or if performance of the FLOCs fails
to stabilize. Downgrades to classes F-RR and G-RR may occur if
additional loans default or transfer to the special servicer.
In addition to its baseline scenario, Fitch envisions a downside
scenario where the health crisis is prolonged beyond 2021; should
this scenario play out, Fitch expects that a greater percentage of
classes may be given a Negative Outlook, or those with Negative
Outlooks will be downgraded one or more categories.
VENTURE 40 CLO: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Venture 40
CLO Ltd./Venture 40 CLO LLC's floating- and fixed-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 preliminary ratings are based on information as of Nov. 18,
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 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; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Venture 40 CLO Ltd./Venture 40 CLO LLC
Class A1, $270.00 million: AAA (sf)
Class A2, $22.50 million: AAA (sf)
Class B1, $39.50 million: AA (sf)
Class BF, $10.00 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D1 (deferrable), $18.00 million: BBB (sf)
Class D2 (deferrable), $9.00 million: BBB- (sf)
Class E (deferrable), $15.75 million: BB- (sf)
Subordinated notes, $40.12 million: not rated
VISIO 2020-1R: S&P Assigns Prelim B (sf) Rating to Class B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Visio
2020-1R Trust's mortgage-backed notes.
The note issuance is an RMBS transaction backed by first-lien,
fixed-rate, and adjustable-rate fully amortizing investment
property mortgage loans secured by single-family residential
properties, planned-unit developments, condominiums, manufactured
home, and two- to four-family residential properties to both prime
and nonprime borrowers. The pool has 1,530 business-purpose
investor loans and are exempt from the qualified
mortgage/ability-to-repay rules.
The preliminary ratings are based on information as of Nov. 19,
2020. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The pool's collateral composition);
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage originators, Visio Financial Services Inc. and
Lima One Capital LLC; and
-- The impact the economic stress brought on by 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 believes there remains a high degree of uncertainty about the
evolution of the coronavirus pandemic.
Reports that at least one experimental vaccine is highly effective
and might gain initial approval by the end of the year are
promising, but this is merely the first step toward a return to
social and economic normality; equally critical is the widespread
availability of effective immunization, which could come by the
middle of next year.
"We use 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.
Preliminary Ratings Assigned
Visio 2020-1R Trust(i)
Class A-1, $160,771,000: AAA (sf)
Class A-2, $13,499,000: AA (sf)
Class A-3, $20,248,000: A (sf)
Class M-1, $12,282,000: BBB (sf)
Class B-1, $5,643,000: BB (sf)
Class B-2, $4,979,000: B (sf)
Class B-3, $3,873,392: NR
Class XS, notional(ii): NR
(i)The collateral and structural information reflect the term
sheet dated Nov. 17, 2020. The preliminary ratings assigned to the
classes address the ultimate payment of interest and principal.
(ii)The notional amount equals the loans' unpaid principal
balance.
NR--Not rated.
WELLS FARGO 2015-C26: Fitch Lowers Rating on 2 Tranches to B-sf
---------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed nine classes of
Wells Fargo Commercial Mortgage Trust 2015-C26, commercial mortgage
pass-through certificates.
RATING ACTIONS
WFCM 2015-C26
Class A-3 94989CAW1; LT AAAsf Affirmed; previously AAAsf
Class A-4 94989CAX9; LT AAAsf Affirmed; previously AAAsf
Class A-S 94989CAZ4; LT AAAsf Affirmed; previously AAAsf
Class A-SB 94989CAY7; LT AAAsf Affirmed; previously AAAsf
Class B 94989CBC4; LT AA-sf Affirmed; previously AA-sf
Class C 94989CBD2; LT A-sf Affirmed; previously A-sf
Class D 94989CAG6; LT BBB-sf Affirmed; previously BBB-sf
Class E 94989CAJ0; LT BB-sf Downgrade; previously BBsf
Class F 94989CAL5; LT B-sf Downgrade; previously Bsf
Class PEX 94989CBE0; LT A-sf Affirmed; previously A-sf
Class X-A 94989CBA8; LT AAAsf Affirmed; previously AAAsf
Class X-C 94989CAA9; LT BB-sf Downgrade; previously BBsf
Class X-D 94989CAC5; LT B-sf Downgrade; previously Bsf
Classes X-A, X-B, X-C, X-D and X-E are IO.
Class A-S, B and C certificates may be exchanged for class PEX
certificates, and class PEX certificates may be exchanged for class
A-S, B, and C certificates.
KEY RATING DRIVERS
Increased Loss Expectations: While the majority of the pool
maintains stable performance, loss expectations on the pool have
increased slightly due to the 11 Fitch Loans of Concern (FLOCs;
20.8% of the pool), including four loans (10.1%) in special
servicing, and overall concerns about the impact of the coronavirus
pandemic on the pool.
Slightly Improved Credit Enhancement (CE) and Defeasance: As of the
October 2020 distribution date, the pool's aggregate balance had
been reduced by 14.5% to $822.6 million from $962.1 million at
issuance. Eight loans have paid off since issuance with no realized
losses to date.
The majority of the pool matures in 2024 (21.8%) and 2025 (78.1%),
with only one loan (0.1%) maturing in 2022. Currently, three loans
(1.2%) are full-term IO, while one loan (1.2%) remains in its
partial IO periods. Five loans (7.4%) are currently defeased.
Coronavirus Impact: Fitch expects significant economic impacts to
certain hotels, retail and multifamily properties from the
coronavirus pandemic due to the related reductions in travel and
tourism, temporary closures and capacity rules, and lack of clarity
at this time on the potential duration and/or impact of the
pandemic. Properties collateralized by hotels, retail and
multifamily total 21.6%, 26.1% and 19.7%, respectively. Fitch's
base case analysis applied additional stresses to nine hotel loans,
six retail loans and two mutlifamily properties due to their
vulnerability to the coronavirus pandemic; this analysis
contributed to the downgrades and Negative Outlooks.
FLOCs: The largest FLOC is the Chateau on the Lake loan (5.0%),
which is secured by fee and leasehold interests in a 301-room hotel
complex located in Branson, MO. The loan is current per the
servicer. The loan transferred to special servicing in July 2016
due to the voluntary Chapter 11 bankruptcy filing of the borrower
in June 2016. This action was part of a larger bankruptcy that
included 71 John Q Hammons entities with secured debt of
approximately $953.1 million. The filing was made in connection
with litigation related to a complex deal made in 2005 to
reprivatize Hammons Hotels. Per the servicer, the bankruptcy action
has now been resolved.
The pandemic has affected the property's performance. Per the TTM
August 2020 STR report, occupancy, ADR, and RevPAR were 36.9%,
$167, and $62, respectively. RevPAR declined 32.7% yoy. The hotel
and its amenities are currently open with 50% capacity limitations.
Per servicer commentary, the loan is expected to return to the
master servicer in the near term.
The next largest FLOC is the Broadcom Building loan (4.3%), which
is secured by a now fully vacant flex/R&D property that was
previously 100% leased to the Broadcom Corporation. Broadcom
exercised its option to terminate the lease early and vacated by
May 2018. The property consists of approximately 60% office space,
20% lab space, 15% amenity space (which includes a cafeteria, gym
and locker rooms, outdoor tennis court, beach volleyball court,
outdoor amphitheater and barbecues) and a 10,000 sf (5% of NRA)
data center space. A letter of intent for the property was
reportedly signed with a major corporation. However, due to
regulatory and business challenges, the company is no longer
pursuing the deal. The property continues to be marketed for lease.
Fitch performed a dark value analysis on the vacant property and,
factoring in the in-place reserve of $4.5 million, concluded a
value of $28.2 million ($141 psf). Fitch assumed market rent
declines of 10%, downtime between leases (18 months), carrying
costs, and re-tenanting costs ($20 psf new tenant improvements and
4% leasing costs).
The third largest FLOC is the Aloft Houston by the Galleria loan
(3.7%), which is secured by a 152-room limited service hotel
located adjacent to the Houston Galleria development. The loan
transferred to special servicing in May 2020 due to a
coronavirus-relief request and imminent default. Per the TTM March
2020 STR report, the subject hotel had occupancy, ADR and RevPAR of
86.4%, $114, and $98, respectively, which is far below the issuance
RevPAR level of $132 (TTM September 2014). According to the
servicer, the TTM June 2020 NOI DSCR was 0.40x compared to 0.87x at
YE 2019, 0.82x at YE 2018, 1.17x as of YE 2017, 1.49x as of YE 2016
and 2.10x as of YE 2015. While part of the decrease in DSCR over
past few years was attributable to the loan beginning to amortize
in February 2017, TTM June 2020 NOI was only $997 thousand, while
YE 2018 NOI was $1.6 million, and reported NOI at issuance was $3.8
million (TTM September 2014). The servicer reported last year that
the deterioration in cash flow was a result of increased
competition in the area. The borrower had reportedly implemented an
expense reduction program, but the coronavirus pandemic has now
further impacted the property's performance. A petition for
appointment of receiver was filed and subsequently granted in June
2020; the receivership is stabilizing operations while maintaining
brand standards. The special servicer is reportedly in the process
marketing the hotel for sale with the receiver's assistance.
The next two FLOCS are secured by hotel loans that have requested
debt service relief due to coronavirus related hardship. The
Staybridge Suites - North Everett (2.4%%) is located in Mukilteo,
WA, proximate to Boeing headquarters. The borrower has not provided
recent financial information. The Courtyard Richmond North Glen
Allen (1.4%) is secured by a 150-room hotel loan located in Glen
Allen, VA; the servicer reported YE 2019 NOI DSCR was 2.05x.
No other FLOC comprises more than 1.2% of the pool; these remaining
loans include two additional specially serviced loans. The Piedmont
Center loan (1.2%), which transferred to special servicing on Nov.
27, 2018. The office property, which is located in Greenville, SC,
has seen declining performance primarily due to a vacating tenant.
Further, the property is located in a weak market. Interim
financing taken out by the borrower for tenant improvement work was
not paid back as agreed and a receiver has been appointed. A
receiver is working on stabilizing the property for eventual sale.
The Sparkleberry Crossing loan (0.2%) is secured by a retail
property in Columbia, SC that has suffered some performance
decline. However, the special servicer expects to return the loan
to the master servicer imminently.
Additional Considerations
Diverse Pool: The 10 largest loans represent 36.8% of the total
pool balance, which is a lower concentration than other Fitch-rated
CMBS transactions of similar vintage.
Property Type Concentration: The highest property type
concentration is retail at 26.1%, while the next highest is hotels
with an above average concentration of 21.6%; hotels have the
highest probability of default in Fitch's multiborrower model. The
third highest property type is multifamily/manufactured housing at
19.7%, including two student housing properties at 3.9%.
RATING SENSITIVITIES
The Negative Outlooks on classes D through F reflect concerns over
the FLOCS. Further downgrades are possible should performance at
these properties further decline or fail to stabilize.
Factors that could, individually or collectively, lead to a
positive rating action/upgrade:
Sensitivity factors that could lead to upgrades would include
stable to improved asset performance, coupled with additional
paydown and/or defeasance. Upgrades to the 'A-sf'- and
'AA-sf'-rated classes are not expected but would likely occur with
significant improvement in CE and/or defeasance and/or the
stabilization to the properties impacted from the coronavirus
pandemic. Upgrade of the 'BBB-sf' class is considered unlikely and
would be limited based on the sensitivity to concentrations or the
potential for future concentrations. Classes would not be upgraded
above 'Asf' if there is a likelihood of interest shortfalls. An
upgrade to the 'BB-sf', or 'B-sf' rated classes is not likely
unless the performance of the remaining pool stabilizes and the
senior classes pay off.
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 expected losses from underperforming or specially
serviced loans. Downgrades to the 'AA-sf'- and 'AAAsf'-categories
are not likely due to the position in the capital structure, but
may occur should interest shortfalls occur. Downgrades to the 'A-'
and 'BBB-' classes would occur should overall pool losses increase
and/or one or more large loans have an outsized loss, which would
erode CE. Downgrades to the 'BB-' or 'B-' classes would occur
should loss expectations increase as FLOC performance declines or
fails to stabilize, including the specially serviced loans.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
YORK CLO-8: S&P Assigns Prelim BB- (sf) Rating to Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to York CLO-8
Ltd./York CLO-8 LLC'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 York CLO Managed Holdings LLC.
The preliminary ratings are based on information as of Nov. 17,
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
York CLO-8 Ltd./York CLO-8 LLC
Class X, $3.375 million: AAA (sf)
Class A-1, $258.000 million: AAA (sf)
Class A-2, $12.000 million: AAA (sf)
Class B-1, $64.00 million: AA (sf)
Class B-2, $8.000 million: AA (sf)
Class C (deferrable), $24.750 million: A (sf)
Class D-1 (deferrable)(i), $24.00 million: BBB- (sf)
Class D-2 (deferrable)(i), $2.300 million: BBB- (sf)
Class E (deferrable), $14.200 million: BB- (sf)
Subordinated notes, $36.500 million: Not rated
(i)Payments are allocated sequentially to the class D-1 and then
D-2 notes.
*********
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