/raid1/www/Hosts/bankrupt/TCR_Public/210411.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, April 11, 2021, Vol. 25, No. 100
Headlines
AIG CLO 2021-1: Moody's Gives (P)B3 Rating to $5.64MM Class F Notes
BEAR STEARNS 2005-PWR7: Fitch Lowers Class E Debt Rating to Csf
CANTOR COMMERCIAL 2016-C4: Fitch Affirms B- Rating on 2 Tranches
CANYON CAPITAL 2021-1: Moody's Gives (P)Ba3 Rating to Cl. E Notes
CANYON CAPITAL 2021-2: Moody's Gives (P)Ba3 Rating to Cl. E Notes
CF 2019-CF1: Fitch Affirms B- Rating on 2 Cert. Classes
CSAIL COMMERCIAL 2016-C6: Fitch Puts 4 Classes on Watch Negative
DRYDEN 75 CLO: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
IMSCI 2014-5: Fitch Affirms B Rating on Class G Debt
JP MORGAN 2012-CIBX: Moody's Lowers Cl. G Certs Rating to C
JPMBB COMMERCIAL 2015-C29: Fitch Lowers 2 Debt Classes to 'Csf'
MADISON PARK L: S&P Assigns BB- (sf) Rating on $15MM Class E Notes
MIDOCEAN CREDIT VIII: Fitch Affirms B- Rating on Class F Notes
MIDOCEAN CREDIT VIII: S&P Affirms 'BB- (sf)' on Class E Notes
NEW MOUNTAIN 2: S&P Assigns BB- (sf) Rating on Class E Notes
PSMC 2021-1 TRUST: Fitch to Rate Class B-5 Tranche 'B+(EXP)'
PSMC 2021-1: S&P Assigns Prelim B (sf) Rating on Class B-5 Certs
RACE POINT IX: S&P Affirms B (sf) Rating on Class D-R Notes
RR 2: S&P Assigns Prelim BB- (sf) Rating on $30MM Class D-R Notes
SEQUOIA INFRASTRUCTURE I: S&P Assigns BB- (sf) Rating on E Notes
UBS COMMERCIAL 2012-C1: Fitch Lowers Class F Certs to 'Csf'
VOYA CLO 2017-3: S&P Assigns B- (sf) Rating on Class E-R Notes
WELLS FARGO 2015-SG1: Fitch Lowers Rating on 2 Tranches to 'CCC'
[*] Moody's Lowers Ratings on 3 Bonds of US RMBS Issued 2004-2007
[*] S&P Takes Various Action on 556 Classes From 22 US RMBS Deals
*********
AIG CLO 2021-1: Moody's Gives (P)B3 Rating to $5.64MM Class F Notes
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Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by AIG CLO 2021-1, LLC (the "Issuer"
or "AIG CLO 2021-1").
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2034
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$53,000,000 Class B Senior Secured Floating Rate Notes due 2034
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$29,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class C Notes"), Assigned (P)A2 (sf)
US$35,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$21,750,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034 (the "Class E Notes"), Assigned (P)Ba3 (sf)
US$5,640,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2034 (the "Class F Notes"), Assigned (P)B3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes, the Class E Notes, and the Class F Notes are referred to,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
AIG CLO 2021-1 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10% of the
portfolio may consist of second-lien loans, unsecured loans, senior
secured bonds, unsecured bonds and first lien last out loans,
provided that no more than 5% of the portfolio consists of senior
secured bonds and unsecured bonds. Moody's expect the portfolio to
be approximately 75% ramped as of the closing date.
AIG Credit Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer will issue two classes
of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 50
Weighted Average Rating Factor (WARF): 2900
Weighted Average Spread (WAS): 3.55%
Weighted Average Coupon (WAC): 7%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9 years
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of corporate assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BEAR STEARNS 2005-PWR7: Fitch Lowers Class E Debt Rating to Csf
---------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 12 classes of
Bear Stearns Commercial Mortgage Securities Trust I 2005-PWR7
(BSCMSI 2005-PWR7) commercial mortgage pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
Bear Stearns Commercial Mortgage Securities Trust 2005-PWR7
B 07383F4C9 LT BBsf Affirmed BBsf
C 07383F4D7 LT Bsf Affirmed Bsf
D 07383F4E5 LT CCCsf Affirmed CCCsf
E 07383F4G0 LT Csf Downgrade CCsf
F 07383F4H8 LT Dsf Affirmed Dsf
G 07383F4J4 LT Dsf Affirmed Dsf
H 07383F4K1 LT Dsf Affirmed Dsf
J 07383F4L9 LT Dsf Affirmed Dsf
K 07383F4M7 LT Dsf Affirmed Dsf
L 07383F4N5 LT Dsf Affirmed Dsf
M 07383F4P0 LT Dsf Affirmed Dsf
N 07383F4Q8 LT Dsf Affirmed Dsf
P 07383F4R6 LT Dsf Affirmed Dsf
KEY RATING DRIVERS
High Loss Expectations; Pool Concentration and Adverse Selection:
The pool is concentrated, with only four of the original 124
loans/assets remaining. Fitch's loss expectations on the REO asset,
which is the largest asset comprising 85.9% of the pool, remain
high.
The downgrade reflects the continued high certainty of losses from
the REO asset affecting the outstanding classes, as well as
concerns surrounding the second largest loan in the pool, Mission
Paseo (11.8%), which is secured by a 60,941-sf unanchored retail
shopping center in Las Vegas, NV, and was designated a Fitch Loan
of Concern (FLOC) due to the borrower requesting pandemic relief.
The loan is scheduled to mature in January 2023. The two remaining
non-specially serviced loans are defeased (2.3%).
As of the March 2021 distribution date, the pool's aggregate
principal balance has been reduced by 95% to $55.9 million from
$1.1 billion at issuance. Realized losses since issuance total
$59.2 million (5.3% of original pool balance). Cumulative interest
shortfalls totaling $12.3 million are currently affecting classes C
through K and M through Q.
The REO Shops at Boca Park asset (85.9% of pool) is a 138,152-sf
community shopping center located in Las Vegas, NV. The loan was
originally transferred to special servicing in October 2009 for
imminent default, and the borrower subsequently filed for
bankruptcy in June 2010. The loan was modified in November 2012,
reducing the note rate and extending the loan's maturity through
January 2016. The loan transferred back to special servicing in
February 2016 after failing to repay at its extended maturity date,
and the asset became REO in September 2018.
The special servicer is currently holding the asset to stabilize
the rent roll and pursue new leasing interest. The property was 79%
occupied as of January 2021, compared with 83% in March 2019. The
largest tenants include Recreation Equipment Inc (REI; 20% of NRA
leased through February 2024), Nevada Fine Wine and Spirits, LLC
(18.9% of NRA leased through May 2024), and The Cheesecake Factory
Restaurant (7.0% of NRA leased through September 2022). Per the
servicer, parking garage repairs are anticipated to begin at the
property in April 2021.
Exposure to Coronavirus Pandemic: Retail loans/assets comprise
97.7% of the remaining pool. Outside of the two defeased loans in
the pool (2.3%), the one remaining non-specially serviced loan
(Mission Paseo; 11.8% of the pool; maturing in January 2023) is
secured by a retail neighborhood center in the secondary market of
Las Vegas, NV.
Due to the concentrated nature of the pool, Fitch performed a
sensitivity analysis that grouped the remaining loans based on
timing and likelihood for repayment from maturing defeased and
performing loans and by expected losses from the liquidation of the
specially serviced REO asset; the ratings reflect this sensitivity
analysis. Fitch's distressed ratings consider the potential for
negative impact on potential sales, loan refinanceability and
workout strategies.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to classes B and C are unlikely given the significant
pool concentration and adverse selection, but may occur with
significantly better than expected recoveries on the REO asset
and improved performance on the non-specially serviced Mission
Paseo loan. The Stable Rating Outlooks reflect the high credit
enhancement of each class. All other remaining classes are
distressed and future upgrades are unlikely given the
concentrated nature of the pool and high concentration of the
pool represented by the REO asset.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- All remaining classes are subject to further downgrades with
greater certainty of losses and/or as losses are realized.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
CANTOR COMMERCIAL 2016-C4: Fitch Affirms B- Rating on 2 Tranches
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Fitch Ratings has affirmed 16 classes of Cantor Commercial Real
Estate Mortgage Trust (CFCRE), commercial mortgage pass-through
certificates, series 2016-C4. In addition, the Rating Outlooks for
classes E and X-E have been revised to Negative from Stable.
DEBT RATING PRIOR
---- ------ -----
CFCRE 2016-C4
A-2 12531YAK4 LT AAAsf Affirmed AAAsf
A-3 12531YAM0 LT AAAsf Affirmed AAAsf
A-4 12531YAN8 LT AAAsf Affirmed AAAsf
A-HR 12531YAP3 LT AAAsf Affirmed AAAsf
A-M 12531YAU2 LT AAAsf Affirmed AAAsf
A-SB 12531YAL2 LT AAAsf Affirmed AAAsf
B 12531YAV0 LT AA-sf Affirmed AA-sf
C 12531YAW8 LT A-sf Affirmed A-sf
D 12531YAE8 LT BBB-sf Affirmed BBB-sf
E 12531YAF5 LT BB-sf Affirmed BB-sf
F 12531YAG3 LT B-sf Affirmed B-sf
X-A 12531YAQ1 LT AAAsf Affirmed AAAsf
X-B 12531YAS7 LT AA-sf Affirmed AA-sf
X-E 12531YAB4 LT BB-sf Affirmed BB-sf
X-F 12531YAC2 LT B-sf Affirmed B-sf
X-HR 12531YAR9 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Stable Loss Expectations: The affirmations reflect overall stable
performance and loss expectation of the pool since Fitch's prior
rating action. Fitch's current ratings incorporate a base case loss
of 3.50%. The Negative Outlooks on classes E, F, X-E and X-F
reflect losses that could reach 7.00% when factoring in additional
pandemic-related stresses and a potential outsized loss on the
Hyatt Regency St. Louis at The Arch loan.
Fitch Loans of Concern: There are 17 Fitch Loans of Concern (FLOCs;
41% of pool), including two loans (5.7%) in special servicing. The
largest increase in loss since Fitch's prior rating action is the
AG Life Time Fitness Portfolio loan (5.8%), which is secured by a
portfolio of 10 Life Time Fitness centers located across New
Jersey, Massachusetts, Illinois, Minnesota, Ohio, Alabama,
Virginia, Georgia, and Missouri. At the original sale lease-back
transaction, the sponsor executed a 20-year NNN master lease across
all 10 properties through June 2035 with four, five-year renewal
options. Fitch's analysis includes a 25% haircut to the YE 2019 NOI
due to concerns with the coronavirus pandemic, single
tenancy/binary risk and the special use nature of the properties.
The second largest increase in loss is the Banderas Corporate
Center loan (0.7%), which is secured by a 40,359-sf office property
in Rancho Santa Margarita, CA. Occupancy declined to 71% as of
September 2020 from 86% at YE 2019 and 100% at YE 2018 due to
Ensign Services (13.9% of NRA) and Caterpillar (10%) vacating at
their respective July 2019 and April 2020 lease expirations. The
largest tenant, Regus (50.8%), is also on month-to-month terms
after its lease expired in July 2019. Other top tenants with
near-term maturities include Scientific Telephone Samples (9.8%;
October 2021) and Keystone Pacific Property Management (6.6%;
January 2023). Fitch's analysis includes a 20% haircut to the YE
2019 NOI to reflect occupancy declines and near-term lease rollover
concerns.
The third largest increase in loss is the 215 West 34th Street &
218 West 35th Street loan (5.7%), which is secured by a mixed-use
property located on West 34th Street between 7th & 8th Avenues in
Manhattan. The collateral consists of 78,287 sf of retail space and
the leased fee interest in the 340-key Renaissance by Marriott
hotel located on floors 4 through 40. The hotel is subject to a
68-year master lease with 10% rent increases every six years.
Retail tenants include DSW Shoes (47.4% of retail NRA; January 2028
lease expiry), Planet Fitness (19.6%; June 2030), Capital One
(10.9%; November 2028) and Rainbow USA (6.9%, April 2021). Duane
Reade (15.2%; October 2031) fully subleases its space to Party
City. As of the TTM July 2020, hotel occupancy, ADR and RevPAR
declined to 82.6%, $271 and $224, respectively, from 90.6%, $327
and $296 as of TTM July 2019. Fitch applied a 20% haircut to the YE
2019 NOI to reflect coronavirus performance concerns.
The largest specially serviced loan is the NMS Los Angeles
Multifamily Portfolio loan (3.2%), which is secured by a portfolio
of six multifamily properties totaling 384 units in Santa Monica;
Los Angeles; Northridge and Canoga, CA. The loan transferred to
special servicing in August 2020 for imminent monetary default at
the request of the borrower. The loan was over 90 days delinquent
as of March 2021. The special servicer is evaluating the borrower's
COVID-19 relief request. Portfolio occupancy declined to 88% at YE
2019 from 92.2% at YE 2018.
Alternative Loss Considerations: Fitch applied an additional
sensitivity that assumed a potential outsized loss of 25% to the
maturity balance of the Hyatt Regency St. Louis at The Arch loan
(6.4%) to reflect declining performance and an expected longer
recovery timeframe due to economic demand drivers that include two
professional sports stadiums, a convention complex and multiple
dining establishments that are all highly vulnerable to the
pandemic; the Negative Rating Outlooks reflect this analysis.
The Hyatt Regency St. Louis at The Arch loan is secured by a
910-key, full-service hotel in St. Louis, MO. YE 2020 NOI was
negative. The property has several dining establishments, with food
& beverage revenue accounting for 33% of EGI in 2019. As of TTM
November 2020, occupancy, ADR and RevPAR fell to 24.1%, $117 and
$28, respectively, from 66.8%, $150 and $100 as of TTM November
2019. TTM November occupancy, ADR and RevPAR penetration rates were
85.9%, 96.9% and 83.2%, respectively.
Additional Stresses Applied due to Coronavirus Exposure: Ten loans
(18.2%) are secured by retail properties and six loans (16.4%) are
secured by hotel properties. Fitch applied additional
coronavirus-related stresses to seven retail loans (13.8%) and all
six hotel loans (16.4%); the Negative Rating Outlooks incorporate
these additional stresses.
Increased Credit Enhancement (CE): As of the March 2021 remittance
reporting, the pool's aggregate balance has been reduced by 7.1% to
$780.3 million from $840.0 million at issuance. Four loans (2.8%)
are fully defeased. Since Fitch's prior rating action, three loans
(2.6% of prior pool) prepaid in full during their open period,
including the specially serviced Wharfside Village loan.
Nine loans (32.5% of current pool) are full-term, interest only;
four loans (11.8%) remain in their partial interest-only period and
36 loans (55.7%) are amortizing. Based on the scheduled balance at
maturity, the pool will pay down by 11.4%. Scheduled loan
maturities include one loan (6.4%) in 2024, 12 loans (21.8%) in
2025 and 34 loans (71.8%) in 2027. Interest shortfalls total
$63,839 and are impacting the non-rated class G.
RATING SENSITIVITIES
The Negative Outlooks on classes E, F, X-E and X-F reflect the
potential for downgrade due to the additional sensitivity on the
Hyatt Regency St. Louis at The Arch loan and concerns associated
with the performance of the FLOCs and ultimate impact of the
coronavirus pandemic. The Stable Outlooks on classes A-2, A-3, A-4,
A-HR, A-SB, A-M, B, C, D, X-A, X-B and X-HR reflect increased CE
and expected continued amortization.
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, particularly on the FLOCs,
coupled with additional paydown and/or defeasance. Upgrades to
classes B, C and X-B would occur with significant improvement
in CE and/or defeasance and with the stabilization of
performance on the FLOCs and/or the properties affected by the
coronavirus pandemic; however, adverse selection and increased
concentrations could cause this trend to reverse.
-- An upgrade to class D 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 classes E, F, X-E and X-F are not likely until the
later years in the transaction and only if the performance of
the remaining pool is stable and/or properties vulnerable to
the coronavirus return to pre-pandemic levels, and there is
sufficient CE. The Rating Outlook for classes E, F, X-E and X
F may be revised back to Stable from Negative with stabilized
performance on the Hyatt Regency St. Louis at The Arch loan.
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 to classes A-2, A
3, A-4, A-HR, A-SB, A-M, B, C, D, X-A, X-B and X-HR are not
likely due to the position in the capital structure, but may
occur should interest shortfalls affect these classes.
-- Downgrades to classes B, C, D and X-B are possible should
expected losses for the pool increase significantly, all the
loans affected by the coronavirus takes a loss and/or the
Hyatt Regency St. Louis at The Arch loan incurs an outsized
loss, which would erode CE.
-- Downgrades to classes E, F, X-E and X-F are possible if
performance of the FLOCs or loans susceptible to the
coronavirus pandemic not stabilize and/or additional loans
default or 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 further downgrades
and/or Negative Outlook revisions.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
CANYON CAPITAL 2021-1: Moody's Gives (P)Ba3 Rating to Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by Canyon Capital CLO 2021-1, Ltd.
(the "Issuer" or "Canyon 2021-1").
Moody's rating action is as follows:
US$4,000,000 Class X Senior Secured Floating Rate Notes due 2034
(the "Class X Notes"), Assigned (P)Aaa (sf)
US$252,000,000 Class A Senior Secured Floating Rate Notes due 2034
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$52,000,000 Class B Senior Secured Floating Rate Notes due 2034
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$19,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class C Notes"), Assigned (P)A2 (sf)
US$24,500,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$19,500,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class X Notes, the Class A Notes, the Class B Notes, the Class
C Notes, the Class D Notes, and the Class E Notes are referred to,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Canyon 2021-1 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of non-first lien senior
secured loans, of which 5% may consist of senior secured bonds,
senior secured notes, and up to 2.5% of senior unsecured bonds.
Moody's expect the portfolio to be approximately 100% ramped as of
the closing date.
Canyon CLO Advisors LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer will issue one class of
unrated notes and subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2775
Weighted Average Spread (WAS): 3.25%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 9.0 years
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of corporate assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
CANYON CAPITAL 2021-2: Moody's Gives (P)Ba3 Rating to Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by Canyon Capital CLO 2021-2, Ltd.
(the "Issuer" or "Canyon 2021-2").
Moody's rating action is as follows:
US$3,000,000 Class X Senior Secured Floating Rate Notes due 2034
(the "Class X Notes"), Assigned (P)Aaa (sf)
US$259,000,000 Class A Senior Secured Floating Rate Notes due 2034
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$53,400,000 Class B Senior Secured Floating Rate Notes due 2034
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$19,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class C Notes"), Assigned (P)A2 (sf)
US$25,700,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$19,500,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2034 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class X Notes, the Class A Notes, the Class B Notes, the Class
C Notes, the Class D Notes, and the Class E Notes are referred to,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Canyon 2021-2 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of non-first lien senior
secured loans, of which 5% may consist of senior secured bonds,
senior secured notes, and up to 2.5% of senior unsecured bonds.
Moody's expect the portfolio to be approximately 100% ramped as of
the closing date.
Canyon CLO Advisors LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $411,000,000
Diversity Score: 67
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.52%
Weighted Average Coupon (WAC): 4.0%
Weighted Average Recovery Rate (WARR): 48.00%
Weighted Average Life (WAL): 9.0 years
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of corporate assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
CF 2019-CF1: Fitch Affirms B- Rating on 2 Cert. Classes
-------------------------------------------------------
Fitch Ratings has affirmed the ratings for CF 2019-CF1 Mortgage
Trust commercial mortgage pass-through certificates, series
2019-CF1.
DEBT RATING PRIOR
---- ------ -----
CF 2019-CF1
A-1 12529MAA6 LT AAAsf Affirmed AAAsf
A-2 12529MAB4 LT AAAsf Affirmed AAAsf
A-3 12529MAD0 LT AAAsf Affirmed AAAsf
A-4 12529MAE8 LT AAAsf Affirmed AAAsf
A-5 12529MAF5 LT AAAsf Affirmed AAAsf
A-S 12529MAJ7 LT AAAsf Affirmed AAAsf
A-SB 12529MAC2 LT AAAsf Affirmed AAAsf
B 12529MAK4 LT AA-sf Affirmed AA-sf
C 12529MAL2 LT A-sf Affirmed A-sf
D 12529MCY2 LT BBBsf Affirmed BBBsf
E 12529MCZ9 LT BBB-sf Affirmed BBB-sf
F 12529MDA3 LT BB-sf Affirmed BB-sf
G 12529MDB1 LT B-sf Affirmed B-sf
X-A 12529MAG3 LT AAAsf Affirmed AAAsf
X-B 12529MAH1 LT A-sf Affirmed A-sf
X-D 12529MCV8 LT BBB-sf Affirmed BBB-sf
X-F 12529MCW6 LT BB-sf Affirmed BB-sf
X-G 12529MCX4 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations in Fitch's base case
are up slightly from with issuance expectations primarily due to
concerns with loans expected to be impacted by the coronavirus
pandemic; in particular, the Fitch Loan of Concern (FLOC), AC by
Marriott San Jose (5.3%). Fitch's current ratings incorporate a
base case loss of 3.4%. The Negative Outlook on class G reflects
losses that could reach 4.3% when factoring additional
coronavirus-related stresses.
Five loans (13.7% of pool) have been designated as FLOCs, including
one loan (.7%) in special servicing. Fairfield Inn & Suites Marion
is secured by a hotel property and transferred to special servicing
in July 2020 for Imminent Monetary Default as a result of
coronavirus-pandemic related hardship. The lender is currently
dual-tracking foreclosure and consent agreement, and discussions
are ongoing. As of the March 2021 distribution period, there were
ten loans (30.5%) on the servicer's watchlist for delinquency,
increased vacancy, partial year drop in performance, rolling
tenants and requesting COVID-19 relief.
Fitch Loans of Concern:
AC by Marriott San Jose (5.3%) is a 210-key select service hotel
property located in San Jose, CA. Property performance has been
impacted by coronavirus related economic hardship. Subject
September 2020 YTD NOI DSCR was 0.08x from 2.28x at YE 2019. In
July 2020, the borrower was provided relief in the form of a
consent agreement whereby FF&E reserve funds may be utilized to
fund debt service between August 2020 and January 2021.
Loudon Station - Building C (3.0%) is a retail/office/multifamily
mixed-use property located in Ashburn, VA. September 2020 NOI DSCR
fallen to .86x compared to YE 2019 NOI of 1.16x and underwritten
NOI DSCR of 1.85x. YE (2019) NOI is 37.4% below underwritten
expectations due to a 32.7% increase in total operating expenses.
Servicer watchlist commentary states that the increase in total
operating expenses is due to one-time expenses. Subject occupancy
was 99% as of September 2020, in line with underwritten
expectations. Per the master servicer, the borrower has not
requested relief from economic hardship resulting from the
coronavirus pandemic and the loan remains current.
Shelbourne Global Portfolio II (2.5%) is a mixed use
(office/industrial) property and an office property located in
Newark, DE. This FLOC was flagged due to concentrated upcoming
rollover, comprising of 26.6% of NRA expiring through 2021. The
largest rolling tenant, Sardo & Sons Warehousing, lease is
scheduled to expire in April 2020 and accounts for 18.5% of
portfolio NRA.
DoubleTree Neenah (1.2%) is a 107 key limited service hotel located
in Neenah, WI. Subject YTD September 2020 NCF DSCR was -.02x
compared to 2.76x at YE 2019 and underwritten NCF DSCR of 2.34x.
According to watchlist commentary, the borrower and special
servicer are in discussions for COVID-19 related relief.
The remaining FLOC accounts for .8% of the total pool balance.
Exposure to Coronavirus: There are five loans secured by hotel
properties (9.7% of pool) with a weighted average NOI DSCR of
2.58x. Five retail loans (10.8%) with a weighted average NOI DSCR
of 2.01x. Nine multifamily loans (17.4%) with a weighted average
NOI DSCR of 1.69x. Fitch's analysis applied additional stresses to
four hotel loans and one multifamily loan given the significant
declines in property-level cash flow expected as a result of
pandemic-based restrictions and the decrease in consumer spending.
Minimal Change to Credit Enhancement: There has been minimal change
in credit enhancement since issuance. As of the March 2021 payment
period, the pool's aggregate balance has been paid down by .31% to
$755.9 million from $758.0 million at issuance. There are 17 loans
comprising 68.1% of the pool that are interest only for the full
term. No loans have been defeased and no loans have been disposed.
Additionally, no loans are scheduled to mature until March 2024.
The pool is expected to pay down by approximately 4.5% by
maturity.
ADDITIONAL CONSIDERATIONS
Investment-Grade Credit Opinion Loans: At issuance, four loans
totaling 24.0% of the pool were given standalone investment-grade
credit opinions. The second largest loan, 3 Columbus Circle (7.6%
of the pool); the fourth largest loan, 65 Broadway, (6.1% of the
pool); the fourth largest loan, Fairfax Multifamily Portfolio (5.3%
of the pool); and the seventh largest loan, Amazon Distribution
Livonia (5.2% of the pool); each received a credit opinion of
'BBB-sf' on a standalone basis.
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 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 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' and 'BBBsf' classes are 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 'B-sf'
and 'BB-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 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 to classes A-1
through A-S and the interest-only classes X-A are not likely
due to the position in the capital structure, but may occur
should interest shortfalls occur.
-- Downgrades to classes B, C, D, E, F, X-B, X-D and X-F are
possible should performance of the FLOCs continue to decline;
should loans susceptible to the coronavirus pandemic not
stabilize; and/or should further loans transfer to special
servicing. Classes G and X-G could be downgraded should the
specially serviced loan not return to the master servicer
and/or as there is more certainty of loss expectations from
other FLOCs.
The Rating Outlooks on these classes may be revised back to Stable
if performance of the FLOCs improves and/or properties vulnerable
to the coronavirus stabilize once the pandemic is over.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, classes with Negative Outlooks will
be downgraded one or more categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
CSAIL COMMERCIAL 2016-C6: Fitch Puts 4 Classes on Watch Negative
----------------------------------------------------------------
Fitch Ratings placed four classes of Credit Suisse Commercial
Mortgage Trust's CSAIL 2016-C6 Commercial Mortgage Trust
Pass-Through Certificates (CSAIL 2016-C6) on Rating Watch Negative
(RWN). In addition, Fitch revised the Outlooks on six classes to
Negative from Stable.
DEBT RATING PRIOR
---- ------ -----
CSAIL 2016-C6
A-S 12636MAJ7 LT AAAsf Revision Outlook AAAsf
B 12636MAK4 LT AA-sf Revision Outlook AA-sf
C 12636MAL2 LT A-sf Revision Outlook A-sf
D 12636MAV0 LT BBB-sf Revision Outlook BBB-sf
E 12636MAX6 LT BB-sf Rating Watch On BB-sf
F 12636MAZ1 LT B-sf Rating Watch On B-sf
X-A 12636MAG3 LT AAAsf Revision Outlook AAAsf
X-B 12636MAH1 LT AA-sf Revision Outlook AA-sf
X-E 12636MAP3 LT BB-sf Rating Watch On BB-sf
X-F 12636MAR9 LT B-sf Rating Watch On B-sf
KEY RATING DRIVERS
Increase in Expected Losses: RWN placements reflect increased loss
expectations on specially serviced loans (17.7% of the pool),
primarily Quaker Bridge Mall (11.4%). The loan is secured by a
357,221sf regional mall located in Lawrenceville, NJ that
transferred to special servicing in November 2020 as a result of
the coronavirus pandemic's impact. The loan has been delinquent
five times in the past 12 months and is currently 90+ days
delinquent. The borrower and servicer are negotiating terms of
payment relief.
Fitch's analysis included a 34% base case loss, and an additional
sensitivity of a 50% loss on the loan to reflect the potential for
continued performance declines and the historically low recovery
values for regional malls.
Increase in Specially Serviced Loans: The Negative Outlooks reflect
increased loss expectations relative to losses modeled in Fitch's
prior rating action, and includes additional stresses on loans
expected to be affected by the pandemic and the outsize loss
applied to Quaker Ridge Mall.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch expects to resolve the RWN within 30 days, and
downgrades of one or more categories are expected.
-- The Negative Outlooks reflect potential future downgrades in
12-24 months should the pandemic continue to negatively affect
performance and loans fail to stabilize. Although near-term
performance will be affected on many properties, lack of
clarity about the duration of the pandemic and the permanence
of the performance declines makes it difficult to discern
which loans will continue to transfer in and out of special
servicing, or ultimately be disposed for losses.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- If the properties revert to their pre-pandemic performance or
actual losses are expected to be significantly better than
Fitch's expectations, ratings would be affirmed and Outlooks
revised back to Stable.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
DRYDEN 75 CLO: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R2, B-R2,
C-R2, D-R2, and E-R2 replacement notes from Dryden 75 CLO
Ltd./Dryden 75 CLO LLC, a CLO originally issued in February 2019
and previously refinanced in July 2019 that is managed by PGIM
Inc.
On the April 1, 2021 refinancing date, the proceeds from the
issuance of the replacement notes were used to redeem the original
notes. We withdrew the ratings on the original notes and assigned
ratings to the replacement notes.
Based on provisions in the supplemental indenture:
-- The replacement class A-R2, B-R2, C-R2, and D-R2 notes will be
issued at a higher spread than the previously refinanced notes;
-- The replacement class E-R2 notes will be issued at a lower
spread than the previously refinanced notes;
-- The class A-R2 subordination will increase;
-- The class C-R2 and D-R2 subordinations will decrease;
-- The stated maturity, reinvestment period, and non-call period
will be extended 3.75, 3.75, and 2.75 years respectively;
-- S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing 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, "We will continue to review whether, in our view, the
ratings assigned to the notes remain consistent with the credit
enhancement available to support them, and we will take further
rating actions as we deem necessary."
Ratings Assigned
Dryden 75 CLO Ltd./Dryden 75 CLO LLC
Replacement class A-R2, 336.00 million: AAA (sf)
Replacement class B-R2, 63.00 million: AA (sf)
Replacement class C-R2 (deferrable), 34.15 million: A (sf)
Replacement class D-R2 (deferrable), 28.85 million: BBB- (sf)
Replacement class E-R2 (deferrable), 21.00 million: BB- (sf)
Subordinated notes, 45.80 million: Not rated
Ratings Withdrawn
Dryden 75 Ltd./Dryden 75 CLO LLC
Class A-R: to not rated from AAA (sf)
Class B-R: to not rated from AA (sf)
Class C-R: to not rated from A (sf)
Class D-R: to not rated from BBB- (sf)
Class E-R: to not rated from BB- (sf)
IMSCI 2014-5: Fitch Affirms B Rating on Class G Debt
----------------------------------------------------
Fitch has affirmed the ratings of Institutional Mortgage Securities
Canada Inc. (IMSCI) 2014-5.
DEBT RATING PRIOR
---- ------ -----
Institutional Mortgage Securities Canada Inc. 2014-5
A-2 45779BCB3 LT AAAsf Affirmed AAAsf
B 45779BCC1 LT AAAsf Affirmed AAAsf
C 45779BCD9 LT Asf Affirmed Asf
D 45779BCE7 LT BBBsf Affirmed BBBsf
E 45779BCF4 LT BBB-sf Affirmed BBB-sf
F 45779BCG2 LT BBsf Affirmed BBsf
G 45779BCH0 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
High Loss Expectations, Nelson Ridge: Fitch's loss expectations
reflect the continued underperformance and maturity default risk of
the Nelson Ridge Pooled Loan (6.8%), which remains a Fitch Loan of
Concern (FLOC).
The pari passu Nelson Ridge Pooled Loan transferred to special
servicing in early 2016 due to a decrease in operating performance.
The property operations were affected by the decline in oil prices,
and occupancy fell to a low of 45% in 2015. Subsequently, the
property was affected by the area wildfires in May 2016. However,
the loan returned to master servicing in January 2017, after a loan
modification and maturity extension was granted. The loan was
granted an additional forbearance in 2020 as a result of the
coronavirus pandemic-related hardship, and the maturity was
extended to December 2021. The subject's YE 2019 NOI debt service
coverage ratio (DSCR) was reported to be negative 0.89x compared
with the underwritten NOI DSCR of 1.87x. According to the subject's
March 2020 rent roll, occupancy was 76%, and monthly in-place rent
has fallen to $1,356.44 per unit from $2,228 per unit as of March
2014. The loan has full recourse to the sponsor, Lanesborough Real
Estate Investment Trust. Despite the recourse provision, Fitch
remains concerned with the loan given the low DSCR, multiple
maturity extensions and demand tied to the energy sector.
Fitch's high expected losses on the Nelson Ridge Pooled Loan
reflect an additional NOI stress to reflect the subject's prolonged
underperformance and maturity default risk. The Negative Rating
Outlooks on classes F and G reflect these concerns. Loss
expectations are in line with Fitch's prior rating action as
overall property-level performance remains generally stable.
Fitch's current ratings incorporate a base case loss of 5.8%, and
additional stresses applied due to the pandemic resulted in a
similar loss. One additional loan has been designated as a FLOC due
to lease rollover concerns. Burnhamthorpe Square (6.8%) is secured
by a participation interest in an office complex located in
Etobicoke, ON. Per the subject's March 2020 rent roll, there were
19 leases accounting for 34.9% of subject NRA scheduled to expire
between April 2020 and December 2021. Most of the leases are
granular in nature, with 18 of the expiring leases comprising less
than 5% of subject NRA. The lease for the subject's largest tenant,
Canada Bread Company (NRA 21%) expired in December 2020, and Fitch
is awaiting updates from the servicer regarding a renewal. As of
March 2020, the subject's average annual in-place rent was below
the submarket. Fitch's analysis included an additional NOI stress
due to uncertainty with the Canada Bread lease.
Pandemic's Impact: There are three loans secured by multifamily
properties (14.1% of pool) with a weighted-average NOI DSCR of
0.44x, and three retail loans (52.2%) with a weighted-average NOI
DSCR of 1.67x. Fitch's analysis applied additional stresses to one
retail loan given the significant declines in property-level cash
flow expected as a result of pandemic-based restrictions.
Improved Credit Enhancement: Class credit enhancement has
significantly increased compared to issuance. As of the March 2021
distribution date, the pool's aggregate principal balance has been
reduced 74.0% to $81.0 million from $311.8 million at issuance,
with 10 loans remaining. Since Fitch's last rating action in 2020,
two loans totaling approximately $12.2 million were paid in full at
their respective maturity dates, and one loan was prepaid for
approximately $4.2 million. There are no full or partial
interest-only loans in the pool. There are 10 loans remaining, of
which five loans comprising approximately 65.8% of total pool
balance have full or partial recourse provisions.
ADDITIONAL CONSIDERATIONS
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, additional guarantors and recourse to the borrowers. Of
the remaining nondefeased loans, all feature full or partial
recourse to the borrowers and/or sponsors.
High Balance Concentration: Of the original 64 loans at closing, 10
remain. The pool exhibits high concentration by balance, as the
top-five loans represent 79% of the outstanding principal balance.
RATING SENSITIVITIES
The Stable Outlooks on classes A-2 through E reflect the overall
stable performance of the majority of the pool and expected
continued amortization. The Negative Outlooks on classes F and G
reflect the potential for downgrades due to concerns surrounding
the ultimate impact of the pandemic and the performance concerns
associated with the FLOCs, especially the Nelson Ridge Pooled
loan.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, coupled with additional
paydown and/or defeasance.
-- Upgrades to the 'Asf' and 'AAsf' rated classes are not
expected but would likely occur with significant improvement
in credit enhancement and/or defeasance and/or the
stabilization to the properties affected by the coronavirus
pandemic.
-- An upgrade of the 'BBBsf' and '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 'Bsf' and 'BBsf' 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 negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans/assets.
-- A downgrade to class A-2 is not likely due to the position in
the capital structure, but may occur should interest
shortfalls occur.
-- Downgrades to classes B, C, D and E are possible should
performance of the FLOCs continue to decline, should loans
susceptible to the coronavirus pandemic not stabilize and/or
should further loans transfer to special servicing.
-- Classes F and G could be downgraded should loss expectations
from FLOCs grow more certain. The Rating Outlooks on these
classes may be revised back to Stable if performance of the
FLOCs improves and/or properties vulnerable to the pandemic
stabilize.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, classes with Negative Outlooks will
be downgraded one or more categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
JP MORGAN 2012-CIBX: Moody's Lowers Cl. G Certs Rating to C
-----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
and downgraded the ratings on six classes in J.P. Morgan Chase
Commercial Mortgage Securities Trust 2012-CIBX, Commercial Mortgage
Pass-Through Certificates, Series 2012-CIBX, as follows:
Cl. A-4, Affirmed Aaa (sf); previously on May 22, 2020 Affirmed Aaa
(sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on May 22, 2020 Affirmed
Aaa (sf)
Cl. A-4FX, Affirmed Aaa (sf); previously on May 22, 2020 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on May 22, 2020 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa2 (sf); previously on May 22, 2020 Affirmed Aa2
(sf)
Cl. C, Downgraded to Baa1 (sf); previously on May 22, 2020 Affirmed
A2 (sf)
Cl. D, Downgraded to Ba2 (sf); previously on May 22, 2020
Downgraded to Baa3 (sf)
Cl. E, Downgraded to Caa1 (sf); previously on May 22, 2020
Downgraded to B1 (sf)
Cl. F, Downgraded to Ca (sf); previously on May 22, 2020 Downgraded
to Caa1 (sf)
Cl. G, Downgraded to C (sf); previously on May 22, 2020 Downgraded
to Ca (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on May 22, 2020 Affirmed
Aaa (sf)
Cl. X-B*, Downgraded to Caa2 (sf); previously on May 22, 2020
Downgraded to Caa1 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on five P&I classes were affirmed because of their
credit support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on five P&I classes were downgraded due to a decline in
pool performance, higher anticipated losses and interest shortfall
concerns, driven primarily by the continued decline in performance
of three of the five largest non-defeased loans. Two regional
malls, Jefferson Mall (7.9% of the pool) and Southpark Mall (7.4%)
are in special servicing and the largest loan, theWit Hotel (9.9%),
has suffered from declining net operating income (NOI) since
securitization. Furthermore, Plaza Centro (3.1%), a retail center
in Puerto Rico, has transferred to special servicing after a
significant decline in occupancy and is in the process of
foreclosure.
The rating on the IO class X-A was affirmed based on the credit
quality of its referenced classes.
The rating on the IO Class X-B was downgraded due to a decline in
the credit quality of its referenced classes. The IO Class
references P&I classes, Cl. B through Cl. NR (Cl. NR is not rated
by Moody's).
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of commercial real estate from a gradual and unbalanced
recovery in US economic activity. Stress on commercial real estate
properties will be most directly stemming from declines in hotel
occupancies (particularly related to conference or other group
attendance) and declines in foot traffic and sales for
non-essential items at retail properties.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 15.1% of the
current pooled balance, compared to 11.4% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.6% of the
original pooled balance, compared to 7.1% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating all classes except interest-only
classes were "Approach to Rating US and Canadian Conduit/Fusion
CMBS" published in September 2020.
DEAL PERFORMANCE
As of the March 17, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 43% to $730.1
million from $1.29 billion at securitization. The certificates are
collateralized by 36 mortgage loans ranging in size from less than
1% to 10.4% of the pool, with the top ten loans (excluding
defeasance) constituting 58% of the pool. Eight loans, constituting
23% of the pool, have defeased and are secured by US government
securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 13, compared to 14 at Moody's last review.
As of the March 2021 remittance report, loans representing 95% were
current or within their grace period on their debt service payments
and 5% were in foreclosure.
Ten loans, constituting 28% of the pool, are on the master
servicer's watchlist, of which one loan, representing 2.2% of the
pool, indicate the borrower has requested relief in relation to the
coronavirus impact on the property. The watchlist includes loans
that meet certain portfolio review guidelines established as part
of the CRE Finance Council (CREFC) monthly reporting package. As
part of Moody's ongoing monitoring of a transaction, the agency
reviews the watchlist to assess which loans have material issues
that could affect performance.
One loan has been liquidated from the pool, resulting in an
aggregate realized loss of $157,592 (for a minimal loss severity of
less than 1%). Five loans, constituting 28% of the pool, are
currently in special servicing. All of the specially serviced
loans, representing 28% of the pool, have transferred to special
servicing since March 2020.
The largest specially serviced loan is the Jefferson Mall Loan
($60.9 million -- 8.3% of the pool), which is secured by a 281,000
square feet (SF) portion of a 957,000 SF regional mall located in
Louisville, Kentucky. The mall's non-collateral anchors include a
former Sears, Dillard's and J.C. Penney. Macy's (152,000 SF) closed
their store at this location before the end of 2017 and the
sponsor, CBL & Associates Properties (CBL), then purchased the
Macy's parcel. A portion (46,000 SF) of the former Macy's space has
been partially backfilled by Round One Entertainment which features
bowling, billiards, arcade games, karaoke, darts, ping pong and a
kid's zone. Additionally, CBL has purchased the Sears parcel and
leased it back to Sears on a 10-year lease with termination options
with a 6-month advance notice. The collateral portion of the mall
was 88% leased as of December 2020 compared to 94% as of December
2019, 96% in 2018 and 2017. The sponsor reported 2019 mall store
sales of $397 per square foot (PSF) compared to $382 PSF in 2018.
The loan transferred to special servicing in February 2020 due to
imminent default as the borrower indicated they would not be able
to pay off the loan at its June 2022 maturity date. The mall faces
competition within the Louisville area from two Brookfield-owned
malls, Oxmoor Center and Mall St. Matthews, both located
approximately eight miles northeast of the subject property. The
loan has amortized by approximately 14.5% since securitization and
remains current on debt service payments as of March 2021. The loan
was modified during August 2020 (maturity and IO period extension)
and was returned to the master servicer in November 2020. However,
the loan transferred back to special servicing during January 2021
due to imminent non-monetary default. The sponsor, CBL, filed for
chapter 11 bankruptcy during November 2020. Moody's analysis
accounted for the higher cash flow volatility and loss severity
associated with Class B malls.
The second largest specially serviced loan is the Southpark Mall
Loan ($56.7 million -- 7.8% of the pool), which is secured by a
390,000 SF portion of a 590,000 SF regional mall located in
Colonial Heights, Virginia. The mall is located approximately 22
miles south of Richmond, Virginia, along Interstate-95. The current
anchors include a 16-screen Regal Cinema (collateral) and two
non-collateral tenants, JC Penney and Macy's. A former Sears, one
of the original anchors, closed its store at this location in 2018.
As a result, total mall occupancy declined to 68% as of December
2018, compared to 99% in 2017 and 98% at securitization. As of
September 2020, inline occupancy was 95%, unchanged from 2019 and
compared to 84% in 2018 and 85% in 2017. The increase in occupancy
in 2019 can be partly attributed to a new lease with H&M for
approximately 21,000 SF. As of September 2020, the total occupancy
included a temporary tenant, Spirit Halloween (in the former Sears
space) and was reported at 96%, however, excluding Spirit Halloween
the occupancy would be reduced to 79%. The sponsor reported 2019
mall store sales of $388 PSF compared to $387 PSF in 2018. The loan
transferred to special servicing in March 2020 due to imminent
default as the borrower initially requested a loan modification and
extension, however, due to the coronavirus impact the borrower has
withdrew its request. The property benefits from being the only
mall situated in the southern portion of the Richmond, VA MSA and
is the only enclosed regional mall within a 25-mile radius. The
loan has amortized by approximately 15.4% since securitization and
remains current on debt service payments as of March 2021. The loan
was granted temporary payment relief during July 2020 and was
returned to the master servicer in November 2020. However, the loan
transferred back to special servicing during February 2021 due to
imminent balloon/maturity default. The sponsor, CBL, filed for
chapter 11 bankruptcy during November 2020. Moody's analysis
accounted for the higher cash flow volatility and loss severity
associated with Class B malls.
The third largest specially serviced loan is The Court at Oxford
Valley Loan ($51.9 million -- 7.1% of the pool), which is secured
by a shadow anchored retail center in Fairless Hills, Pennsylvania.
It is located approximately 25 miles from downtown Philadelphia,
and 2 miles southwest of Interstate-95. Shadow anchors include BJ's
Wholesale Club, Best Buy, Home Depot and Barnes and Noble. There
was a Babies R Us (10% of NRA) at the center which vacated in June
2018 and Spirit Halloween has temporarily leased the space during
seasonal times. The property was 96% leased as of December 2020
compared to 90% in December 2019, 98% in 2015 and 89% at
securitization. The borrower states that recent underperformance is
due to coronavirus outbreak related store closures and tenant
deferral payment plans that were agreed upon during and for the
second quarter of 2020. The loan transferred to special servicing
in March 2021 due to non-monetary default ahead of its scheduled
maturity in July 2021. Due to its historical performance, Moody's
has included this loan in the conduit statistics mentioned further
below.
The fourth largest specially serviced loan is the Plaza Centro Loan
($23.9 million -- 3.3% of the pool) which is secured by a 283,000
SF anchored retail center located in Caguas, Puerto Rico that has
suffered from declining revenue and DSCR since securitization.
Furthermore, the largest tenant, K-Mart (32% of the NRA), had a
lease which expired in February 2020 and the borrower indicated
that the tenant would not be renewing. As of June 2020, the
property was 51% leased. The NOI DSCR has been close to or below
1.0X since 2017 due to lower rental revenue and increased expenses.
The loan transferred to special servicing in June 2020 due to
payment default and is paid through its June 2020 payment date. It
has amortized approximately 13.5% since securitization. The cash
management period commenced as a result of the payment default and
the lender is sweeping all lockbox funds. All reserves were swept
as well. The borrower has agreed to an uncontested receivership and
foreclosure.
The fifth largest specially serviced loan is the Nittany Commons
Loan ($9.5 million -- 1.3% of the pool), which is secured by a
120,391 SF retail center located in State College, Pennsylvania.
The center was formerly anchored by a grocery store, Giant Foods
(65,301 SF), which vacated during 2019 at its lease expiration. As
a result, the center is now only 46% leased. The loan transferred
to special servicing in March 2020 due to imminent monetary
default. The borrower stated there is interest in the vacant space
but a LOI has not been finalized. The loan is now fully cash
managed with a cash trap in place. The loan has amortized by
approximately 14.2% since securitization. The borrower has agreed
to an uncontested receivership and foreclosure. The receiver was
appointed during September 2020.
Moody's has also assumed a high default probability for two poorly
performing loans, constituting 1.7% of the pool, and has estimated
an aggregate loss of $76.2 million (a 46.7% expected loss on
average) from these specially serviced and troubled loans.
As of the March 2021 remittance statement cumulative interest
shortfalls were $685,874. Moody's anticipates interest shortfalls
will continue because of the exposure to specially serviced loans
and/or modified loans. Interest shortfalls are caused by special
servicing fees, including workout and liquidation fees, appraisal
entitlement reductions (ASERs), loan modifications and
extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2019 operating results for 100% of the
pool, and full or partial year 2020 operating results for 95% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 110%, compared to 103% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 23% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.4%.
Moody's actual and stressed conduit DSCRs are 1.26X and 1.07X,
respectively, compared to 1.33X and 1.12X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three performing loans represent 23.8% of the pool balance.
The largest loan is the theWit Hotel Loan ($76.0 million -- 10.4%
of the pool), which is secured by a 310-room full-service hotel
located in Chicago, Illinois. The property is a boutique hotel
product in the Hilton Doubletree brand. The December 2019 trailing
twelve month (TTM) occupancy and revenue per available room
(RevPAR) figures were 80% and $178, respectively, compared to 84%
and $193 for TTM December 2018. Property performance has declined
significantly since securitization due to a decrease in room and
F&B revenue as well as an increase in expenses. The decrease in
revenues can be partially attributed to new inventory of rooms in
the area and fewer citywide conventions in 2019 along with the roof
patio being under renovation during the first half of 2019. The
loan has amortized by approximately 13.2% since securitization,
however, the 2019 reported NOI was more than 20% below its
underwritten levels. The property was also impacted by civil unrest
during May 2020 and insurance proceeds were received as a result.
The loan remained current as of its March 2021 remittance
statement. Moody's LTV and stressed DSCR are 140% and 0.93X,
respectively, compared to 143% and 0.91X at the last review.
The second largest loan is the 100 West Putnam Loan ($67.9 million
-- 9.3% of the pool), which is secured by a 156,000 SF class A
suburban three building office complex located in Greenwich,
Connecticut. The property is also encumbered by a $16 million
B-Note. As of December 2020, the property was 68% leased, unchanged
since the prior review and compared to 97% at securitization. The
decrease in occupancy from securitization was driven partly by the
departure of two tenants during the first half of 2016.
Additionally, two other tenants downsized their spaces upon lease
renewal. There is minimal lease rollover for the current tenants
through 2022 and the loan has amortized by approximately 15.2%
since securitization. Due to lower rental revenues and higher
expenses, the property's NOI has been below underwritten levels
since 2015. Moody's LTV and stressed DSCR are 128% and 0.82X,
respectively, compared to 131% and 0.81X at the last review.
The third largest loan is the Residence Inn Palo Alto Loan ($29.9
million -- 4.1% of the pool), which is secured by a 156 key
extended stay hotel located on the border of Palo Alto, California
and Los Altos, California. The property has had strong historical
occupancy, having been over 74.8% occupied every year since 2005.
The property is located in close proximity to the headquarters of a
number of high-technology companies who use the property to house
employees during extended periods. Property performance has been
strong since securitization, with the NCF consistently increasing
due to strong demand and higher ADR. The loan has remained current
throughout 2020 and has amortized approximately 14.5% since
securitization. Moody's LTV and stressed DSCR are 97% and 1.25X,
respectively, compared to 99% and 1.23X at the last review.
JPMBB COMMERCIAL 2015-C29: Fitch Lowers 2 Debt Classes to 'Csf'
---------------------------------------------------------------
Fitch Ratings has downgraded six and affirmed 10 classes of JPMBB
Commercial Mortgage Securities Trust, series 2015-C29. The Rating
Outlooks on two classes remain Negative.
DEBT RATING PRIOR
---- ------ -----
JPMBB 2015-C29
A-3A1 46644RAY1 LT AAAsf Affirmed AAAsf
A-3A2 46644RAA3 LT AAAsf Affirmed AAAsf
A-4 46644RAZ8 LT AAAsf Affirmed AAAsf
A-S 46644RBD6 LT AAAsf Affirmed AAAsf
A-SB 46644RBA2 LT AAAsf Affirmed AAAsf
B 46644RBE4 LT AA-sf Affirmed AA-sf
C 46644RBF1 LT A-sf Affirmed A-sf
D 46644RBH7 LT Bsf Downgrade BBB-sf
E 46644RAN5 LT CCCsf Downgrade Bsf
EC 46644RBG9 LT A-sf Affirmed A-sf
F 46644RAQ8 LT Csf Downgrade CCCsf
X-A 46644RBB0 LT AAAsf Affirmed AAAsf
X-B 46644RBC8 LT AA-sf Affirmed AA-sf
X-D 46644RAE5 LT Bsf Downgrade BBB-sf
X-E 46644RAG0 LT CCCsf Downgrade Bsf
X-F 46644RAJ4 LT Csf Downgrade CCCsf
Class A-S, B and C certificates may be exchanged for class EC
certificates, and class EC certificates may be exchanged for class
A-S, B and C certificates. Class A-1 and A-2 certificates have paid
in full. Class X-C was previously withdrawn per Fitch's criteria.
Fitch does not rate the classes NR and X-NR certificates.
KEY RATING DRIVERS
Increased Loss Expectations/Specially Serviced Loans: Since Fitch's
last rating action, loss expectations have increased largely due to
the following three top 15 loans (16.3% of the pool), which
transferred to special servicing: One City Centre, Alta Woodlake
Square and Marriott - Pittsburgh, and resulting greater certainty
of losses. Fitch's ratings are based on base case loss expectations
of 11.50%; the Negative Rating Outlooks indicate losses could reach
12.30%, reflecting additional stresses on loans expected to be
negatively impacted by the coronavirus pandemic.
There are 13 (40.3% of the pool) Fitch Loans of Concern (FLOCs),
which include five loans (32.3%) within the top 15 and six
specially serviced loans (24.7%). The top five largest contributors
to loss are One City Centre, Horizon Outlet Shoppes, Alta Woodlake
Square, Aspen Heights - Texas A&M University Corpus Christi and
Marriott - Pittsburgh.
The largest contributor to loss is the specially serviced One City
Centre (8.6%), which is secured by a 602,122-sf office property
located in the heart of Houston's CBD in Houston, TX. The largest
tenants at issuance were Waste Management (40%), lease expiration
December 2020, rated 'BBB+'/Stable; Energy XXI Ltd (14%),
expiration Jan. 31, 2024; and Ballard Exploration (2.9%),
expiration Aug. 31, 2027. Per the master servicer, the loan was
transferred to special servicing on March 23, 2021.
The largest tenant, Waste Management signed a long-term lease in
another location, and has vacated upon lease expiration in December
2020. Per the special servicer, property renovations are being
discussed, and the borrower has interviewed leasing teams to ensure
proper marketing to re-tenant the property. There was one proposal
out for a large prospect tenant in the 300,000-325,000 sf range;
however, the borrower advised that negotiations are on hold. In
addition, the building renovation plans are being revised and
repriced. The YE 2019 debt service coverage ratio (DSCR) was 1.39x
with property occupancy at 67.7%. Fitch's analysis reflects a 43.6%
loss to account for the departure of Waste Management and loss of
leasing income.
The second largest contributor to loss is the specially serviced,
Horizon Outlet Shoppes (3.6%), which is secured by a portfolio of
three outlet centers with a combined 555,682 sf, located in
Oshkosh, WI, Burlington, WA and Fremont, IN. As of YE 2019, the
portfolio has experienced a 32% decline in net operating income
(NOI). The portfolio is 77.2% occupied as of February 2020.
The three properties are located in tertiary markets. Each property
has experienced a decline in occupancy and property operating cash
flow since origination due to tenant bankruptcies, construction of
competitors, and retailers reducing number of stores. Tenants at
all three properties have struggled to maintain sales and have
requested shorter renewal terms (usually one year) and
significantly reduced rents. Many tenants have gone from a per
square foot (psf) basis to a percentage of sales. Fitch's analysis
reflects a discount to the appraisal value provided by the special
servicer.
The third largest contributor to loss is the specially serviced,
Alta Woodlake Square (4.4%), which is secured by a 256-unit
multifamily property located in Houston, TX. The property is
located just off Westheimer Road in the Houston Westchase District,
approximately five miles east of The Houston Galleria and 15 miles
west of Houston's CBD. The loan was transferred to special
servicing in December 2020, due to payment default under the
mezzanine loan and the mezzanine lender pursuing an equity
enforcement action and requesting modifications to the senior loan
in conjunction with the equity enforcement action.
Counsel was engaged by both the master servicer and special
servicer and negotiations continue. Per the special servicer, if
negotiations fail, counsel will pursue foreclosure litigation.
Occupancy at the property as of December 2020 declined to 87.1%
with average asking rent of $1,120 per unit down from 92.6%;
average rent $1,155 per unit as of 9/2019 and $1,492 and 93% at
issuance. The property has suffered declining rents due to a soft
market in addition to increased operating expenses since issuance.
Fitch's analysis includes a 10% stress to the YE 2019 NOI to
reflect decline in occupancy and performance.
The fourth largest contributor to loss is the specially serviced,
Aspen Heights - Texas A&M University Corpus Christi, (3.7%), which
is secured by a 500-unit student housing property located in Corpus
Christi, TX. The property has an approximate 90% student tenant
concentration and is located three miles from Texas A&M-Corpus
Christi. All leases are year-long and approximately 90% are backed
by parental guarantees. The loan was transferred to special
servicing in December 2019 due to monetary default.
The property was 69.4% occupied as of August 2020 with average rent
per unit $682. The loan has been hard cash managed since 2018 due
to low DSCR with a sweep of any and all excess cash to a reserve
held on the loan. Per the special servicer, the borrower had a
buyer lined up and submitted a discounted payoff offer (DPO) which
was approved, but the sale fell out of contract due to
pandemic-related financing delays. A forbearance is being
negotiated while foreclosure is being pursued. The borrower
recently indicated the property sustained some damage from
Hurricane Hanna for which additional information is being sought,
but appears minimal. Fitch's analysis reflects a discount to the
appraisal value provided by the special servicer.
The fifth largest contributor to loss is the specially serviced,
Marriott - Pittsburgh (3.3%), which is secured by a 402 key
full-service hotel located in Pittsburgh, PA. The loan was
transferred to special servicing in March 2021 due to payment
default. The borrower requested relief and the special servicer has
agreed to provide payment relief due to hardships related to the
pandemic. Relief is being provided in the form of a consent
agreement, which allows borrower to utilize reserve funds to cover
debt service payments. Funds were utilized for the June 2020, July
2020 and August 2020 payments in order to bring the loan current.
The most recent YE 2019 DSCR was 2.03x and occupancy of 67% with an
average daily rate (ADR) of $154 and revenue per available room
(RevPAR) of $1055, which compares to the competitive set occupancy,
ADR and RevPAR of 67%, $152 and $102, respectively. The loan
currently has a balance of $833,837 in replacement reserves.
Fitch's analysis reflects a total 26% decline to the YE 2019 NOI,
given expected declines in performance due to the coronavirus
pandemic.
Increased Credit Enhancement/Additional Defeasance: As of the March
2021 distribution date, the pool's aggregate principal balance was
reduced by 29.2% to $696.5 million from $984.5 million at issuance.
Since Fitch's last review, two loans (7% prior review) totalling
$53.6 million prepaid post maturity. Five loans (6% ) are fully
defeased, two of which (1.5%) were defeased since Fitch's last
rating action. Four loans (10.4%) are full-term interest-only and
thirty-one loans (59.7%) remain in partial-interest-only periods.
The remaining 18 loans (28.3%) are amortizing balloon. One loan
(1.5%) is fully amortizing.
Coronavirus Exposure: Eight loans (16.4% of the pool) are secured
by hotel properties, 13 loans (15.7%) are secured by retail
properties including a factory outlet center portfolio (3.6%),
which is currently in special servicing; there are no regional
malls. Additional coronavirus stresses applied to five hotels loans
(7.3%) and two retail loans (1.6%), which also contributed to
maintaining the negative outlook on classes D and X-D.
ADDITIONAL CONSIDERATIONS:
Pool Concentrations: One loan (3.3%) matures in 2024, 50 loans
(89.8%) in 2025, and two loans (3.3%) in 2030. The largest property
types are retail (16.8%), office (29.1%), hotel (13.5%) and
multifamily (17.8%). The larger retail loans consist of retail
center portfolios and a factory outlet center, there are no
regional malls. Three loans (6.6%) are secured by student housing
properties of which two (4.7%) are specially serviced.
RATING SENSITIVITIES
The Negative Rating Outlooks reflect the potential for additional
downgrades should losses on the specially serviced loans be higher
than expected and should performance of the FLOCs decline further
and/or additional loans default. The Stable Rating Outlooks reflect
the relatively stable performance of the majority of the pool,
increased credit enhancement and expected continued amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Sensitivity factors that could lead to upgrades would include
stable to improved asset performance, particularly on the
FLOCs, coupled with additional paydown and/or defeasance.
Upgrades to classes B and C would only occur with significant
improvement in CE and/or defeasance and with performance
stabilization on the FLOCs and/or better than expected
recoveries on the specially serviced loans. Classes would not
be upgraded above 'Asf' if there were likelihood of interest
shortfalls.
-- An upgrade to classes D and X-D is not likely until the later
years in the transaction, and only if the performance of the
remaining pool is stable and/or properties vulnerable to the
pandemic return to pre-pandemic levels, and there is
sufficient CE. Classes E and F are unlikely to be upgraded
absent significant performance improvement on the FLOCs.
The Negative Rating Outlooks may be revised back to Stable if
performance of the FLOCs improves and/or if recoveries on the
specially serviced loans are better than expected.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Sensitivity factors that could lead to downgrades include an
increase in pool-level losses from underperforming or
specially serviced loans/assets. Downgrades to classes A3-A1
through C and X-A, X-B and EC are not likely due to the
position in the capital structure, but may occur should
interest shortfalls affect these classes.
-- Downgrades to classes B, X-B and C are possible should
expected losses for the pool increase significantly,
performance of the FLOCs further decline and/or loans
susceptible to the pandemic not stabilize and incur outsized
losses. Downgrades to classes D and E would occur should loss
expectations increase from continued performance decline of
the FLOCs, additional specially serviced loans or defaults
and/or disposition of specially serviced loans at a higher
loss than expected.
-- Downgrades to classes F and X-F would occur as losses are
realized and/or become more certain.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021.
Should this scenario play out, classes with Negative Rating
Outlooks will be downgraded one or more categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
MADISON PARK L: S&P Assigns BB- (sf) Rating on $15MM Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Madison Park Funding L
Ltd.'s floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P'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
Madison Park Funding L Ltd.
Class A, $230.625 million: AAA (sf)
Class B, $54.375 million: AA (sf)
Class C, $22.500 million: A (sf)
Class D, $22.500 million: BBB- (sf)
Class E, $15.000 million: BB- (sf)
Subordinated notes, $35.600 million: Not rated
MIDOCEAN CREDIT VIII: Fitch Affirms B- Rating on Class F Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the
refinancing notes and affirmed the existing ratings and maintained
the Rating Outlooks on notes issued by MidOcean Credit CLO VIII.
DEBT RATING PRIOR
---- ------ -----
MidOcean Credit CLO VIII
A-1 59801MAA6 LT PIFsf Paid In Full AAAsf
A-1-R LT AAAsf New Rating
A-2 59801MAC2 LT AAAsf Affirmed AAAsf
F 59801NAC0 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
MidOcean Credit CLO VIII (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by MidOcean Credit
Fund Management LP that originally closed in February 2018. The CLO
issued class A-1-R notes (the refinancing notes) and applied the
net issuance proceeds to redeem the existing class A-1 notes at par
(plus accrued interest) on the refinancing date of Apr. 6, 2021.
The class A-2, B, C, D, E, F and income notes were not refinanced.
The refinancing notes generally have the same terms as the
previously outstanding class except that the stated spread has
changed. The spread for the class A-1-R notes is 1.05% compared
with the spread of 1.15% on the original class A-1 notes. No other
material changes were made to the capital structure as a result of
this refinancing.
KEY RATING DRIVERS
Asset Credit Quality: The average credit quality of the indicative
portfolio is 'B'/'B-', which is in line with that of recent CLOs.
Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the Class A-1-R notes benefit
from credit enhancement of 43.0% and standard U.S. CLO structural
features.
Asset Security: The portfolio consists of 100.0% first-lien senior
secured loans and has a weighted average recovery assumption of
76.3%.
Portfolio Composition: The largest three industries comprise 29.5%
of the aggregate principal balance while the top five obligors
represent 5.1% of the aggregate principal balance. The level of
diversity by industry, obligor and geographic concentrations is in
line with other recent U.S. CLOs.
Portfolio Management: The transaction has reinvestment criteria
similar to other U.S. CLOs. The transaction will exit its
reinvestment period in February 2023.
Cash Flow Analysis: No updated cash flow analysis was conducted for
this transaction because (i) the RDR and RLR, plus losses to date,
for the current portfolio and near-term stress scenario remain
lower compared with the RDR and RLR modelled for the stress
portfolio at closing; (ii) the transaction is still in its
reinvestment period; (iii) and the current max weighted average
life remains less than the risk horizon that was tested at closing.
In addition, Fitch views the reduction of the stated spreads (via
the refinancing) as a credit positive for the transaction. The
modelled Fitch stressed portfolio at close continues to serve as a
proxy, and an updated cash flow model analysis was not conducted
for this rating action.
No other material changes were made to the capital structure as a
result of the refinancing. The ratings on the class A-1-R, A-2 and
F notes reflect the stable performance of the transaction since
Fitch's last review in August 2020. The portfolio plus principal
cash totals approximately $500.2 million as of the March 2021
trustee report, which included a negative principal cash balance of
approximately $3.7 million. All collateral quality tests, coverage
tests and concentration limitations were passing with the exception
of the S&P CCC limitation.
The Stable Outlook on the class A-1-R, A-2 and F notes reflects
Fitch's expectation that these notes have a sufficient level of
credit enhancement to withstand portfolio volatility.
KEY PROVISION CHANGES
-- The refinancing will be implemented via the second
supplemental indenture, which amended certain provisions of
the transaction. The changes include but are not limited to:
-- The overall weighted average cost of the liabilities will
decrease from 1.61% to 1.54% at the refinancing date.
-- Certain definitions and provisions were added to allow for the
purchase or acquisition of restructured assets, subject to
certain conditions.
-- The non-call period has been extended to Apr. 6, 2022 for the
refinancing notes.
-- Definitions and provisions related to LIBOR were amended to
permit a replacement benchmark interest rate on the
refinancing notes, if certain conditions are satisfied.
-- The Adjusted Weighed Average Moody's Rating Factor definition
has been amended to conform to Moody's rating criteria.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A-1-R and A
2 notes as these notes are in the highest rating category of
'AAAsf'. The ratings of the class F notes may be sensitive to
variability in key model assumptions, which may include but
are not limited to: asset defaults, significant credit
migration and higher than historically observed recoveries for
defaulted assets.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The ratings of the class A-1-R, A-2 and F notes may be
sensitive to variability in key model assumptions, which may
include but are not limited to: asset defaults, significant
credit migration and lower than historically observed
recoveries for defaulted assets. Fitch conducted rating
sensitivity analysis on the closing date of the CLO,
incorporating increased levels of defaults and reduced levels
of recovery rates, among other sensitivities.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The sources of information used to assess these ratings were
provided by the arranger (Morgan Stanley & Co. LLC) and the public
domain.
MIDOCEAN CREDIT VIII: S&P Affirms 'BB- (sf)' on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its rating to the class A-1-R
replacement notes from MidOcean Credit CLO VIII/MidOcean Credit CLO
LLC, a CLO that is managed by MidOcean Credit Fund Management L.P.
S&P withdrew its rating on the class A-1 note following payment in
full on the April 6, 2021 refinancing date. At the same time, S&P
affirmed its ratings on the class B, C, D, and E notes.
On the April 6, 2021 refinancing date, the proceeds from the class
A-1-R replacement note issuances were used to redeem the class A-1
notes, as outlined in the transaction document provisions. S&P
said, "Therefore, we withdrew our ratings on the original notes in
line with their full redemption and assigned our rating to the
replacement notes. We also affirmed our rating on the class B, C,
D, and E notes, which were unaffected by the amendment (we did not
rate the class A-2 and F notes). The replacement notes were issued
via a supplemental indenture."
S&P said, "The class E note does not pass our cash flow stresses at
its current rating and indicates a one-notch downgrade. Our rating
affirmation reflects the margin of failure (less than 25 basis
points), the notes' subordination levels, the reduced cost of cost
of capital once the amendment passes, and the transaction's
relatively stable performance since the middle of 2020.
"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. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches, as well as qualitative
factors.
"The ratings reflect our view of the credit support available to
the refinanced notes after examining the new and lower spreads,
which reduce the transaction's overall cost of funding.
"We will continue to review whether the ratings on the notes remain
consistent, in our view, with the credit enhancement available to
support them and take rating actions as we deem necessary."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Affirmed
MidOcean Credit CLO VIII/MidOcean Credit CLO VIII LLC
Class B: 'AA (sf)'
Class C: 'A (sf)'
Class D: 'BBB- (sf)'
Class E: 'BB- (sf)'
Other Outstanding Notes
MidOcean Credit CLO VIII/MidOcean Credit CLO VIII LLC
Class A-2: Not rated
Class F: Not rated
Subordinated notes: Not rated
NEW MOUNTAIN 2: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to New Mountain CLO 2
Ltd./New Mountain CLO 2 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 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
New Mountain CLO 2 Ltd./New Mountain CLO 2 LLC
Class A, $248.00 million: AAA (sf)
Class B-1, $36.00 million: AA (sf)
Class B-2, $20.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $41.06 million: Not rated
PSMC 2021-1 TRUST: Fitch to Rate Class B-5 Tranche 'B+(EXP)'
------------------------------------------------------------
Fitch Ratings expects to rate American International Group, Inc.'s
(AIG) PSMC 2021-1 Trust (PSMC 2021-1).
DEBT RATING
---- ------
PSMC 2021-1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-23 LT AAA(EXP)sf Expected Rating
A-24 LT AAA(EXP)sf Expected Rating
A-25 LT AAA(EXP)sf Expected Rating
A-26 LT AAA(EXP)sf Expected Rating
A-X1 LT AAA(EXP)sf Expected Rating
A-X2 LT AAA(EXP)sf Expected Rating
A-X3 LT AAA(EXP)sf Expected Rating
A-X4 LT AAA(EXP)sf Expected Rating
A-X5 LT AAA(EXP)sf Expected Rating
A-X6 LT AAA(EXP)sf Expected Rating
A-X7 LT AAA(EXP)sf Expected Rating
A-X8 LT AAA(EXP)sf Expected Rating
A-X9 LT AAA(EXP)sf Expected Rating
A-X10 LT AAA(EXP)sf Expected Rating
A-X11 LT AAA(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-2 LT A+(EXP)sf Expected Rating
B-3 LT BBB+(EXP)sf Expected Rating
B-4 LT BB+(EXP)sf Expected Rating
B-5 LT B+(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 514 loans with a total balance of
approximately $426.41 million as of the cutoff date. The pool
consists of prime fixed-rate mortgages (FRMs) acquired by
subsidiaries of American International Group, Inc. (AIG) from
various mortgage originators. Distributions of P&I and loss
allocations are based on a traditional senior-subordinate,
shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The pool consists of very
high-quality, 30-year fixed-rate, fully amortizing Safe Harbor
Qualified Mortgage (SHQM) loans to borrowers with strong credit
profiles, relatively low leverage and large liquid reserves. The
loans are seasoned an average of six months. The pool has a
weighted average (WA) original FICO score of 781, which is
indicative of very high credit-quality borrowers. Approximately
90.3% of the loans have a borrower with an original FICO score
equal to or above 750. In addition, the original WA combined
loan-to-value ratio of 67.0% represents substantial borrower equity
in the property and reduced default risk.
Geographic Concentration (Neutral): The pool is geographically
diverse and, as a result, no geographic concentration penalty was
applied. Approximately 38% of the pool is located in California,
which is in line with other recent Fitch-rated transactions. The
top three MSAs account for 29.9% of the pool. The largest MSA
concentration is in the San Francisco MSA (14.1%), followed by the
Los Angeles MSA (8.9%) and the Washington DC MSA (6.8%).
Straightforward Deal Structure (Neutral): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Servicer Advancing (Mixed): The servicer is required to make
monthly advances of delinquent P&I payments to the bondholders to
the extent that it is deemed recoverable. While this feature
provides liquidity to the bonds, it results in higher loss
severities as these amounts need to be recouped out of liquidation
proceeds. In the event the servicer is unable to make the advances,
they will be funded by Wells Fargo as Master Servicer.
CE Floor (Positive): To mitigate tail risk, which arises as the
pool seasons and fewer loans are outstanding, a subordination floor
of 0.95% of the original balance will be maintained for the
certificates. Additionally, the stepdown tests do not allow
principal prepayments to subordinate bondholders in the first five
years following deal closing.
Payment Forbearance (Neutral): As of the cutoff date, none of the
borrowers in the pool are on a coronavirus forbearance plan.
Additionally, any loan that enters a coronavirus forbearance plan
between the cutoff date and the settlement date will be removed
from the pool (at par) within 45 days of closing. For borrowers who
enter a coronavirus forbearance plan post-closing, the P&I
advancing party will advance P&I during the forbearance period. If
at the end of the forbearance period, the borrower begins making
payments, the advancing party will be reimbursed from any catch-up
payment amount. If the borrower does not resume making payments,
the loan will likely become modified and the advancing party will
be reimbursed from principal collections on the overall pool. This
will likely result in writedowns to the most subordinate class,
which will be written back up as subsequent recoveries are
realized. Since there will be no borrowers on a coronavirus
forbearance plan as of the closing date and forbearance requests
have significantly declined, Fitch did not increase its loss
expectation to address the potential for writedowns due to
reimbursement of servicer advances.
No Meaningful Changes From Prior Transactions (Neutral): This
transaction is the first securitization this year by this issuer
and the fourth since January 2020. All transactions have been
collateralized with comparable credit-quality and assets, and have
used the identical structure and transaction parties. Fitch's
projected asset loss from the transaction's CE is consistent with
prior transactions.
Extraordinary Expense Treatment (Neutral): The trust provides for
expenses, including indemnification amounts and costs of
arbitration, to be paid by the net WA coupon of the loans, which
does not affect the contractual interest due on the certificates.
Furthermore, the expenses to be paid from the trust are capped at
$300,000 per annum, which can be carried over each year, subject to
the cap until paid in full.
Low Operational Risk (Neutral): Operational risk is well controlled
in this transaction. AIG has strong operational practices and is an
'Above Average' aggregator. The aggregator has experienced senior
management and staff, strong risk management and corporate
governance controls, and a robust due diligence process. Primary
and master servicing functions will be performed by Cenlar FSB and
Wells Fargo Bank, N.A., rated 'RPS2'/Negative and 'RMS1-'/Negative,
respectively. Fitch did not apply adjustments to the expected
losses as a result of the operational assessments.
Top Tier Representation and Warranty Framework (Positive): The
loan-level representation, warranty and enforcement (RW&E)
framework is consistent with Tier I quality. Fitch reduced its loss
expectations by 13bps at the 'AAAsf' rating category as a result of
the Tier 1 framework and the 'A' Fitch-rated counterparty
supporting the repurchase obligations of the RW&E providers.
Third-Party Due Diligence Results (Positive): Third-party due
diligence was performed on 100% of loans in the transaction by AMC,
Recovco, and EdgeMac. AMC is assessed as 'Acceptable - Tier 1', and
Recovco and EdgeMAC are assessed as 'Acceptable - Tier 3' by Fitch.
The results of the review identified no material exceptions. Credit
exceptions were supported by mitigating factors and compliance
exceptions were primarily TRID-related and cured with subsequent
documentation. Fitch applied a credit for the high percentage of
loan level due diligence, which reduced the 'AAAsf' loss
expectation by 15bps.
Macro or Sector Risks (Positive): Consistent with the "Additional
Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicates the current assumptions
require reconsideration. In response to revisions made to Fitch's
macroeconomic baseline scenario, observed actual performance data,
and the unexpected development in the health crisis arising from
the advancement and availability of COVID vaccines, Fitch
reconsidered the application of the Coronavirus-related ERF floors
of 2.0 and used ERF Floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf'
rating stresses, respectively. Fitch's March 2021 Global Economic
Outlook and related base-line economic scenario forecasts have been
revised to a 6.2% U.S. GDP growth for 2021 and 3.3% for 2022
following a -3.5% GDP growth in 2020. Additionally, Fitch's U.S.
unemployment forecasts for 2021 and 2022 are 5.8% and 4.7%,
respectively, which is down from 8.1% in 2020. These revised
forecasts support Fitch reverting back to the 1.5 and 1.0 ERF
floors described in Fitch's "U.S. RMBS Loan Loss Model Criteria."
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. The implied rating sensitivities are only
an indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to or
that may be considered in the surveillance of the transaction.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 8.9% in the base case. The
analysis indicates that there is some potential rating
migration with higher MVDs for all rated classes, compared
with the model projection. Specifically, a 10% additional
decline in home prices would lower all rated classes by one
full category.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or in other words positive home price growth with no
assumed overvaluation. The analysis assumes positive home
price growth of 10%. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is
potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
Fitch has added a Coronavirus Sensitivity Analysis that that
includes a prolonged health crisis resulting in depressed consumer
demand and a protracted period of below-trend economic activity
that delays any meaningful recovery to beyond 2021. Under this
severe scenario, Fitch expects the ratings to be impacted by
changes in its sustainable home price model due to updates to the
model's underlying economic data inputs. Any long-term impact
arising from coronavirus disruptions on these economic inputs will
likely affect both investment and speculative grade ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Recovco and EdgeMac. The third-party due diligence
described in Form 15E focused on credit, compliance, and property
valuation for each loan and is consistent with Fitch criteria. The
due diligence companies performed a review on 100% of the loans.
The results indicate high quality loan origination practices that
are consistent with non-agency prime RMBS. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment to its analysis: loans with due diligence
received a credit in the loss model. This adjustment reduced the
'AAAsf' expected losses by 15 bps.
ESG CONSIDERATIONS
PSMC 2021-1 has an ESG Relevance Score of '4[+]' for Transaction
Parties & Operational Risk due to well-controlled operational risk
that includes strong R&W framework, transaction due diligence
results, an 'Above Average' aggregator, and an 'Above Average'
master servicer, all of which resulted in a reduction in the
expected losses. This has a positive impact on the credit profile
and is relevant to the ratings in conjunction with other factors.
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.
PSMC 2021-1: S&P Assigns Prelim B (sf) Rating on Class B-5 Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to PSMC 2021-1
Trust's mortgage pass-through certificates.
The certificate issuance is an RMBS securitization backed by
first-lien, fixed-rate, fully amortizing mortgage loans secured by
single-family residential properties (including townhouses),
condominiums, and planned-unit developments to prime borrowers.
The preliminary ratings are based on information as of April 5,
2021. 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 high-quality collateral in the pool;
-- The available credit enhancement;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework 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.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Preliminary Ratings Assigned
PSMC 2021-1 Trust
Class A-1, $362,440,000: AAA (sf)
Class A-2, $362,440,000: AAA (sf)
Class A-3, $271,830,000: AAA (sf)
Class A-4, $271,830,000: AAA (sf)
Class A-5, $18,122,000: AAA (sf)
Class A-6, $18,122,000: AAA (sf)
Class A-7, $72,488,000: AAA (sf)
Class A-8, $72,488,000: AAA (sf)
Class A-9, $44,567,000: AAA (sf)
Class A-10, $44,567,000: AAA (sf)
Class A-11, $289,952,000: AAA (sf)
Class A-12, $90,610,000: AAA (sf)
Class A-13, $289,952,000: AAA (sf)
Class A-14, $90,610,000: AAA (sf)
Class A-15, $407,007,000: AAA (sf)
Class A-16, $407,007,000: AAA (sf)
Class A-17, $54,366,000: AAA (sf)
Class A-18, $18,122,000: AAA (sf)
Class A-19, $54,366,000: AAA (sf)
Class A-20, $18,122,000: AAA (sf)
Class A-21, $235,586,000: AAA (sf)
Class A-22, $36,244,000: AAA (sf)
Class A-23, $235,586,000: AAA (sf)
Class A-24, $36,244,000: AAA (sf)
Class A-25, $126,854,000: AAA (sf)
Class A-26, $126,854,000: AAA (sf)
Class A-X1, $407,007,000(i)(ii)(iii): AAA (sf)
Class A-X2, $362,440,000(i)(ii)(iv): AAA (sf)
Class A-X3, $271,830,000(i)(ii)(v): AAA (sf)
Class A-X4, $18,122,000(i)(ii)(vi): AAA (sf)
Class A-X5, $72,488,000(i)(ii)(vii): AAA (sf)
Class A-X6, $44,567,000(i)(ii)(viii): AAA (sf)
Class A-X7, $407,007,000(i)(ii)(iii): AAA (sf)
Class A-X8, $54,366,000(i)(ii)(ix): AAA (sf)
Class A-X9, $18,122,000(i)(ii)(x): AAA (sf)
Class A-X10, $235,586,000(i)(ii)(xi): AAA (sf)
Class A-X11, $36,244,000(i)(ii)(xii): AAA (sf)
Class B-1, $7,249,000: AA (sf)
Class B-2, $4,477,000: A- (sf)
Class B-3, $3,411,000: BBB- (sf)
Class B-4, $1,493,000: BB- (sf)
Class B-5, $1,279,000: B (sf)
Class B-6, $1,492,975: not rated
Class R, N/A: not rated
(i)Notional balance.
(ii)The class A-X1, A-X2, A-X3, A-X4, A-X5, A-X6, A-X7, A-X8, A-X9,
A-X10, and A-X11 certificates are interest-only certificates.
(iii)The class A-X1 and A-X7 certificates will each accrue interest
on a notional amount equal to the aggregate class principal amount
of the class A-5, A-9, A-19, A-20, A-21 and A-22 certificates.
(iv)The class A-X2 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-5, A-19, A-20, A-21 and A-22 certificates.
(v)The class A-X3 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-21 and A-22 certificates.
(vi)The class A-X4 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-5 certificates.
(vii)The class A-X5 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the classes
A-19 and A-20 certificates.
(viii)The class A-X6 certificates will accrue interest on a
notional amount equal to the aggregate class principal amount of
the class A-9 certificates.
(ix)The class A-X8 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-19 certificates.
(x)The class A-X9 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-20 certificates.
(xi)The class A-X10 certificates will accrue interest on a notional
amount equal to the aggregate class principal amount of the class
A-21 certificates.
(xii)The class A-X11 certificates will accrue interest on a
notional amount equal to the aggregate class principal amount of
the class A-22 certificates.
N/A--Not applicable.
RACE POINT IX: S&P Affirms B (sf) Rating on Class D-R Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1A-2 and
A-2-R2 replacement notes from Race Point IX CLO Ltd., a CLO
originally issued in 2017 that is managed by Bain Capital Credit,
L.P., and withdrew its ratings on the original class A-1A-R and
A-2-R notes. At the same time, S&P affirmed its ratings on the
class B-R, C-R, and D-R notes.
On the April 6, 2021 refinancing date, the proceeds from the class
A-1A-2 and A-2-R2 replacement note issuances were used to redeem
the original class A-1A-R and A-2-R notes as outlined in the
transaction document provisions. Therefore, S&P withdrew its
ratings on the original notes in line with their full redemption,
and we assigned ratings to the replacement notes.
S&P said, "In line with our criteria, our cash flow scenarios
applied forward-looking assumptions on the expected timing and
pattern of defaults, and recoveries upon default, under various
interest rate and macroeconomic scenarios. In addition, our
analysis considered the transaction's ability to pay timely
interest or ultimate principal, or both, to each of the rated
tranches. The results of the cash flow analysis--and other
qualitative factors as applicable--demonstrated, in our view, that
all of the rated outstanding classes have adequate credit
enhancement available at the rating levels associated with these
rating actions.
"The assigned ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Affirmed
Race Point IX CLO Ltd.
Class B-R: A (sf)
Class C-R: BB+ (sf)
Class D-R: B (sf)
Ratings Withdrawn
Race Point IX CLO Ltd.
Class A-1A-R to not rated from 'AAA (sf)
Class A-2-R to not rated from 'AA (sf)'
RR 2: S&P Assigns Prelim BB- (sf) Rating on $30MM Class D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1L, A-1R, A-2L, A-2R, B-R, C-R, and D-R notes and A-1L and A-2L
loans replacement notes and A-1L and A-2L loans from RR 2 Ltd./RR 2
LM LLC, a CLO originally issued in October 2017 that is managed by
Redding Ridge Asset Management LLC. The replacement notes will be
issued via a proposed supplemental indenture.
The preliminary ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels.
The preliminary ratings are based on information as of April 2,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the April 12, 2021 refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. S&P said, "At that time, we anticipate withdrawing
the ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-1L, A-1R, A-2L, A-2R, B-R, C-R, and D-R
notes and A-1L and A-2L loans are expected to be issued at a lower
spread than the originally issued classes, respectively.
-- The class A-1b notes are being removed from the transaction.
-- The stated maturity will be extended seven years, and the
reinvestment period will be extended four years.
-- Workout loan-related concepts were added.
Preliminary Ratings Assigned
RR 2 Ltd./RR 2 LM LLC
Class A-1L loans(i) $512.00 million: AAA (sf)
Class A-1L(i), $0.00: AAA (sf)
Class A-1R, $0.00: AAA (sf)
Class A-2L loans(i)$88.00 million: AA (sf)
Class A-2L(i), $0.00: AA (sf)
Class A-2R, $0.00: AA (sf)
Class B-R (deferrable), $56.00 million: A (sf)
Class C-R (deferrable), $48.00 million: BBB- (sf)
Class D-R (deferrable), $30.00 million: BB- (sf)
Subordinated notes, $86.26 million: not rated
(i)The class A-1L loans can be converted into a maximum of $512
million in A-1L notes, and the class A-2L loans can be converted
into a maximum of $88 million in A-2L notes.
SEQUOIA INFRASTRUCTURE I: S&P Assigns BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sequoia Infrastructure
Funding I Ltd./Sequoia Infrastructure Funding I LLC's floating-rate
notes.
The note issuance is a CLO securitization backed by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the investment advisor'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
Sequoia Infrastructure Funding I Ltd./Sequoia Infrastructure
Funding I LLC
Class A, $138.0 million: AAA (sf)
Class B, $36.8 million: AA (sf)
Class C (deferrable), $13.8 million: A (sf)
Class D (deferrable), $11.5 million: BBB (sf)
Class E (deferrable), $9.2 million: BB- (sf)
Subordinated notes, $24.0 million: Not rated
UBS COMMERCIAL 2012-C1: Fitch Lowers Class F Certs to 'Csf'
-----------------------------------------------------------
Fitch Ratings downgrades two classes and affirms seven classes of
UBS Commercial Trust 2012-C1 (UBS 2012-C1) commercial mortgage
pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
UBS 2012-C1
A-3 90269GAC5 LT AAAsf Affirmed AAAsf
A-AB 90269GAD3 LT AAAsf Affirmed AAAsf
A-S 90269GAE1 LT AAAsf Affirmed AAAsf
B 90269GAF8 LT AAAsf Affirmed AAAsf
C 90269GAL5 LT AAsf Affirmed AAsf
D 90269GAN1 LT BBB-sf Affirmed BBB-sf
E 90269GAQ4 LT CCCsf Downgrade Bsf
F 90269GAS0 LT Csf Downgrade CCCsf
X-A 90269GAG6 LT AAAsf Affirmed AAAsf
Class X-A is IO.
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and Negative Outlooks
reflect increased loss expectations on the Fitch Loans of Concern
(FLOCs, 22.4% of the pool), including the three specially serviced
loans (10.5% of the pool), and overall concern over the impact of
the coronavirus pandemic on the pool. Fitch's current ratings
incorporate a base case loss of 8.2%. Losses could reach 9.3% when
factoring in additional stresses related to the coronavirus
pandemic, including a scenario that assumed an outsized loss of 75%
on the Poughkeepsie Galleria loan (7.6% of the pool). The Negative
Outlooks on classes C and D reflect these additional stresses.
Largest Contributors to Loss: The largest contributor to loss is
the specially serviced Poughkeepsie Galleria loan. The loan
transferred to special servicing in April 2020 due to imminent
default related to the impact of the ongoing pandemic on property
performance and is now 90+ days delinquent. Per the servicer,
workout discussions with the borrower are ongoing. Fitch modeled a
base case loss of 63% on this loan, which equates to a valuation
based on a cap rate of approximately 18% applied to the YE 2019
servicer reported NOI.
The loan is secured by a 691,325-sf portion of a two-level 1.2
million sf enclosed regional mall located in Poughkeepsie, NY,
which is approximately 70 miles north of New York City. The center
is anchored by non-collateral Macy's and Target. Two collateral
anchors are now dark; the Sears (ground lease) closed permanently
in early 2020 while JCPenney (26% of collateral NRA) closed in
October 2020 prior to its lease expiration date of August 2022. The
JCPenney site is now reportedly being used as a COVID-19
vaccination site. The loss of the two anchors may lead to cotenancy
issues.
No recent rent roll has been provided, but collateral occupancy is
reportedly below 60%. The servicer reported YE 2020 NOI DSCR was
0.48x as due to the ongoing pandemic, much of the mall was closed
or operating with limited capacity during parts of 2020.
Non-collateral anchor Target remained open as an essential
business. Performance was trending downward prior to the onset of
the pandemic with the YE 2019 NOI DSCR at 0.94x and a YE 2018 NOI
DSCR of 1.11x.
The next largest contributor to loss is the Hartford 21 loan (6.7%
of the pool). The loan is secured by a leasehold interest in a
36-floor tower, which consists of a 262-unit multifamily building,
106,530-sf of office space and a 57,139-sf retail component. The
property is considered one of the top upscale apartment complexes
in Hartford, CT. As of the December 2020 rent roll, the multifamily
portion of the property, which is by far the largest revenue
generator at the property, was 80.2% occupied, a decline from the
prior year occupancy of 94%. The office portion remained 46.3%
occupied by St. Joseph College through August 2022 with the retail
portion at 49.1% leased; the largest retail tenant is TD Bank
(24.9% of retail NRA, through October 2022).
Per Reis (4Q20), the City of Hartford multifamily submarket has a
vacancy rate of 5.3% and average asking rents of $1,181 per month.
Actual vacancy at the subject was 19.8%, per the December 2020 rent
roll, with average rents higher than market at approximately $2,070
per month for this upscale property. Per the servicer, the YE 2020
NOI DSCR was 0.90x compared to 1.04x at YE 2019 and 1.13x at YE
2018.
The next largest contributor to loss is the specially serviced
Westminster Square loan (1.6% of the pool). The loan transferred to
special servicing as a result of the borrower's failure to comply
with cash management and is now 90+ days delinquent. The special
servicer is considering conducting a receiver sale in the near
term.
Per the most recent rent roll, the property was 73.3% leased, which
is below the Reis 4Q20 submarket occupancy rate of 83%.
Approximately 30% of the NRA is either month to month or expiring
in the next 12 months. Fitch applied a 30% haircut to the YE 2019
cash flow in its analysis to account for the declining occupancy
and substantial near-term tenant roll.
The next largest contributor to loss is the specially serviced
Action Hotel Portfolio loans (1.4% of the pool). The three cross
collateralized loans transferred to special servicing in March 2020
due to payment default related to the ongoing pandemic. The loans
are now reported as current and discussions regarding a possible
modification are ongoing.
The three loans are secured by three limited service hotels located
in upstate New York. The servicer reported YTD June 2020 portfolio
cash flow was negative. Fitch applied a 26% haircut to the YE 2018
cash flow in its analysis to account for the impact of the
coronavirus pandemic on the portfolio.
Improved Credit Enhancement (CE), Significant Defeasance: As of the
March 2021 distribution date, the pool's aggregate principal
balance had been paid down by 24.9% to $999.5 million from $1.3
billion at issuance. Eight loans have paid off or been disposed
since issuance. Realized losses to date have been $4.9 million.
There are 23 loans (48.7%) that are fully defeased, including five
of the top 10 loans in the pool. Only one defeased loan (12%)
remains in its IO period, and all other loans are currently
amortizing. All loans mature or have their anticipated repayment
dates (ARD) by May 2022 with seven loans scheduled to mature in
2021 (17.6%) and 49 loans in 2022 (82.4%).
Alternative Loss Consideration: Fitch performed an additional
sensitivity scenario that assumed a potential outsized loss of 75%
on the Poughkeepsie Galleria loan. The Negative Outlooks on classes
C and D reflect this analysis.
Exposure to Coronavirus: Significant economic impact to certain
hotels, retail and multifamily properties, is expected from the
coronavirus pandemic and the lack of clarity at this time on the
potential length of the impact. Thirteen loans (23.6% of pool) are
secured by retail properties, five loans (7.5%) are secured by
hotel properties and three loans (2.3%) are secured by multifamily
properties. Fitch applied additional coronavirus related stresses
to four retail loans (3.4%), three hotel loans (3.2%), and one
multifamily property (2.3%; the Negative Rating Outlooks
incorporate these additional stresses.
RATING SENSITIVITIES
The Negative Outlooks on classes C and D reflect the potential for
downgrades due to concerns surrounding the ultimate impact of the
coronavirus pandemic and the performance of the FLOCs. Rating
Outlooks for the senior classes remain Stable due to the CE,
significant defeasance and the stable performance of the majority
of the remaining pool and continued expected amortization.
Factors that could, individually or collectively, lead to a
positive rating action/upgrade:
-- Upgrades to Classes C and D are considered unlikely unless
loss expectations improve on several of the FLOCs. Class D
would not be upgraded above 'Asf' if there is a likelihood for
interest shortfalls. The distressed classes (classes E through
F) are unlikely to be upgraded unless resolution of the
specially serviced loans, and in particular the Poughkeepsie
Galleria loan, are substantially better than expected.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade:
-- Sensitivity Factors that lead to downgrades include an
increase in pool level losses from underperforming or
specially serviced loans. Downgrades to the 'AAAsf' rated
classes are not considered likely due to the position in the
capital structure, but may occur should performance of the
underlying pool significantly decline and/or should interest
shortfalls occur.
-- Downgrades to classes rated in the 'AAsf' and 'BBB-sf'
categories would occur should overall pool losses increase
significantly and/or one or more large loans have an outsized
loss, which would erode CE. The 'AAsf' rated class would also
be downgraded should interest shortfalls occur. Downgrades to
the distressed classes could occur should losses be realized
or become more certain.
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 and/or further
Negative Rating Outlook revisions.
Deutsche Bank is the trustee for the transaction and also serves as
the backup advancing agent. Fitch's Issuer Default Rating for
Deutsche Bank is currently 'BBB'/'F2'/Positive. Fitch relies on the
master servicer, Wells Fargo & Company (A+/F1/Negative), which is
currently the primary advancing agent, as a direct counterparty.
Fitch provided ratings confirmation on Dec. 12, 2018.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The transaction has an ESG Relevance Score of 4 for Exposure to
Social Impacts due the regional mall that is underperforming as a
result of changing consumer preference to shopping. The exposure
has a negative impact on the credit profile and is highly relevant
to the ratings.
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.
VOYA CLO 2017-3: S&P Assigns B- (sf) Rating on Class E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2a-R,
A-2b-R, B-R, C-R, D-R, and E-R replacement notes from Voya CLO
2017-3 Ltd., a CLO originally issued in July 2017 that is managed
by Voya Alternative Asset Management LLC. S&P withdrew its ratings
on the original class A-1A, A-2, B, C, and D notes following
payment in full on the April 1, 2021 refinancing date.
On the April 1, 2021 refinancing date, the proceeds from the class
A-1-R, A-2a-R, A-2b-R, B-R, C-R, D-R, and E-R replacement note
issuances were used to redeem the original class A-1A, A-2, B, C,
and D notes, as outlined in the transaction document provisions.
Therefore, S&P withdrew its ratings on the original notes in line
with their full redemption and assigned ratings to the replacement
notes. The original class A-1B notes, which were not rated by S&P
Global Ratings, were also paid in full.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"The assigned ratings reflect our view that the credit support
available is commensurate with the associated rating levels.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
Ratings Assigned
Voya CLO 2017-3 Ltd.
Class X-R, $6.00 million: Not rated
Class A-1-R, $362.00 million: AAA (sf)
Class A-2a-R, $73.00 million: AA (sf)
Class A-2b-R, $10.00 million: AA (sf)
Class B-R, $36.00 million: A (sf)
Class C-R, $32.75 million: BBB- (sf)
Class D-R, $21.00 million: BB- (sf)
Class E-R, $9.00 million: B- (sf)
Subordinated notes, $53.30 million: Not rated
Ratings Withdrawn
Voya CLO 2017-3 Ltd.
Class A-1A to NR from 'AAA (sf)'
Class A-2 to NR from 'AA (sf)'
Class B to NR from 'A (sf)'
Class C to NR from 'BBB- (sf)'
Class D to NR from 'B+ (sf)'
NR--Not rated.
WELLS FARGO 2015-SG1: Fitch Lowers Rating on 2 Tranches to 'CCC'
----------------------------------------------------------------
Fitch Ratings has downgraded five classes and affirmed seven
classes of Wells Fargo Commercial Mortgage Trust 2015-SG1 (WFCM
2015-SG1). In addition, Fitch has revised the Rating Outlook for
one class as indicated.
DEBT RATING PRIOR
---- ------ -----
WFCM 2015-SG1
A-4 94989QAV2 LT AAAsf Affirmed AAAsf
A-S 94989QAX8 LT AAAsf Affirmed AAAsf
A-SB 94989QAW0 LT AAAsf Affirmed AAAsf
B 94989QBA7 LT AA-sf Affirmed AA-sf
C 94989QBB5 LT A-sf Affirmed A-sf
D 94989QBD1 LT BB-sf Downgrade BBB-sf
E 94989QAL4 LT B-sf Downgrade BB-sf
F 94989QAN0 LT CCCsf Downgrade B-sf
PEX 94989QBC3 LT A-sf Affirmed A-sf
X-A 94989QAY6 LT AAAsf Affirmed AAAsf
X-E 94989QAA8 LT B-sf Downgrade BB-sf
X-F 94989QAC4 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increased Loss Expectations: While the majority of the pool
continues to exhibit stable performance, loss expectations have
increased since Fitch's last rating action, primarily due to an
increase of Fitch Loans of Concern (FLOCs), some of which have been
affected by the slowdown in economic activity related to the
coronavirus pandemic. Fitch identified 18 loans as FLOCs (47.3% of
the pool), including the three largest loans in the pool, Patrick
Henry Mall (9.7%), Boca Park Marketplace (6.8%) and Fifth Third
Center (5.6%).
Fitch's current ratings incorporated a base case loss of 7.2%. The
Negative Outlooks on classes A-S through E reflect that losses
could reach 12.5% when factoring in additional pandemic-related
stresses and a potential outsized loss on the Patrick Henry Mall
loan.
The largest contributor to expected losses is the Boca Park
Marketplace loan, which transferred to special servicing in July
2020 for imminent default. The loan is secured by a 148,095-sf
shopping center located in Las Vegas, NV. Major tenants include
Ross Dress for Less (20.7% NRA), Lamps Plus (7.5% NRA), Petland
(5.6% NRA), and Tilly's (5.4% NRA). The property is part of a
larger retail development and is shadow anchored by Target, REI,
Total Wine & More, Office Max. Due to co-tenancy clauses associated
with a non-collateral Von's grocery store vacant since 2016, three
of the major tenants at the subject property (Ross, Tilly's and
Famous Footwear) are paying percentage rent that is on-average 70%
below the tenant's base rent. Occupancy at September 2020 remains
in line with issuance at 96%; however, the subject's NOI has been
negatively impacted by the co-tenancy clauses and reduced rent. The
special servicer has indicated that discussions are ongoing with
the borrower (Triple Five Investment) and foreclosure is possible.
Fitch's loss expectations are based on a haircut to the November
2020 appraisal.
The largest FLOC and largest loan in the pool is the Patrick Henry
Mall. It is secured by a 716,558-sf (432,401 sf collateral)
regional mall built in 1988 and renovated in 2005, located in
Newport News, VA in the Hampton Roads metro. The largest tenant is
JCPenney (19.7% NRA expiration October 2025); the tenant recently
renewed for five years, and there are four renewal options
remaining, as the tenant exercised first option in 2015. Other
major tenants include Dick's Sporting Goods (11.6% NRA; expiration
January 2022), and Forever 21 (4.9% NRA; expiration October 2022;
not on recent closing list). Macy's and Dillard's are
non-collateral anchors with lease expirations in 2063. The mall is
93.6% occupied as of June 2020. In-line tenant sales (under 10,000
sf) were $406 psf compared to $426 psf as of YE 2019 and $405 psf
at issuance. The loan is sponsored by Pennsylvania Real Estate
Investment Trust (PREIT), which filed for bankruptcy in November
2020, but emerged in December 2020. Fitch's base case analysis
included an additional stress to the reported NOI to reflect
performance concerns related to the impact of the pandemic. Fitch
also assumed an outsized loss of 50% in a sensitivity test to
reflect concerns with refinancing in 2025.
The third largest loan in the pool, Fifth Third Center, has also
been designated a FLOC. It is secured by a 160,565-sf office
building located in Naples, FL. Occupancy declined to 55% as of
September 2020 from 87% at issuance. Fifth Third Bank, the largest
tenant at issuance, accounted for 64.9% of NRA but downsized and
now accounts for only 11.5% of NRA. The borrower reports that
several leases have been signed and negotiations are ongoing with
prospective tenants to backfill the space vacated by Fifth Third
Bank. The servicer reported NOI DSCR as of September 2020 was
reported to be 0.73x.
Limited Change to Credit Enhancement: As of the March 2021
distribution date, the pool's aggregate principal balance paid down
by 9.7% to $646.8 million from $716.3 million at issuance. Interest
shortfalls are currently impacting classes E through G. Three loans
(1.9% of pool) are fully defeased. Eleven loans (11.8%) are
full-term and the remaining 57 loans (88.2%) are amortizing. Loan
maturities include one loan (1.1%) in 2022; one loan (0.7%) in
2024; and 66 loans (98.2%) in 2025.
Alternative Loss Considerations: In addition to a base case loss,
Fitch applied a 50% loss severity on the Patrick Henry Mall loan to
reflect the potential for outsized losses given the asset type and
concerns with the sponsor and refinanceability at the loan's 2025
maturity.
Coronavirus Exposure: Loans backed by retail properties represent
34.1% of the pool, including five (22.5%) in the top 15. Hotel
loans represent 22.4% of the pool, including three loans (9.9%) in
the top 10 that have all been designated as FLOCs, due to revenue
declines from the coronavirus pandemic. Loans secured by
multifamily properties represent 9.2% of the pool. The retail loans
have a weighted average (WA) NOI DSCR of 1.75x and can withstand an
average 42.9% decline to NOI before DSCR falls below 1.00x. The
hotel loans have a WA NOI DSCR of 2.21x and can withstand a 54.8%
decline to NOI before the DSCR falls below 1.0x. The multifamily
loans have a WA NOI DSCR of 1.90x and can withstand a 47.4% decline
to NOI before DSCR falls below 1.00x.
Fitch applied an additional stress on loans that does not meet
certain DSCR tolerance thresholds to address the expected
significant performance declines, due to the pandemic. In addition
to the sensitivity analysis on the Patrick Henry Mall, these
additional stresses contributed to the Negative Outlooks.
RATING SENSITIVITIES
Classes A-4 and A-SB have Stable Outlooks due to sufficient credit
enhancement relative to expected losses and expected continued
amortization. The Negative Outlooks on classes A-S through E,
exchangeable class PEZ and interest-only classes X-A and X-E
reflect the possibility of a downgrade due the high retail and
hotel exposure within the pool, uncertainty of losses from the
specially serviced Boca Park Marketplace and concerns with the
Patrick Henry Mall.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades are currently not expected in the near term given the
uncertainty surrounding the duration of the pandemic and the
expectation that the Patrick Henry Mall and other loans
susceptible to the pandemic will have difficulties refinancing
at their respective maturities. Sensitivity factors that could
lead to upgrades would include stable to improved asset
performance, particularly on the FLOCs, and additional paydown
and/or defeasance.
-- Upgrades to classes B through E may occur with the better than
expected recoveries from the specially serviced loans/assets
and other loans susceptible to the pandemic that may result in
scenarios better than currently expected. Classes would not be
upgraded above 'Asf' if there were likelihood of interest
shortfalls.
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 to classes A-4 and
A-SB are not likely due to the position in the capital
structure, but may occur should interest shortfalls affect
these classes.
-- A further downgrade to classes B, C and D may occur with an
outsized loss on Patrick Henry Mall loan and a further
downgrade to class E may occur should overall loss
expectations increase due to a continued decline in the
performance of the FLOCs, additional loans default and/or
transfer to special servicing and/or loans susceptible to the
pandemic not stabilize. A further downgrade to the distressed
class F may occur as losses are realized.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021.
Should this scenario play out, classes with Negative Rating
Outlooks may be downgraded one or more categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
[*] Moody's Lowers Ratings on 3 Bonds of US RMBS Issued 2004-2007
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of three bonds
from two US residential mortgage backed transactions (RMBS), WaMu
Mortgage Pass-Through Certificates, WMALT Series 2007-3 Trust
backed by Alt-A loans, and WaMu Mortgage Pass-Through Certificates
Series 2004-RP1 Tr backed by FHA and VA loans. The ratings of the
affected tranches are sensitive to loan performance deterioration
due to the pandemic.
A List of Affected Credit Ratings is available at
https://bit.ly/3rDScF9
Issuer: WaMu Mortgage Pass-Through Certificates, WMALT Series
2007-3 Trust
Cl. X*, Downgraded to Ca (sf); previously on Feb 7, 2018 Confirmed
at Caa3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates Series 2004-RP1 Tr
Cl. I-S*, Downgraded to Caa3 (sf); previously on Nov 29, 2017
Downgraded to Caa2 (sf)
Cl. I-B-1, Downgraded to Caa2 (sf); previously on Jul 25, 2016
Downgraded to Caa1 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
The rating downgrades on the interest-only tranches reflects the
updated performance and increases in losses on the underlying
bonds/collateral. The rating downgrade on Cl. I-B-1 from WaMu
Mortgage Pass-Through Certificates Series 2004-RP1 Tr reflects the
erosion of credit enhancement available to the bond. 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 have observed an increase in
delinquencies, payment forbearance, and payment deferrals since the
start of pandemic, which could result in higher realized losses.
Moody's analysis of WMALT Series 2007-3 Trust 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 Moody's analysis, the proportion of borrowers that are currently
enrolled in payment relief plans varied greatly, ranging between
approximately 2% and 19% among RMBS transactions issued before
2009. In Moody's analysis, Moody's assume 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. Moody's 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.
In response to the COVID-19 spurred economic shock, the Federal
Housing Administration (FHA) and the Department of Veterans Affairs
(VA) have enacted temporary policies that allow servicers to offer
payment forbearance to borrowers financially impacted by COVID-19.
In addition, the FHA and VA have loss mitigation options to assist
borrowers at the end of the forbearance period to help repay the
missed payments. In Moody's analysis of WaMu 2004-RP1 transaction,
Moody's increased its model-derived expected losses by
approximately 10% to reflect the performance deterioration
resulting from a slowdown in US economic activity in 2020 due to
the COVID-19 outbreak.
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of residential mortgage loans from a gradual and
unbalanced recovery in US economic activity.
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 rating WaMu Mortgage Pass-Through
Certificates Series 2004-RP1 Tr Cl. I-B-1 was FHA-VA US RMBS
Surveillance Methodology published in July 2020.
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. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
[*] S&P Takes Various Action on 556 Classes From 22 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 556 classes from 22 U.S.
RMBS credit risk transfer transactions issued in 2016 through 2020
by both Fannie Mae and Freddie Mac. The transactions are backed by
prime conforming collateral. The review yielded 474 upgrades, 70
affirmations, and 12 discontinuations.
S&P said, "For each mortgage reference pool, we performed credit
analysis using updated loan-level information from which we
determined foreclosure frequency, loss severity, and loss coverage
amounts commensurate for each rating level.
"We used a mortgage operational assessment (MOA) factor of 0.80x
for both Fannie Mae and Freddie Mac, except for one transaction
backed by seasoned originations, Connecticut Avenue Securities
Trust 2019-HRP1, for which the MOA factor was 1.0x."
The upgrades primarily reflect deleveraging as each respective
transaction seasons and lowers its default expectations for the
remaining collateral as its combined loan-to-value (CLTV) ratio
decrease. The transactions benefit from low accumulated losses to
date, high prepayment speeds, sequential payment to the rated
classes, and a growing percentage of credit support to the rated
classes. Although the transactions' delinquency percentages remain
elevated compared with pre-COVID-19 levels due to extended
forbearances and declining pool balances from high prepayments,
they have generally been leveling off or declining in the reviewed
transactions. Current delinquency levels have caused delinquency
triggers to fail, locking out some classes from principal payments.
Some of the upgraded classes would likely pay off soon after
delinquency triggers pass, given current prepayment speeds. In
addition, several transactions also allow for the distribution of
principal to the subordinate notes, despite the failure of the
delinquency trigger, if a certain percentage of available
subordination is met.
The upgrades also reflect an average rating movement of 3.8
notches. Of the 474 upgraded classes, 423 were related modifiable
and exchangeable certificates (MACRs). Excluding the MACRs, the
upgrades reflected an average rating movement of 3.4 notches.
S&P discontinued its ratings on 12 classes because they were paid
in full.
The affirmations reflect S&P's view that the projected collateral
performance relative to its projected credit support on these
classes remain relatively consistent with our prior projections.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of its criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. Some of these considerations include:
-- Factors related to the COVID-19 pandemic,
-- Collateral performance or delinquency trends,
-- Priority of principal payments,
-- Priority of loss allocation,
-- Expected short duration, and
-- Available subordination and credit enhancement floors.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
A list of Affected ratings can be viewed at:
https://bit.ly/3mlNr1Z
*********
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