/raid1/www/Hosts/bankrupt/TCR_Public/210502.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, May 2, 2021, Vol. 25, No. 121
Headlines
245 PARK AVENUE 2017-245P: Fitch Affirms BB Rating on 2 Tranches
AB BSL 2: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
ACCESS GROUP 2002-A: S&P Assigns 'B+ (sf)' Rating on Class B Notes
AIG CLO 2021-1: Moody's Assigns B3 Rating to $5.64M Class F Notes
ALESCO PREFERRED XIII: Fitch Affirms C Rating on 4 Tranches
AMERICAN CREDIT 2021-2: S&P Assigns B+ (sf) Rating on Class F Notes
AMUR EQUIPMENT 2021-1: Moody's Assigns B3 Rating to Class F Notes
ANCHORAGE CREDIT 7: Moody's Gives Ba2 Rating on $15M Class E Notes
ARCAP 2003-1: Moody's Withdraws C Rating on Cl. F Certificates
ARES XLII CLO: Moody's Hikes Class D Notes Rating From Ba1
ASSET-BACK 2013-1: DBRS Hikes Class F Notes Rating to BB(sf)
ATLAS SENIOR XIII: S&P Affirms B (sf) Rating on Class E Notes
BALLYROCK CLO 15: S&P Assigns BB- (sf) Rating on Class D Notes
BANK 2018-BNK12: Fitch Affirms B- Rating on 2 Tranches
BANK 2021-BNK32: DBRS Finalizes BB(high) Rating on 2 Certs Classes
BARINGS CLO 2019-I: S&P Assigns BB- (sf) Rating on Class E-R Notes
BARINGS CLO 2019-II: S&P Assigns Prelim 'BB-' Rating on D-R Notes
BASSWOOD PARK: S&P Assigns BB-(sf) Rating on $16.665MM E Notes
BASSWOOD PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
BATTALION CLO XI: Moody's Assigns Ba3 Rating to $26M Cl. E-R Notes
BATTALION XIX: S&P Assigns BB- (sf) Rating on $16MM Class E Notes
BAYVIEW COMMERCIAL 2006-SP1: Moody's Raises Cl. B-1 Notes to Ba3
BENEFIT STREET III: S&P Affirms B- (sf) Rating on Class D-R Notes
BENEFIT STREET XXIII: S&P Assigns BB- (sf) Rating on Class E Notes
BENEFIT STREET XXIII: S&P Assigns Prelim BB- (sf) Rating E Notes
BSPRT 2021-FL6: DBRS Finalizes B(low) Rating on Class H Notes
BX COMMERCIAL 2019-XL: DBRS Confirms B(low) Rating on Class J Certs
BX COMMERCIAL 2021-MC: S&P Assigns Prelim B- Rating on E Certs
CANADIAN COMMERCIAL 2015-3: DBRS Confirms BB(low) Rating on G Certs
CARVANA AUTO 2021-N1: DBRS Confirms BB Rating on Class E Notes
CARVANA AUTO 2021-N1: DBRS Finalizes B(sf) Rating on Class F Notes
CARVANA AUTO 2021-P1: DBRS Finalizes BB(high) Rating on N Notes
CEDAR FUNDING II: S&P Assigns B- (sf) Rating on Class F Notes
CENTERBRIDGE CREDIT 1: Moody's Gives (P)Ba3 Rating to Cl. E Notes
CIFC FUNDING 2019-II: S&P Assigns Prelim BB- Rating on E-R Notes
CITIGROUP 2016-GC36: Fitch Lowers Class E Certs to 'CCC'
CITIGROUP 2021-J1: S&P Assigns Prelim B (sf) Rating on B-5 Certs
CITIGROUP COMMERCIAL 2013-GC15: DBRS Cuts Class F Certs Rating to C
CITIGROUP MORTGAGE 2021-J1: Fitch Rates B-5 Tranche 'B+(EXP)'
COLT 2021-3R MORTGAGE: Fitch Gives 'B(EXP)' Rating to B2 Certs
COMM 2013-CCRE11: DBRS Confirms B(sf) Rating on Class F Certs
COMM 2013-CCRE6: DBRS Confirms BB(low) Rating on Class F Certs
COMM 2013-CCRE8: DBRS Confirms B(high) Rating on Class F Certs
COMM 2013-CCRE9: Fitch Lowers Rating on Class F Debt to 'Csf'
COMM 2014-LC17: DBRS Cuts Class F Certs Rating to C(sf)
COMM 2014-UBS3: DBRS Confirms BB(sf) Rating on Class F Certs
COMM 2015-CCRE24: Fitch Lowers Class F Debt Rating to 'CCC'
COMM 2015-CCRE27: DBRS Confirms B(sf) Rating on Class X-E Certs
COMM 2015-LC21: DBRS Cuts Class F Certs Rating to CCC(sf)
COMM 2019-WCM: DBRS Confirms Class B(low) Rating on Class G Certs
COMM 2021-LBA: DBRS Finalizes B(low) Rating on Class G Certs
CSAIL 2016-C6: Fitch Lowers 2 Tranches to 'CCC'
CSMC TRUST 2018-RPL4: Fitch Assigns B Rating on Class M-7 Tranche
DBUBS 2011-LC2: DBRS Confirms B(sf) Rating on 2 Classes of Certs
DEERPATH CAPITAL 2021-1: S&P Assigns Prelim 'BB-' on E-R Notes
DT AUTO 2021-2: S&P Assigns BB- (sf) Rating on Class E Notes
EAGLE RE 2021-1: Moody's Assigns B3 Rating to Cl. B-2 Notes
FREDDIE MAC 2021-DNA3: S&P Assigns BB-(sf) on Class B-1 Notes
GLS AUTO 2020-1: S&P Affirms 'BB- (sf)' Rating on Class D Notes
GOLDMAN SACHS 2011-GC5: Fitch Lowers Class F Certs to 'Csf'
GS 2021-NQM1: S&P Assigns Prelim B(sf) Rating on Class B-2 Certs
GS MORTGAGE 2012-GCJ7: DBRS Cuts Class F Certs Rating to C
GS MORTGAGE 2013-GC10: DBRS Confirms B(sf) Rating on Class F Certs
GS MORTGAGE 2015-GC28: DBRS Confirms B Rating on Class X-D Certs
GS MORTGAGE 2021-RPL1: DBRS Assigns B(sf) Rating on Class B-2 Notes
HARRIMAN PARK: S&P Assigns BB- (sf) Rating on Class E-R Notes
HARRIMAN PARK: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
HERTZ VEHICLE 2013-A: DBRS Hikes Class C Securities Rating to BB
HIN TIMESHARE 2020-A: Fitch Affirms B Rating on Class E Tranche
INSTITUTIONAL MORTGAGE 2012-2: DBRS Confirms B(low) on G Certs
INSTITUTIONAL MORTGAGE 2013-3: DBRS Confirms B Rating on F Certs
IVY HILL XVIII: S&P Assigns BB- (sf) Rating on $30MM Class E Notes
JP MORGAN 2010-C2: S&P Lowers Class H Certs Rating to 'D (sf)'
JP MORGAN 2012-C8: DBRS Confirms BB(sf) Rating on Class F Certs
JP MORGAN 2021-6: Fitch Assigns B(EXP) Rating on Class B-5 Debt
JP MORGAN 2021-6: Moody's Assigns (P)B3 Rating to Cl. B-5 Notes
JP MORGAN 2021-MHC: Moody's Assigns B3 Rating to Class F Certs
JPMBB COMMERCIAL 2015-C31: DBRS Cuts Class F Certs Rating to CCC
JPMBB COMMERCIAL 2015-C32: DBRS Cuts Rating of 4 Certs Classes to C
JPMBB COMMERCIAL 2015-C33: DBRS Confirms BB Rating on Class E Certs
JPMCC 2012-CIBX: DBRS Cuts Rating on 2 Certs Classes to C(sf)
JPMCC TRUST 2011-C5: Fitch Lowers Class G Tranche to 'Csf'
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
KAYNE CLO 11: S&P Assigns BB- (sf) Rating on $14MM Class E Notes
LB-UBS COMMERCIAL 2007-C6: S&P Cuts Class D Certs Rating to 'D(sf)'
LIFE 2021-BMR: DBRS Gives Provisional B(low) Rating on G Certs
LSTAR COMMERCIAL 2015-3: DBRS Confirms BB Rating on Class E Certs
MADISON PARK XXXIV: S&P Assigns BB- (sf) Rating on Class E-R Notes
MAGNETITE XXII: S&P Assigns Prelim BB-(sf) Rating on E-R Notes
MELLO MORTGAGE 2021-MTG1: DBRS Finalizes B Rating on Class B5 Certs
MELLO WAREHOUSE 2021-2: Moody's Assigns B2 Rating to 2 Tranches
MF1 2021-FL5: DBRS Finalizes B(low) Rating on Class G Notes
MIDOCEAN CREDIT II: S&P Affirms CCC+ (sf) Rating on Class F Notes
MORGAN STANLEY 2013-C7: DBRS Cuts Rating on 3 Classes to C(sf)
MORGAN STANLEY 2015-C20: DBRS Cuts Class F Certs Rating to C(sf)
MORGAN STANLEY 2015-C23: DBRS Confirms B Rating on Class X-FG Certs
MORGAN STANLEY 2021-L5: Fitch Rates Class G Certs 'B-sf'
MSC MORTGAGE 2012-C4: DBRS Cuts Rating on 3 Classes to C(sf)
NEUBERGER BERMAN 41: S&P Assigns BB- (sf) Rating on Class E Notes
NEWREZ WAREHOUSE 2021-1: Moody's Gives (P)B3 Rating on Cl. E Notes
OBX 2021-J1: Moody's Assigns (P)B2 Rating to Cl. B-5 Notes
OBX TRUST 2021-J1: Fitch Affirms B(EXP) Rating on Class B-5 Notes
OCEANVIEW MORTGAGE 2021-1: Moody's Gives B3 Rating to B-5 Notes
OCTAGON 53: S&P Assigns BB- (sf) Rating on $18.75MM Class E Notes
PALMER SQUARE 2019-1: Moody's Rates $13.75M Class E Notes 'Ba2'
PALMER SQUARE 2021-2: Moody's Gives B1 Rating on $7M Class E Notes
PROGRESS RESIDENTIAL 2021-SFR2: DBRS Gives B(low) Rating on G Certs
RIN IV: Moody's Assigns Ba3 Rating to $11M Class E Notes
SEQUOIA MORTGAGE 2021-3: Fitch Gives Final BB- Rating on B-4 Certs
SIXTH STREET XVIII: S&P Assigns BB- (sf) Rating on Class E Notes
SIXTH STREET XVIII: S&P Assigns Prelim BB- (sf) Rating on E Notes
SLC STUDENT 2004-1: Fitch Assigns B- Ratings on 2 Tranches
SLC STUDENT 2004-1: S&P Cuts Clas A-7/B Trusts Ratings to 'B (sf)'
THOMPSON PARK: S&P Assigns BB- (sf) Rating on Class E Notes
TRINITAS CLO XV: S&P Assigns B- (sf) Rating on $5MM Class F Notes
UBS-BARCLAYS 2012-C3: DBRS Confirms B(high) Rating on Class F Certs
UBS-BARCLAYS 2012-C4: DBRS Cuts Class F Certs Rating to CCC(sf)
VENTURE 35 CLO: Moody's Hikes Rating on $30MM Class E Notes to Ba3
VENTURE 42: S&P Assigns BB- (sf) Rating on $18.75MM Class E Notes
VISIO 2021-1R: S&P Assigns Prelim B (sf) Rating on Class B-2 Notes
WELLS FARGO 2015-NXS1: DBRS Confirms B(sf) Rating on Class F Certs
WELLS FARGO 2015-NXS2: DBRS Cuts Class F Certs Rating to CCC(sf)
WELLS FARGO 2021-FCMT: Fitch Affirms B- Rating on Class F Certs
WESTLAKE AUTOMOBILE 2021-1: DBRS Finalizes B(sf) Rating on F Notes
WFRBS COMMERCIAL 2012-C10: DBRS Cuts Class F Certs Rating to B(low)
WFRBS COMMERCIAL 2013-C17: DBRS Confirms BB Rating on Class E Certs
WFRBS COMMERCIAL 2013-C18: DBRS Cuts Rating on 2 Classes to CCC(sf)
WIND RIVER 2017-1: Moody's Gives Ba3 Rating on $24M Cl. E-R Notes
[*] S&P Takes Various Actions on 104 Classes From 14 RMBS Deals
[*] S&P Took Actions on 12 Classes from 2 US RMBS Non-QM Deal
[*] S&P Took Various Actions on 103 Classes From 20 US RMBS Deals
*********
245 PARK AVENUE 2017-245P: Fitch Affirms BB Rating on 2 Tranches
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Fitch Ratings has affirmed seven classes of 245 Park Avenue Trust
2017-245P (245 Park Avenue Trust 2017-245P) Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates.
DEBT RATING PRIOR
---- ------ -----
245 Park Avenue 2017-245P
A 90187LAA7 LT AAAsf Affirmed AAAsf
B 90187LAG4 LT AA-sf Affirmed AA-sf
C 90187LAJ8 LT A-sf Affirmed A-sf
D 90187LAL3 LT BBB-sf Affirmed BBB-sf
E 90187LAN9 LT BBsf Affirmed BBsf
HRR 90187LAQ2 LT BBsf Affirmed BBsf
X-A 90187LAC3 LT AAAsf Affirmed AAAsf
TRANSACTION SUMMARY
HRR represents the horizontal credit risk retention interest, which
comprised at least 5% of the fair market value of the non-residual
classes in the aggregate (at issuance).
Classes X-A and X-B are interest only.
KEY RATING DRIVERS
Stable Cash Flow: The affirmations reflect the stable performance
of the collateral, which consists of the fee simple interest in a
1.7 million square floor office tower located at 245 Park Avenue in
Midtown Manhattan. The property continues to maintain a high
occupancy at 93.2% as of December 2020. Per the servicer, the YE
2020 net cash flow (NCF) debt service coverage ratio (DSCR) was
2.57x compared to 2.50x for YE 2019 for this interest only loan.
High-Quality Office Collateral in Prime Location: The loan is
secured by a 44-story class A office building located on an entire
block bound by Park Avenue, Lexington Avenue and 47th and 48th
Streets in the Grand Central office submarket of Midtown
Manhattan.
Historical Occupancy and High-Quality Tenancy: The property was
93.2% leased as of the December 2020 rent roll (compared to 91.6%
at December 2019 and 91.2% at issuance) and has recorded average
occupancy of over 90% since 2007. The property has served as the
U.S. headquarters for Societe Generale (A-/F1/Stable), Major League
Baseball, Angelo Gordon, and Rabobank (A+/F1/Negative).
Creditworthy tenants account for more than half of the property's
base rent.
The property is performing slightly below market levels. Per Reis
(4Q 2020), the Grand Central submarket had a class A office vacancy
rate of 7.9% and average asking rents of $89.45 psf. The average in
place rent at the subject was $79.72 psf, as of the December 2020
rent roll.
Rollover Risk and Departure of MLB: In total, 19.9% of property NRA
expires in 2022 with an additional 18.7% of NRA expiring in 2026,
one year prior to loan maturity. Further, Major League Baseball
(MLB) is the second largest tenant at the property, leasing 13.6%
of the NRA. MLB's lease expires in October 2022, but the league
announced its intention to vacate early and relocate to another
property. MLB currently subleases approximately 147,000 sf to four
tenants. Per recent news reporting, MLB began occupying its new
headquarters in January 2020; however, it has not vacated its space
at the subject property as it still maintains servers and
logistical equipment there. Any final move out has been delayed by
the ongoing coronavirus pandemic.
A leasing reserve currently has a balance of $8.7 million. A cash
flow sweep will be triggered should MLB vacate the majority of its
space, or not renew its lease at least one-year prior to
expiration.
Subleased Space: J.P. Morgan Chase Bank (AA-/F1+/Negative)
currently leases about 788,000 sf at the property, approximately
560,000 sf of which is subleased to Societe Generale through
October 2022. In 2012, Societe Generale executed a direct lease
with the prior owner with a start date of November 2022 and an
initial lease term of 10 years, with two five-year extension
options. Societe Generale further subleases two of its floors. J.P.
Morgan also subleases an estimated 210,000 sf of space to various
other tenants.
Per the servicer, Houlihan Lokey, which was subleasing an estimated
80,000 sf from J.P. Morgan, also signed a direct lease with the
borrower which will commence in November 2022. The new lease
includes not just the subleased space but additional 34,000 sf of
expansion space and about 71,000 sf of temporary space currently
leased by MLB. The lease term for the temporary space is
approximately a year. Additionally, MLB currently subleases
approximately 147,000 sf (approximately 66.6% of its space) to four
tenants; Houlihan Lokey, National Austalia Bank and the Rockefeller
Foundation at sublease rates, which are below direct lease rates
for MLB. Fitch marked down the rents for the MLB space to the lower
of the sublease rents in its cash flow analysis.
Coronavirus Impact: The transaction is secured by a single property
and is more susceptible to single-event risks related to the
market, sponsor, or the largest tenants occupying the property. The
social and market disruption caused by the effects of the
coronavirus pandemic and related containment measures were not a
factor in this review. New small tenant, Dos Caminos restaurant
(0.1% of NRA), tenant build out is delayed by the pandemic. Only
small tenants Regus (2.2% of NRA, which is vacating at lease
expiration) and Scott Young (0.2% of NRA) requested COVID-19
relief.
Fitch Leverage: The $500 million mortgage loan has a Fitch DSCR and
loan-to-value (LTV) of 1.08x and 81.1%, respectively, and debt of
$696 psf based on the current NRA.
The total debt package includes mezzanine financing in the amount
of $568 million that is not included in the trust.
Sponsorship: The loan funded the acquisition of the subject
property for $2.21 billion by HNA Group (HNA). HNA, based in China,
is a global company with interests across an array of sectors. In
2018, SL Green acquired a non-controlling indirect interest in the
borrower from HNA. SL Green, as the management company, has taken
control of the properties day to management and leasing activities,
but HNA still has the approval rights on the daily operation.
RATING SENSITIVITIES
The Rating Outlook for all classes remains Stable. No rating
actions are anticipated unless there are material changes in
property occupancy or cash flow. The property performance is
consistent with issuance.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade to class B, C, D, E and HRR would occur with
significant improvement in performance of the underlying
asset. Defeasance and paydown would not play a role in
contemplating an upgrade, given the single-asset and non
amortizing nature of the securitized loan.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A decline in performance of the underlying asset or loan
default. A downgrade to the senior 'AAAsf' or 'AA-sf' rated
classes is not considered likely due to the position in the
capital structure, but may occur should interest shortfalls
occur. A downgrade to classes C, D, E and HRR is possible
should the loan experience material and sustained performance
decline, including a substantial decline in occupancy and/or
cash flow.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
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.
AB BSL 2: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to AB BSL CLO 2
Ltd./AB BSL CLO 2 LLC's floating- and fixed-rate notes and loans.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of April 27,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
AB BSL CLO 2 Ltd./AB BSL CLO 2 LLC
Class A loan, $100 million: AAA (sf)
Class A, $148 million: AAA (sf)
Class B-1, $28 million: AA (sf)
Class B-2, $28 million: AA (sf)
Class C (deferrable), $24 million: A (sf)
Class D (deferrable), $22 million: BBB- (sf)
Class E (deferrable), $17 million: BB- (sf)
Subordinated notes, $36 million: Not rated
ACCESS GROUP 2002-A: S&P Assigns 'B+ (sf)' Rating on Class B Notes
------------------------------------------------------------------
S&P Global Ratings raised its rating on Access Group Inc.'s series
2002-A class B notes to 'B+ (sf)' from 'B (sf)'. At the same time,
S&P removed it from CreditWatch, where it had placed it with
positive implications on Jan. 28, 2021. The transaction is backed
by a pool of private student loans.
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."
RATING ACTION RATIONALE
The parity for the class B notes has been increasing as the issuer
is optionally redeeming the notes, which has led to an increase in
the credit enhancement levels. Additionally, the transaction has a
requirement to maintain a 102.00% subordinate asset percentage and
$1.5 million in net assets, which is contributing to an increase in
the overall transaction parity. S&P said, "We expect the
transaction will no longer be able to make releases in order to
maintain the $1.50 million net asset requirement, which is
functioning as a credit enhancement floor requirement. Since our
2018 review, the class B notes post-distribution parity has grown
to 102.97% from 100.12%. We upgraded the class B notes to 'B+ (sf)'
to reflect the increase in credit enhancement that we expect to
continue due to the credit enhancement floor and the current
payment trend. The issuer may continue to make payments to the
subordinate notes as long as the senior parity is maintained at
110.00%, which could result in further increases in credit
enhancement levels for the class B notes."
S&P said, "At the same time, we continue to monitor parity levels
for the class A-2 notes, which is on a declining trend due to the
issuer optionally redeeming the class B notes. Continuing payments
to the class B notes could lead to a deterioration in credit
enhancement levels and have negative implications for the current
rating on the class A-2 notes."
LOAN STATUS
The majority of the loans are in current repayment and the total
percentage of non-paying loans is slightly lower compared to our
2018 review.
Table 1
Loan Status(i)
2018 review(%)(ii) Current review(%)(iii)
In-school/grace 0.06 0.18
Forbearance 1.76 0.71
30+ delinquencies(iv) 3.16 2.14
Current repayment 95.02 96.98
(i)As a percentage of current collateral balance.
(ii)As of the December 2017 distribution date.
(iii)As of the March 2021 distribution date.
(iv)Nonpaying loans include loans in school, grace, and forbearance
status, as well as 30+ day delinquencies and interim charge offs.
CURRENT CAPITAL STRUCTURE AND KEY STRUCTURAL FEATURES
Table 2
Current
Amount(i) Note(i) Maturity
Class (mil. $) factor (%) date Coupon
A-2 13.2 12.61 September 2037 Auction rate
B 6.6 20.95 September 2037 Auction rate
(i)As of the March 2021 distribution date.
The series 2002-A trust directs available funds (subsequent to
senior fees and note interest payments) to the senior notes until
the senior parity and total parity levels reach 110.00% and
101.50%, respectively. Then the issuer may make payments to the
subordinate notes as long as the above-noted thresholds are
maintained. The issuer can release funds as long as the subordinate
asset percentage remains at least 102.00%, and there are net assets
of at least $1.50 million.
Currently, the payments are being made to the class B notes but
could change on each payment date due to the optionality that the
structure allows. The post-distribution senior parity was 138.63%
as of our 2018 review. The senior parity increased and then began
to decrease as the issuer made the decision to pay the class B
notes. The post-distribution senior parity is 153.69% as of March
2021 distribution date. Senior parity could decline in the short
term if the issuer continues to exercise its option to pay the
class B noteholders.
DEFAULT EXPECTATIONS
S&P said, "As part of our analytical review and according to our
student loan criteria, we compare the transaction's remaining
credit enhancement with our projection of remaining losses by
reviewing its collateral performance and the current collateral
characteristics, including defaults and levels of recoveries,
forbearance, deferments, delinquencies, and seasoning.
"Based on our review of the data available, the transaction
collateral pool has experienced defaults within our expectations."
CASH FLOW MODELING ASSUMPTIONS
S&P ran midstream break-even cash flows for the class B notes under
a 'BB' stress scenarios. The cash flow runs simulate the maximum
amount of remaining cumulative net losses a transaction can absorb
(as a percentage of the pool balance as of the cash flow cut-off
date) before failing to pay full and timely interest and ultimate
principal.
The following are some of the other major cash flow modeling
assumptions we applied:
-- Five-year straight-line default curves.
-- Recovery rates of 25.00% over six years.
-- Voluntary prepayment speeds starting at approximately 1.00%
constant prepayment rates (CPR)--an annualized prepayment speed
stated as a percentage of the current loan balance--and ramping up
1.00% per year to a maximum CPR range of 6.00% based on various
rating scenarios.
-- Forbearance rates of 7.50% for a period of 12 months.
-- Runs that considered the issuer making payments sequentially to
the classes, as well as runs that considered the issuer allocating
optional payments to the subordinate noteholders.
-- Stressed one-month LIBOR interest rate paths (up/down and
down/up) based on the Cox-Ingersoll-Ross framework.
CASH FLOW MODELING RESULTS
S&P said, "We primarily relied upon the down interest rate scenario
because we believe this scenario is most relevant to the
transaction based on the current macroeconomic environment. The
resulting multiple of break-even net loss to our base case net loss
expectation is in the range of 0.6x-1.6x. Our recommendation of 'B+
(sf)' rating considers the current and expected growth in credit
enhancement due to the net assets requirement and the expectation
of defaults at the lower end of the range given the seasoning of
the pool.
"We will continue to monitor the performance of the underlying
student loans backing the transactions relative to our ratings and
the available credit enhancement to the classes."
AIG CLO 2021-1: Moody's Assigns B3 Rating to $5.64M Class F Notes
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Moody's Investors Service has assigned ratings to six classes of
notes 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"), Definitive Rating Assigned Aaa (sf)
US$53,000,000 Class B Senior Secured Floating Rate Notes due 2034
(the "Class B Notes"), Definitive Rating Assigned Aa2 (sf)
US$29,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class C Notes"), Definitive Rating Assigned A2
(sf)
US$35,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class D Notes"), Definitive Rating Assigned
Baa3 (sf)
US$21,750,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034 (the "Class E Notes"), Definitive Rating Assigned Ba3
(sf)
US$5,640,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2034 (the "Class F Notes"), Definitive Rating Assigned 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
herein, 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 may consist of
senior secured bonds and unsecured bonds. The portfolio is
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 issued 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): 2918
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 regard 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.
ALESCO PREFERRED XIII: Fitch Affirms C Rating on 4 Tranches
-----------------------------------------------------------
Fitch Ratings has affirmed 44 and upgraded seven tranches from
eight collateralized debt obligations (CDOs) backed primarily by
trust preferred (TruPS) securities issued by banks, insurance
companies, and to smaller extent, structured finance (SF) issuers.
Rating actions and performance metrics for each CDO are reported in
the accompanying rating action report.
DEBT RATING PRIOR
---- ------ -----
ALESCO Preferred Funding XIII, Ltd./Inc.
A-1 014495AB1 LT AAsf Affirmed AAsf
A-2 014495AC9 LT BBBsf Affirmed BBBsf
B 014495AD7 LT CCCsf Affirmed CCCsf
C-1 014495AE5 LT Csf Affirmed Csf
C-2 014495AF2 LT Csf Affirmed Csf
D-1 014495AG0 LT Csf Affirmed Csf
D-2 014495AH8 LT Csf Affirmed Csf
Trapeza CDO IX, Ltd./Inc.
A-1 89413AAA9 LT AAsf Upgrade Asf
A-2 89413AAB7 LT Asf Upgrade BBBsf
A-3 89413AAC5 LT BBBsf Upgrade BBsf
B-1 89413AAD3 LT CCCsf Affirmed CCCsf
B-2 89413AAE1 LT CCCsf Affirmed CCCsf
B-3 89413AAF8 LT CCCsf Affirmed CCCsf
C 89413AAG6 LT Csf Affirmed Csf
ALESCO Preferred Funding XI, Ltd./Inc.
A-1 01450AAA8 LT AAsf Affirmed AAsf
A-1B 01450AAF7 LT AAsf Affirmed AAsf
A-2 01450AAB6 LT BBBsf Affirmed BBBsf
B 01450AAC4 LT BBsf Affirmed BBsf
C-1 01450AAD2 LT Csf Affirmed Csf
C-2 01450AAE0 LT Csf Affirmed Csf
C-3 01450AAH3 LT Csf Affirmed Csf
D 01449YAA0 LT Csf Affirmed Csf
InCapS Funding I. Ltd./Corp.
B-1 453247AC2 LT BBsf Upgrade Bsf
B-2 453247AD0 LT BBsf Upgrade Bsf
C 453247AE8 LT CCCsf Affirmed CCCsf
ALESCO Preferred Funding XIV, Ltd./Inc.
A-1 014498AB5 LT Asf Affirmed Asf
A-2 014498AC3 LT BBBsf Upgrade BBsf
B 014498AD1 LT CCCsf Affirmed CCCsf
C-1 014498AE9 LT Csf Affirmed Csf
C-2 014498AF6 LT Csf Affirmed Csf
C-3 014498AH2 LT Csf Affirmed Csf
D-1 014498AG4 LT Csf Affirmed Csf
D-2 014498AJ8 LT Csf Affirmed Csf
ALESCO Preferred Funding X, Ltd./Inc.
A-1 01449WAA4 LT AAsf Affirmed AAsf
A-2A 01449WAB2 LT BBBsf Affirmed BBBsf
A-2B 01449WAG1 LT BBBsf Affirmed BBBsf
B 01449WAC0 LT BBsf Affirmed BBsf
C-1 01449WAD8 LT Csf Affirmed Csf
C-2 01449WAE6 LT Csf Affirmed Csf
D-1 01449WAF3 LT Csf Affirmed Csf
D-2 01449WAH9 LT Csf Affirmed Csf
D-3 01449WAJ5 LT Csf Affirmed Csf
ALESCO Preferred Funding XII, Ltd./Inc.
A-1 01450DAB0 LT AAsf Upgrade Asf
A-2 01450DAC8 LT BBBsf Affirmed BBBsf
B 01450DAD6 LT Bsf Affirmed Bsf
C-1 01450DAE4 LT Csf Affirmed Csf
C-2 01450DAF1 LT Csf Affirmed Csf
D 01450DAG9 LT Csf Affirmed Csf
Regional Diversified Funding 2005-1 Ltd./Corp.
A-2 Floating Rate LT Asf Affirmed Asf
Senior Note 75903AAC1
B-1 Floating Rate LT Csf Affirmed Csf
Senior Sub 75903AAD9
B-2 Fixed Rate LT Csf Affirmed C
Senior Sub 75903AAE7 sf
KEY RATING DRIVERS
The main driver behind the upgrades was deleveraging from
collateral redemptions and excess spread, which resulted in
paydowns to the senior most notes, ranging between 0.3% and 25% of
their balances at last review. The magnitude of the deleveraging
for each CDO is reported in the accompanying rating action report.
For four transactions, the credit quality of the collateral
portfolios, as measured by a combination of Fitch's bank scores and
public ratings, remained stable or improved, with the other four
exhibiting negative credit migration. There were no new cures since
last review. One bank issuer deferred for the third time and one
insurance issuer deferred across two CDOs during this review
period. One SF issuer defaulted since last review.
In InCaps Funding I, Ltd./Corp, the ratings for class B-1, B-2 and
C notes were constrained by the interest shortfall risk scenario
due to the outstanding out-of-the-money swap, 29% of the performing
portfolio being comprised of semi-annual paying assets, and the
high level of portfolio concentration. Since last review, the class
B-1 and B-2 note balances were reduced by 25%, which in turn
decreased the amount of interest due on such classes of notes.
The ratings on 23 classes of notes in the seven remaining
transactions have been capped based on the application of the
performing credit enhancement (CE) cap as described in Fitch's
TruPS CDO Criteria.
RATING SENSITIVITIES
To address potential risks of adverse selection and increased
portfolio concentration, Fitch applied a sensitivity scenario, as
described in the criteria, to applicable transactions.
In addition, this review applied a coronavirus stress scenario.
Under this scenario, all issuers in the pool were downgraded either
by 0.5 for private bank scores or one notch for publicly rated
banks and insurance issuers with a mapped rating. The outcome of
this scenario was considered in assignment of Outlooks and when the
notes' performing CE was indicating a potential upgrade.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Future upgrades to the rated notes may occur if a transaction
experiences improvement in CE through deleveraging from
collateral redemptions and/or interest proceeds being used for
principal repayment.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to the rated notes may occur if a significant share
of the portfolio issuers defers or defaults on their TruPS
instruments, which would cause a decline in performing CE
levels. If the pandemic-inflicted disruptions become more
prolonged, Fitch will formulate a sensitivity scenario that
represents a more severe impact on the banking and insurance
sectors than the scenario specified.
AMERICAN CREDIT 2021-2: S&P Assigns B+ (sf) Rating on Class F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its ratings to American Credit
Acceptance Receivables Trust 2021-2's asset-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect:
-- The availability of approximately 63.17%, 57.74%, 48.99%,
42.01%, 37.46%, and 35.87% credit support, including excess spread,
for the class A, B, C, D, E, and F notes, respectively, based on
stressed cash flow scenarios. These credit support levels provide
more than 2.17x, 1.98x, 1.62x, 1.35x, 1.25x, and 1.15x coverage of
our expected net loss range of 27.75%-28.75% for the class A, B, C,
D, E, and F notes, respectively.
-- The hard credit enhancement in the form of subordination,
overcollateralization, and a reserve account in addition to excess
spread.
-- The expectation that under a moderate ('BBB') stress scenario
(1.35x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', 'BB (sf)', and 'B+ (sf)'
ratings on the class A, B, C, D, E, and F notes, respectively, will
be within the credit stability limits specified by section A.4 of
the Appendix of "S&P Global Ratings Definitions," published Jan. 5,
2021.
-- The timely payment of interest and principal by the designated
legal final maturity dates under our stressed cash flow modeling
scenarios that S&P believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction.
-- The backup servicing arrangement with Wells Fargo Bank N.A.
The transaction's payment and legal structures.
Ratings Assigned
American Credit Acceptance Receivables Trust 2021-2
Class A, $297.00 million: AAA (sf)
Class B, $54.00 million: AA (sf)
Class C, $121.50 million: A (sf)
Class D, $81.00 million: BBB (sf)
Class E, $54.00 million: BB (sf)
Class F, $20.25 million: B+ (sf)
AMUR EQUIPMENT 2021-1: Moody's Assigns B3 Rating to Class F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
Series 2021-1 notes issued by Amur Equipment Finance Receivables IX
LLC (Amur 2021-1). Amur Equipment Finance, Inc. (Amur) is the
sponsor of the securitization, which is backed by fixed-rate loans
and leases secured primarily by trucking, transportation and
construction equipment. Amur is also the servicer of the
securitized pool. Amur 2021-1 is Amur's ninth transaction backed by
somewhat similar collateral and the third that Moody's has rated.
The complete rating actions are as follows:
Issuer: Amur Equipment Finance Receivables IX LLC
Class A-1 Notes, Definitive Rating Assigned P-1 (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa2 (sf)
Class C Notes, Definitive Rating Assigned A1 (sf)
Class D Notes, Definitive Rating Assigned Baa2 (sf)
Class E Notes, Definitive Rating Assigned Ba2 (sf)
Class F Notes, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The definitive ratings of the notes are based on the credit quality
of the securitized equipment loan and lease pool and its expected
performance, the historical performance of Amur's managed portfolio
and that of its prior securitizations, the experience and expertise
of Amur as the originator and servicer of the underlying pool, the
back-up servicing arrangement with Wells Fargo Bank National
Association (Aa1 negative), the transaction structure including the
level of credit enhancement supporting the notes, and the legal
aspects of the transaction.
Moody's median cumulative net loss expectation for the Amur 2021-1
collateral pool is 6.00% and loss at a Aaa stress is 28.00%.
Moody's cumulative net loss expectation and loss at a Aaa stress is
based on its analysis of the credit quality of the underlying
collateral pool and the historical performance of similar
collateral, including Amur's managed portfolio performance, the
track-record, ability and expertise of Amur to perform the
servicing functions, and current expectations for the macroeconomic
environment during the life of the transaction.
Additionally, in assigning a P-1 (sf) rating to the Class A-1
Notes, Moody's considered the cash flows the underlying receivables
are expected to generate during the collection periods prior to the
Class A-1 notes' legal final maturity date. At current size,
assuming no prepayment and Moody's stress default assumption, the
A-1 tranche can withstand a reduction in expected cashflows of
roughly 39% and payoff prior to maturity.
The classes of notes will be paid sequentially. At transaction
closing, the Class A, Class B, Class C, Class D, Class E, and Class
F notes benefit from 30.45%, 25.20%, 19.95%, 14.70%, 11.20%, and
8.70% of hard credit enhancement, respectively. Initial hard credit
enhancement for the notes consists of (1) subordination (except for
the Class F notes), (2) over-collateralization (OC) of 7.50% of the
initial adjusted discounted pool balance with the transaction
utilizing excess spread to build the OC to a target of 10.00% of
the outstanding adjusted discounted pool balance, and (3) a fully
funded, non-declining reserve account of 1.20% of the initial
adjusted discounted pool balance. The transaction also benefits
from an OC floor of 1.75%. Excess spread may be available as
additional credit protection for the notes. The sequential-pay
structure and non-declining reserve account will result in a
build-up of credit enhancement supporting the rated notes.
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 US economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans"
published in December 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the notes if levels of credit
protection are greater than necessary to protect investors against
current expectations of loss. Moody's then current expectations of
loss may be better than its original expectations because of lower
frequency of default by the underlying obligors or slower
depreciation in the value of the equipment securing obligors'
promise of payment. As the primary drivers of performance, positive
changes in the US macro economy and the performance of various
sectors in which the obligors operate could also affect the
ratings. This transaction has a sequential pay structure and
therefore credit enhancement will grow as a percentage of the
collateral balance as collections pay down senior notes.
Prepayments and interest collections directed toward note principal
payments will accelerate this build-up of enhancement.
Down
Moody's could downgrade the notes if levels of credit protection
are insufficient to protect investors against current expectations
of portfolio losses. Credit enhancement could decline if excess
spread is not sufficient to cover losses in a given month. Losses
could rise above Moody's original expectations as a result of a
higher number of obligor defaults or deterioration in the value of
the equipment securing obligors' promise of payment. As the primary
drivers of performance, negative changes in the US macro economy
and the performance of various sectors in which the obligors
operate could also affect the ratings. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties and inadequate transaction
governance.
ANCHORAGE CREDIT 7: Moody's Gives Ba2 Rating on $15M Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
CDO refinancing notes issued by Anchorage Credit Funding 7, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$41,000,000 Class B-R Senior Secured Fixed Rate Notes due 2037
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$15,000,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class C-R Notes"), Assigned A2 (sf)
US$12,000,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class D-R Notes"), Assigned Baa1 (sf)
US$15,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2037 (the "Class E Notes"), Assigned Ba2 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CDO's portfolio and structure.
The Issuer is a managed cash flow collateralized debt obligation
(CDO). The issued notes are collateralized primarily by a portfolio
of corporate bonds and loans.
Anchorage Capital Group, L.L.C. (the "Manager") will continue to
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 remaining
reinvestment period.
The Issuer previously issued one other class of secured notes and
one class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: changes to the definition of
"Adjusted Weighted Average Moody's Rating Factor".
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $300,000,000
Diversity Score: 59
Weighted Average Rating Factor (WARF): 3312
Weighted Average Coupon (WAC): 6.03%
Weighted Average Recovery Rate (WARR): 34.0%
Weighted Average Life (WAL): 9 years
In consideration of the current high uncertainties around the
global economy, and the ultimate performance of the CDO portfolio,
Moody's conducted a number of additional sensitivity analyses
representing a range of outcomes that could diverge, both to the
downside and the upside, from Moody's base case. Some of the
additional scenarios that Moody's considered in its analysis of the
transaction include, among others: additional near-term defaults of
companies facing liquidity pressure; a lower recovery rate
assumption on defaulted assets to reflect declining loan recovery
rate expectations.
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 the US economic activity.
Moody's regard 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.
ARCAP 2003-1: Moody's Withdraws C Rating on Cl. F Certificates
--------------------------------------------------------------
Moody's Investors Service has withdrawn the ratings on the
following notes issued by ARCap 2003-1 Resecuritization Trust
Collateralized Debt Obligation Certificates, Series 2003-1 ("ARCap
2003-1 Resecuritization Trust"):
Cl. E, Withdrawn (sf); previously on Dec 28, 2017 Upgraded to Ca
(sf)
Cl. F, Withdrawn (sf); previously on Dec 28, 2017 Affirmed C (sf)
ARES XLII CLO: Moody's Hikes Class D Notes Rating From Ba1
----------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
CLO refinancing notes issued by Ares XLII CLO Ltd. (the "Issuer").
Moody's rating action is as follows:
US$248,000,000 Class A-R Senior Floating Rate Notes due 2028 (the
"Class A-R Notes"), Assigned Aaa (sf)
US$58,500,000 Class B-R Senior Floating Rate Notes due 2028 (the
"Class B-R Notes"), Assigned Aa2 (sf)
Additionally, Moody's has taken a rating action on the following
outstanding notes originally issued by the Issuer on March 22, 2017
(the "Original Closing Date"):
US$21,600,000 Class D Mezzanine Deferrable Floating Rate Notes due
2028 (the "Class D Notes"), Upgraded to Baa3 (sf); previously on
July 20, 2020 Downgraded to Ba1 (sf)
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.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Ares CLO Management LLC (the "Manager") will continue to 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 remaining
reinvestment period.
The Issuer previously issued Class C notes, Class E notes, and
subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: the inclusion of alternative
benchmark replacement provisions; extension of the non-call period;
and changes to the definition of "Moody's Default Probability
Rating".
Moody's rating action on the Class D Notes is primarily a result of
the refinancing, which increases excess spread available as credit
enhancement to the rated notes. Additionally, the Notes benefited
from a shortening of the weighted average life (WAL).
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $386,021,849
Defaulted par: $1,457,167
Diversity Score: 74
Weighted Average Rating Factor (WARF): 3144
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.59%
Weighted Average Recovery Rate (WARR): 47.90%
Weighted Average Life (WAL): 4.78 years
In consideration of the current high uncertainties around the
global economy, and the ultimate performance of the CLO portfolio,
Moody's conducted a number of additional sensitivity analyses
representing a range of outcomes that could diverge, both to the
downside and the upside, from Moody's base case. Some of the
additional scenarios that Moody's considered in its analysis of the
transaction include, among others: an additional cashflow analysis
assuming a lower WAS to test the sensitivity to LIBOR floors;
sensitivity analysis on deteriorating credit quality due to a large
exposure to loans with negative outlook, and a lower recovery rate
assumption on defaulted assets to reflect declining loan recovery
rate expectations.
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 the US economic activity.
Moody's regard 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.
ASSET-BACK 2013-1: DBRS Hikes Class F Notes Rating to BB(sf)
------------------------------------------------------------
DBRS Limited upgraded its ratings on the following classes of
Asset-Back Notes issued by Selkirk 2013-1 (the Trust):
-- Class C to AA (high) (sf) from AA (sf)
-- Class D to AA (low) (sf) from A (high) (sf)
-- Class E to BBB (high) (sf) from BBB (sf)
-- Class F to BB (sf) from BB (low) (sf)
DBRS Morningstar also confirmed its ratings on the following
classes:
-- Class A2 at AAA (sf)
-- Class B at AAA (sf)
All trends are Stable.
The rating upgrades reflect the increased credit support to the
bonds as a result of scheduled loan amortization, successful loan
repayments, and the overall stable performance of the remaining
collateral in the pool. As of the February 2021 remittance, there
had been a collateral reduction of 80.4% since issuance, with 6.8%
of the collateral reduction occurring in the last 12 months; eight
loans have repaid from the Trust over the past year, contributing
$62.5 million in principal reduction to the senior bonds. According
to the February 2021 remittance, of the original 55-loan pool, 10
loans remain and have an aggregate outstanding principal balance of
$180.5 million. As of the February 2021 remittance, there were no
loans on the servicer's watchlist or in special servicing.
Based on the YE2019 reporting for the remaining loans in the pool
(most recent available), overall performance remained healthy, with
a weighted-average (WA) debt service coverage ratio (DSCR) and WA
loan-to-value ratio of 2.02 times (x) and 52.1%, respectively. The
reported figures represented a WA net cash flow (NCF) growth of
27.1% over the DBRS Morningstar NCF figures from issuance. The
largest two loans, PetSmart Corporate Headquarters (Prospectus
ID#1, 28.4% of the pool) and 777 Long Ridge Road — Long Ridge
Office Park (Prospectus ID#4, 21.3% of the pool), are both secured
by single-tenant office properties, which reported YE2019 DSCR
figures of 3.33x and 1.03x, respectively.
Although there is concentration exposure for the pool with just 10
loans remaining, the resulting expected loss for the pool suggested
the rated bonds in the transaction remain well insulated from near-
to moderate-term uncertainty for the underlying collateral. DBRS
Morningstar also considered the repayment of eight loans over the
course of the last 12 months, much of which occurred amid the
Coronavirus Disease (COVID-19) pandemic, as a positive sign for the
pool overall, as the remaining loans have similar credit profiles
to those that were repaid.
The 777 Long Ridge Road — Long Ridge Office Park loan is secured
by a three-building Class B office property totalling 313,682
square feet in Stamford, Connecticut. The loan exhibited a decline
in performance, as the YE2019 DSCR was reported at 1.03x compared
with the YE2018 DSCR of 1.71x, driven by an increase in
professional fees, rent abatements, and prepayment of January 2019
rent in December 2018. The property is fully occupied by Office
Finance International Holdings, which originally signed a 10-year
lease in September 2016 through April 2026 after General Electric
vacated the subject property. The tenant received a significant
leasing incentive package with the lease execution in September
2016, including an extended rental abatement period that lasted
from October 2016 to March 2017.
Subsequently, the tenant extended its lease through April 2030 and
was given an additional six months of free rent, one of which was
taken in December 2019. Once the remaining rental concessions have
burned off, DBRS Morningstar expects the DSCR to be in line with
the issuance expectations through loan maturity.
Notes: All figures are in U.S. dollars unless otherwise noted.
ATLAS SENIOR XIII: S&P Affirms B (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-L-R,
A-1-N-R, A-1-F-R, B-N-R, B-F-R, and C-R replacement notes from
Atlas Senior Loan Fund XIII Ltd., a collateralized loan obligation
(CLO) originally issued in March 2019 that is managed by Crescent
Capital Group L.P. S&P withdrew its ratings on the original class
A-2A-F, A-2A-N, B-F, B-N, and C notes following their full
redemption. At the same time, S&P affirmed its ratings on the class
X, D, and E notes.
The replacement notes are being issued via a supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, also stipulates the following:
-- The new rated class A-1-L-R loan replaced the previously
unrated class A-1-L loan.
-- The class A-1-N and A-2A-N floating-rate notes and the class
A-2A-F and A-2B-F fixed-rate notes were merged into the floating
class A-1-N-R and fixed class A-1-F-R notes.
-- The non-call period was updated to April 22, 2022, from April
22, 2021.
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.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and will take rating actions as we deem
necessary."
S&P 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 Assigned
Atlas Senior Loan Fund XIII Ltd.
Replacement class A-1-L-R, $255.00 mil.: AAA (sf)
Replacement class A-1-N-R, $68.00 mil.: AAA (sf)
Replacement class A-1-F-R, $32.00 mil.: AAA (sf)
Replacement class B-N-R, $37.50 mil.: AA (sf)
Replacement class B-F-R, $15.00 mil.: AA (sf)
Replacement class C-R, $32.50 mil.: A (sf)
Ratings Affirmed
Atlas Senior Loan Fund XIII Ltd.
Class X: AAA (sf)
Class D: BBB- (sf)
Class E: B (sf)
Ratings Withdrawn
Atlas Senior Loan Fund XIII Ltd.
Class A-2A-F: to NR, from AAA (sf)
Class A-2A-N: to NR, from AAA (sf)
Class B-F: to NR, from AA (sf)
Class B-N: to NR, from AA (sf)
Class C: to NR, from A (sf)
NR--Not rated.
BALLYROCK CLO 15: S&P Assigns BB- (sf) Rating on Class D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Ballyrock CLO 15
Ltd./Ballyrock CLO 15 LLC's floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Ballyrock CLO 15 Ltd./Ballyrock CLO 15 LLC
Class A-1, $256.00 million: AAA (sf)
Class A-2, $48.00 million: AA (sf)
Class B (deferrable), $24.00 million: A (sf)
Class C (deferrable), $24.00 million: BBB- (sf)
Class D (deferrable), $16.00 million: BB- (sf)
Subordinated notes, $41.25 million: Not rated
BANK 2018-BNK12: Fitch Affirms B- Rating on 2 Tranches
------------------------------------------------------
Fitch Ratings has affirmed BANK 2018-BNK12, commercial mortgage
pass-through certificates, series 2018-BNK12.
DEBT RATING PRIOR
---- ------ -----
BANK 2018-BNK12
A-1 06541KAW8 LT AAAsf Affirmed AAAsf
A-2 06541KAX6 LT AAAsf Affirmed AAAsf
A-3 06541KAZ1 LT AAAsf Affirmed AAAsf
A-4 06541KBA5 LT AAAsf Affirmed AAAsf
A-S 06541KBD9 LT AAAsf Affirmed AAAsf
A-SB 06541KAY4 LT AAAsf Affirmed AAAsf
B 06541KBE7 LT AA-sf Affirmed AA-sf
C 06541KBF4 LT A-sf Affirmed A-sf
D 06541KAJ7 LT BBB-sf Affirmed BBB-sf
E 06541KAL2 LT BB-sf Affirmed BB-sf
F 06541KAN8 LT B-sf Affirmed B-sf
X-A 06541KBB3 LT AAAsf Affirmed AAAsf
X-B 06541KBC1 LT AAAsf Affirmed AAAsf
X-D 06541KAA6 LT BBB-sf Affirmed BBB-sf
X-E 06541KAC2 LT BB-sf Affirmed BB-sf
X-F 06541KAE8 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations have increased due
to an increase in the number of Fitch Loans of Concern (FLOCs) and
specially serviced loans. Fitch's ratings assume a base case loss
is 4.3%. The Negative Outlooks reflect additional sensitives, which
reflect losses that could reach 5.3%. These additional
sensitivities include additional stresses applied to loans expected
to be impacted by the coronavirus pandemic; in particular, the FLOC
CoolSprings Galleria loan (9.8%) given concerns with the pandemic's
impact on longer-term performance and sponsor bankruptcy.
Six loans (19.3% of pool) were designated Fitch Loans of Concern
(FLOCs), this includes the pool's sole specially serviced loan,
Holiday Inn Express at the Stadiums (1.0%). As of the March 2021
distribution period there were 27 loans (30%) on the servicer's
watchlist for low DSCR, tenant bankruptcy, deferred maintenance,
failure to provide proof of insurance coverage and coronavirus
pandemic-related underperformance.
Alternative Loss Scenario: In its analysis, Fitch applied a 30%
Loss Severity to CoolSprings Galleria (9.8%) due to weak
sponsorship, significant competition with overlapping anchors and
declining sales since issuance as well as the decrease in commerce
and tourism amid the coronavirus pandemic and potential for a more
prolonged impact on mall performance. The additional loss assumes a
10% stress to YE 2020 NOI and a 18.0% cap rate. The Negative Rating
Outlooks on class E, F, X-E and X-F partially reflects this
sensitivity scenario as well as ongoing concerns with the ultimate
impact of the pandemic on long-term performance of other loans in
the transaction.
Fitch Loans of Concern:
CoolSprings Galleria (9.8%) is a 1.2 million-sf mall located in
Franklin, TN sponsored by CBL and TIAA; the mall is anchored by
Macys, JCPenney, Belk and Dillards. In-line sales excluding Apple
at the property were $465 psf in 2015; however, yoy sales decreased
in 2016 and 2017, falling to $438 psf, a 5.8% decrease. In response
to coronavirus related economic hardship, a consent agreement was
executed in July 2020 whereby an allowance to defer reserve
deposits and utilize reserve funds to pay debt service between June
and August 2020. This loan's sponsorship is a "50/50" joint venture
split between TIAA and CBL. In November 2020, one of the loan's
sponsors, CBL, declared bankruptcy and announced plans to
restructure. The Cash Trap Event has been triggered due to the
bankruptcy of one of the loan's sponsors.
Northwest Hotel Portfolio (3.5%) is comprised of seven limited
service hotels, totaling 818 keys located across the Pacific
Northwest. This loan is on the servicer's watchlist for
underperformance as a result of coronavirus pandemic-related
economic hardship. The portfolio TTM September 2020 NOI debt
service coverage ratio (DSCR) has fallen to 1.03x compared to 1.61x
at YE 2019 and underwritten NOI DSCR of 1.96x. The portfolio TTM
June 2020 occupancy, ADR and RevPAR were 63.48%, $141.19 and
$89.59, respectively. Compared to TTM June 2019 occupancy, ADR and
RevPAR of 75.36%, $146.18 and $112.20, respectively. This loan has
been classified as "60 Days" delinquent twice in the last 12
months, and as of the March 2021 payment date, the loan was
current. A consent agreement was granted whereby monthly reserve
deposits would be deferred and an allowance to utilize reserve
funds to cover monthly debt service payments between September and
November 2020.
Pico Rivera Marketplace (2.1%) is a neighborhood retail center
located in Pico Rivera, CA, approximately 12.0 miles southeast of
the Los Angeles CBD. Servicer reported YE 2020 2020 EGI has fallen
23% compared to YE 2019 due to the impact on rental income and
expense reimbursement by the coronavirus pandemic. The special
servicer approved a lease amendment for the subject's largest
tenant, LA Fitness (NRA 56%) whereby the tenant's monthly rent was
abated for April and May 2020 payments and 50% of rent due June
2020. This decline in performance corresponds to YE 2020 NOI DSCR
falling to 0.96x from 2.07x at YE 2019 and bank underwritten NOI
DSCR of 2.09x.
Hampton & Homewood Memphis (1.2%) is a 256 key hotel portfolio that
consists of two properties, Homewood Suites Memphis Southwind
(52.7% of ALA) and Hampton Inn Memphis Southwind (47.3%). Servicer
reported TTM September 2020 EGI has fallen 47% or approximately
$4.4 million compared to YE 2019 due to economic hardship as a
result of the coronavirus pandemic. This decline in performance
corresponds to TTM September 2020 NOI DSCR falling to 0.46x from
1.94x at YE 2019 and bank underwritten NOI DSCR of 1.87x.
Doubletree Kenosha (1.1%) is a full service hotel located in
Pleasant Prairie, WI. Loan is on the servicer's watchlist for
coronavirus pandemic related economic hardship. Subject YE 2020 EGI
has dropped 39% or approximately $1.9 million compared to YE 2019.
This corresponds to YE 2020 NOI DSCR falling to 0.22x compared to
2.13x at YE 2019 and 2.03x at bank underwriting.
Holiday Inn Express at the Stadiums (1.0%) is a limited service
hotel located in Baltimore, MD and transferred to special servicing
in June 2020 for payment default as a result from coronavirus
related economic hardship. The special servicer is currently dual
tracking a foreclosure/modification resolution. A Receivership
Order was filed in December 2020; however, the special servicer has
requested that receivership action be delayed to provide more to
time to finalize a forbearance agreement.
Regional Mall Concentration: Two of the top three loans (18.5% of
pool) are secured by regional malls. CoolSprings Galleria (FLOC,
9.8%), the second largest loan in the pool, is a 1.2 million-sf
mall located in Franklin, TN sponsored by CBL and TIAA; the mall is
anchored by Macys, JCPenney, Belk and Dillards. Fair Oaks Mall
(8.7%), the third largest loan in the pool, is a 1.6 million-sf
mall located in Fairfax, VA anchored by Macys, Lord & Taylor,
Sears, and JCPenney with 2020 inline sales excluding Apple of $248
psf. At issuance, Fair Oaks Mall received a credit opinion of
'BBB-sf*' on a stand-alone basis.
Exposure to Coronavirus: There are seven loans (10.3% of pool),
which have a weighted average NOI DSCR of 2.08x, are secured by
hotel properties. Thirteen loans (28.0%), which have a weighted
average NOI DSCR of 1.94x, are secured by retail properties. Five
loans (14.9%), which have a weighted average NOI DSCR of 1.97x, are
secured by multifamily properties. Fitch's base case analysis
applied additional stresses to six hotel loans, four retail loans
and one multifamily loan given the significant declines in
property-level cash flow expected in the short term as a result of
the decrease in consumer spending and property closures from the
coronavirus pandemic.
Minimal Change to Credit Enhancement: As of the March 2021
distribution date, the pool's aggregate principal balance has paid
down by 2.1% to $881.8 million from $901.2 million at issuance. At
issuance, based on the scheduled balance at maturity, the pool was
expected to pay down by 8.6%, which is above the 2018 average of
7.2% and the 2017 average of 7.9%. No loans mature until 2023. One
loan comprising .32% of the outstanding pool principal balance has
been defeased. Of the remaining pool balance, 21 loans comprising
48.3% of the pool were classified as full interest-only through the
term of the loan.
ADDITIONAL CONSIDERATIONS
Investment-Grade Credit Opinion Loans: Four loans comprising 23.5%
of the transaction received an investment-grade credit opinion.
Fair Oaks Mall (8.7% of pool) received a credit opinion of
'BBB-sf*' on a stand-alone basis; 181 Fremont Street (6.6%)
received a stand-alone credit opinion of 'BBB-sf*'; The Gateway
(6.2%) received a stand-alone credit opinion of 'BBBsf*'; and Apple
Campus 3 (1.9%) received a credit opinion of 'BBB-sf*' on a
stand-alone basis.
Co-op Concentration: The transaction contains a total of 22 loans
(11.7% of the pool) secured by multifamily cooperatives located
primarily within the greater New York City metro area. At issuance,
the pool's Fitch DSCR and LTV net of co-op loans are 1.18x and
108.5%, respectively.
RATING SENSITIVITIES
The Stable Outlooks on classes A-1 through D reflect the overall
stable performance of the majority of the pool and expected
continued amortization. The Negative Outlooks on classes E, F, X-E
and X-F reflect the potential for downgrade due to concerns
surrounding the ultimate impact of the coronavirus pandemic and the
performance concerns associated with the FLOCs, which include one
specially serviced loans and CoolSprings Galleria.
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 '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. Upgrades of the 'BBB-sf' class 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:
-- 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 and X-B are not
likely due to the position in the capital structure, but may
occur should interest shortfalls occur. Downgrades to classes
B, C, D and X-D 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 E, F, X-E and X-F 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.
BANK 2021-BNK32: DBRS Finalizes BB(high) Rating on 2 Certs Classes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2021-BNK32 issued by BANK 2021-BNK32:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-4-X1 at AAA (sf)
-- Class A-4-X2 at AAA (sf)
-- Class A-5 at AAA(sf)
-- Class A-5-1 at AAA(sf)
-- Class A-5-2 at AAA(sf)
-- Class A-5-X1 at AAA(sf)
-- Class A-5-X2 at AAA(sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA(sf)
-- Class A-S at AAA (sf)
-- Class A-S-1 at AAA (sf)
-- Class A-S-2 at AAA (sf)
-- Class A-S-X1 at AAA (sf)
-- Class A-S-X2 at AAA (sf)
-- Class B at AAA (sf)
-- Class B-1 at AAA (sf)
-- Class B-2 at AAA (sf)
-- Class B-X1 at AAA (sf)
-- Class B-X2 at AAA (sf)
-- Class C at AA (high) (sf)
-- Class C-1 at AA (high) (sf)
-- Class C-2 at AA (high) (sf)
-- Class C-X1 at AA (high) (sf)
-- Class C-X2 at AA (high) (sf)
-- Class X-D at A (sf)
-- Class E at A (low) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BBB (low) (sf)
-- Class G at BB (high) (sf)
All trends are Stable. Classes X-D, X-F, X-G, X-H, D, E, F, G, and
H have been privately placed. Class RR is a nonoffered
certificate.
The Class X-A, Class X-B, Class X-D, Class X-F, Class X-G, and
Class X-H certificates (collectively referred to as the Class X
Certificates) are interest-only (IO) certificates that reference a
single rated tranche or multiple rated tranches. The IO rating
mirrors the lowest-rated applicable reference obligation tranche
adjusted upward by one notch if senior in the waterfall.
The Class A-4-1, Class A-4-2, Class A-4-X1, Class A-4-X2, Class
A-5-1, Class A-5-2, Class A-5-X1, Class A-5-X2, Class A-S-1, Class
A-S-2, Class A-S-X1, Class A-S-X2, Class B-1, Class B-2, Class
B-X1, Class B-X2, Class C-1, Class C-2, Class C-X1, and Class C-X2
certificates are also offered certificates. Such classes of
certificates, together with the Class A-4, Class A-5, Class A-S,
Class B, and Class C certificates, constitute the Exchangeable
Certificates. The Class A-1, Class A-2, Class A-SB, Class A-3,
Class D, Class E, Class F, Class G, and Class H certificates,
together with the RR Interest and the Exchangeable Certificates
with a certificate balance, are referred to as the principal
balance certificates.
With regard to the Coronavirus Disease (COVID-19) pandemic, the
magnitude and extent of performance stress posed to global
structured finance transactions remain highly uncertain. This
considers the fiscal and monetary policy measures and statutory law
changes that have already been implemented or will be implemented
to soften the impact of the crisis on global economies. Some
regions, jurisdictions, and asset classes are, however, feeling
more immediate effects. DBRS Morningstar continues to monitor the
ongoing coronavirus pandemic and its impact on both the commercial
real estate sector and the global fixed income markets.
Accordingly, DBRS Morningstar may apply additional short-term
stresses to its rating analysis, for example by front-loading
default expectations and/or assessing the liquidity position of a
structured finance transaction with more stressful operational risk
and/or cash flow timing considerations.
The collateral consists of 64 fixed-rate loans secured by 106
commercial and multifamily properties. The transaction is a
sequential-pay pass-through structure. Two loans, representing
13.9% of the pool, are shadow-rated investment grade by DBRS
Morningstar. Additionally, 19 loans in the pool, representing 8.3%
of the pool, are backed by residential co-operative loans, which
typically have very low expected losses. The conduit pool was
analyzed to determine the provisional ratings, reflecting the
long-term probability of loan default within the term and its
liquidity at maturity. When the cut-off balances were measured
against the DBRS Morningstar Net Cash Flow and their respective
actual constants, the initial DBRS Morningstar Weighted-Average
(WA) Debt Service Coverage Ratio (DSCR) of the pool was 3.03 times
(x). There were only five loans, representing 4.5%, that exhibited
a DSCR Morningstar DSCR below 1.32x, a threshold indicative of a
higher likelihood of midterm default. The pool additionally
includes five loans, representing 8.8% of the allocated pool
balance, that exhibit a DBRS Morningstar Loan-to-Value (LTV) ratio
in excess of 67.1%, a threshold generally indicative of
above-average default frequency. The WA DBRS Morningstar LTV of the
pool at issuance was 51.0% and the pool is scheduled to amortize
down to a DBRS Morningstar WA LTV of 49.6% at maturity. These
credit metrics are based on the A-note balances. Excluding the
shadow-rated loans, the deal still exhibits a favorable WA DBRS
Morningstar LTV of 53.4%.
Two of the loans, 605 Third Avenue and Seventh Avenue Leased Fee,
exhibit credit characteristics consistent with investment-grade
shadow ratings. Combined, these loans represent 13.9% of the pool.
605 Third Avenue has credit characteristics consistent with a A
(low) shadow rating. Seventh Avenue Leased Fee has credit
characteristics consistent with a AAA shadow rating. Additionally,
nineteen loans in the pool, representing 8.3% of the transaction,
are backed by residential co-operative loans. Residential
co-operatives tend to have minimal risk, given their low leverage
and low risk to residents if the co-operative associations default
on their mortgages. The WA DBRS Morningstar LTV for these loans is
16.1%.
Thirty-nine loans, representing a combined 65.9% of the pool by
allocated loan balance, exhibit issuance LTVs of less than 59.3%, a
threshold historically indicative of relatively low-leverage
financing and generally associated with below-average default
frequency. The WA DBRS Morningstar LTV of 51.0% compares favorably
against BANK 2020-BNK30 at 52.4% and BANK 2020-BNK29 at 58.4%, both
of which were rated by DBRS Morningstar. Even with the exclusion of
the shadow-rated loans and the loans secured by co-operative
properties, collectively representing 22.2% of the pool, the deal
exhibits favorable DBRS Morningstar Issuance LTV of 55.9%.
While the pool demonstrates favorable loan metrics with WA DBRS
Morningstar Issuance and Balloon LTVs of 51.0% and 49.6%,
respectively, it also exhibits heavy leverage barbelling. There are
two loans, accounting for 13.9% of the pool, with investment-grade
shadow ratings and a WA LTV of 36.4% and 19 loans, representing
8.3% of the transaction, secured by co-operatives with a WA DBRS
Morningstar LTV of 16.1%. The pool also has 39 loans, representing
a combined 65.9% of the pool by allocated loan balance, with an
issuance LTV lower than 59.3%, a threshold historically indicative
of relatively low-leverage financing. There are five loans,
comprising a combined 8.8% of the pool balance, with an issuance
LTV higher than 67.1%, a threshold historically indicative of
relatively high-leverage financing and generally associated with
above-average default frequency. The WA expected loss of the pool's
investment-grade and co-operative component was approximately 0.4%,
while the WA expected loss of the pool's conduit component was
substantially higher at approximately 1.8%, further illustrating
the barbelled nature of the transaction.
Sixteen loans, representing 21.5% of the pool, are in areas
identified as DBRS Morningstar Market Ranks 7 or 8, which are
generally characterized as highly dense urbanized areas that
benefit from increased liquidity driven by consistently strong
investor demand, even during times of economic stress. Markets with
these ranks benefit from lower default frequencies than less dense
suburban, tertiary, and rural markets. Urban markets represented in
the deal include New York and San Francisco. Furthermore, 30 loans,
representing 41.1% of the pool balance, have collateral in MSA
Group 3, which represents the best-performing group in terms of
historical CMBS default rates among the top 25 MSAs. MSA Group 3
has a historical default rate of 17.2%, which is nearly 40.0% lower
than the overall CMBS historical default rate of 28.0%.
DBRS Morningstar deemed three loans, representing 27.7% of the pool
balance, received a property quality of Average (+) or better
including two loans, representing 19.9% of the pool balance, to
have Above Average quality. Four loans, which represent the largest
four loans in the pool, representing 37.7% of the pool, have Strong
sponsorship. Furthermore, DBRS Morningstar identified only one
loan, representing just 0.80% of the pool, as having a sponsorship
and/ or loan collateral that results in DBRS Morningstar
classifying the sponsor strength as Weak.
The pool has a relatively high concentration of loans secured by
office and retail properties; these 16 loans represent 51.2% of the
pool balance. The ongoing coronavirus pandemic continues to pose
challenges globally and the future demand for office and retail
space is uncertain with many store closures, companies filing for
bankruptcy or downsizing, and more companies extending their
remote-working strategy. One of the six off loans, 605 Third
Avenue, representing 27.8% of the office concentration, is
shadow-rated investment grade by DBRS Morningstar. Furthermore,
74.0% of the office loans are located in MSA Group 3, which
represents the lowest historical CMBS default rates. Of the retail
concentration, four loans, representing 31.1% of the retail
concentration, are secured by multiple properties (22 in total),
which insulate the loans from issues at any one property.
Furthermore, 53.1% of the total retail concentration is in an area
with a DBRS Morningstar Mark Rank of 6 or higher. The office and
retail properties exhibit favorable WA DBRS Morningstar DSCRs of
3.39x and 1.97x, respectively. Additionally, both property types
exhibit favorable WA Morningstar LTVs at 51.3% and 56.8%,
respectively. Two of the loans secured by office properties,
representing 63.0% of the concentration, have sponsors that were
deemed to be Strong.
Thirty-eight loans, representing 78.5% of the pool balance, are
structured with full-term IO periods. An additional 14 loans,
representing 16.4% of the pool balance, are structured with
partial-IO terms ranging from one month to 60 months. Of the 38
loans structured with full-term IO periods, 10 loans, representing
27.8% of the pool by allocated loan balance, are located in areas
with a DBRS Morningstar Market Rank of 6, 7, or 8. These markets
benefit from increased liquidity even during times of economic
stress. Two of the 38 identified loans, representing 13.9% of the
total pool balance, are shadow-rated investment grade by DBRS
Morningstar: 605 Third Avenue and 530 Seventh Avenue Fee. The
full-term IO loans are effectively preamortized, as evidenced by
the very low WA DBRS Morningstar Issuance LTV of only 52.1% for
these loans.
Notes: All figures are in U.S. dollars unless otherwise noted.
BARINGS CLO 2019-I: S&P Assigns BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R notes replacement notes from Barings CLO Ltd.
2019-I/Barings CLO 2019-I LLC, a CLO originally issued in March
2019 that is managed by Barings LLC, a subsidiary of MassMutual.
The replacement notes were issued via a supplemental indenture.
The ratings reflect our opinion that the credit support available
is commensurate with the associated rating levels.
On the April 22, 2021 refinancing date, the proceeds from the
issuance of the replacement notes redeemed the original notes. At
that time, S&P withdrew the ratings on the original notes and
assigned ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which, in addition to outlining the terms of the replacement notes,
also includes the following provisions:
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at a lower spread than the original notes.
-- The stated maturity was extended by four years.
-- The reinvestment period was extended by two years.
-- The non-call period was extended to April 2023.
-- The weighted average life test value was extended.
-- Of the underlying collateral obligations, 100.00% have credit
ratings assigned by S&P Global Ratings.
-- Of the underlying collateral obligations, 97.15% have recovery
ratings assigned by S&P Global Ratings.
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.
"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
Barings CLO Ltd. 2019-I/Barings CLO 2019-I LLC
Class A-R, $315.00 million: AAA (sf)
Class B-R, $65.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), 18.50 million: BB- (sf)
Subordinated notes, $53.05 million: Not rated
Ratings Withdrawn
Barings CLO Ltd. 2019-I/Barings CLO 2019-I LLC
Class A-1 to not rated from AAA (sf)
Class B to not rated from AA (sf)
Class C to not rated from A (sf)
Class D to not rated from BBB- (sf)
BARINGS CLO 2019-II: S&P Assigns Prelim 'BB-' Rating on D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A1-R, A2-R, B-R, C-R, and D-R replacement notes from Barings CLO
Ltd. 2019-II, a CLO originally issued in April 2019 that is managed
by Barings LLC.
The preliminary ratings are based on information as of April 29,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the May 6, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. At
that time, S&P expects to withdraw its ratings on the original
notes and assign ratings to the replacement notes. However, if the
refinancing doesn't occur, S&P may affirm its ratings on the
original notes and withdraw its preliminary ratings on the
replacement notes.
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A1-R, A2-R, B-R, and C-R notes are
expected to be issued at a lower spread than the original notes.
-- The class D-R notes are expected to be issued at a higher
spread than the original notes.
-- The stated maturity will be extended 4.0 years.
-- The reinvestment period will be extended 2.0 years.
-- The non-call period will be extended to May 2023.
-- The weighted average life test value will be extended.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data 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. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Barings CLO Ltd. 2019-II/Barings CLO 2019-II LLC
Class A1-R, $311.75 million: AAA (sf)
Class A2-R, $64.25 million: AA (sf)
Class B-R (deferrable), $29.75 million: A (sf)
Class C-R (deferrable), $29.75 million: BBB- (sf)
Class D-R (deferrable), $18.50 million: BB- (sf)
Subordinated notes, $57.90 million: Not rated
BASSWOOD PARK: S&P Assigns BB-(sf) Rating on $16.665MM E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Basswood Park CLO
Ltd./Basswood Park CLO LLC's floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Basswood Park CLO Ltd./Basswood Park CLO LLC
Class A, $282.375 million: AAA (sf)
Class B, $59.625 million: AA (sf)
Class C (deferrable), $27.000 million: A (sf)
Class D (deferrable), $27.000 million: BBB- (sf)
Class E (deferrable), $16.650 million: BB- (sf)
Subordinated notes, $44.600 million: Not rated
BASSWOOD PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Basswood
Park CLO Ltd./Basswood Park CLO LLC's floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests.
The preliminary ratings are based on information as of April 22,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Basswood Park CLO Ltd./Basswood Park CLO LLC
Class A, $282.375 million: AAA (sf)
Class B, $59.625 million: AA (sf)
Class C (deferrable), $27.000 million: A (sf)
Class D (deferrable), $27.000 million: BBB- (sf)
Class E (deferrable), $16.650 million: BB- (sf)
Subordinated notes, $44.600 million: not rated
BATTALION CLO XI: Moody's Assigns Ba3 Rating to $26M Cl. E-R Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
CLO refinancing notes issued by Battalion CLO XI Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$400,000,000 Class A-R Senior Secured Floating Rate Notes due
2034 (the "Class A-R Notes"), Assigned Aaa (sf)
US$87,000,000 Class B-R Senior Secured Floating Rate Notes due 2034
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$32,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class C-R Notes"), Assigned A2 (sf)
US$40,500,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class D-R Notes"), Assigned Baa3 (sf)
US$26,000,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2034 (the "Class E-R Notes"), Assigned Ba3 (sf)
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.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of senior secured loans and eligible
investment and up to 10% of the portfolio may consist of non-senior
secured loans with a maximum of 5% second lien loans.
Brigade Capital Management, LP (the "Manager") will continue to
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 extended 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 issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; changes to the
overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Moody's Adjusted Weighted Average Rating Factor" and changes to
the base matrix and modifiers.
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.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $642,671,693
Defaulted par: $3,104,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3183
Weighted Average Spread (WAS): 3.81%
Weighted Average Recovery Rate (WARR): 47.93%
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 regard 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 Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
BATTALION XIX: S&P Assigns BB- (sf) Rating on $16MM Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Battalion CLO XIX
Ltd./Battalion CLO XIX LLC's floating rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P'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
Battalion CLO XIX Ltd./Battalion CLO XIX LLC
Class A, $252.0 million: AAA (sf)
Class B, $52.0 million: AA (sf)
Class C, $24.0 million: A (sf)
Class D, $24.0 million: BBB- (sf)
Class E, $16.0 million: BB- (sf)
Subordinated notes, $49.5 million: Not rated
BAYVIEW COMMERCIAL 2006-SP1: Moody's Raises Cl. B-1 Notes to Ba3
----------------------------------------------------------------
Moody's Investors Service upgraded ratings for two classes of notes
issued by Bayview Commercial Mortgage Pass-Through Trust 2006-SP1,
reflecting performance of the transactions. The loans are secured
primarily by small commercial real estate properties in the U.S.
owned by small businesses and investors.
The complete rating actions are as follows:
Issuer: Bayview Commercial Mortgage Pass-Through Trust 2006-SP1
Cl. M-4, Upgraded to A2 (sf); previously on Sep 12, 2019 Upgraded
to Baa1 (sf)
Cl. B-1, Upgraded to Ba3 (sf); previously on May 31, 2012
Downgraded to B2 (sf)
RATINGS RATIONALE
The upgrade is primarily prompted by paydown of Cl. M-3 that led to
an increase in credit enhancement for Cl. M-4 and Cl. B-1 from
subordination due to sequential pay structure of the transaction
and overcollateralization. The total hard credit enhancement for
Cl. M-4 and Cl. B-1 increased to 70.7% and 36.8% as of the March
2021 distribution date from 63.9% and 32.8% as of the August 2020
distribution date, respectively
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 small businesses and commercial real estate from a
gradual and unbalanced recovery in US economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating SME Balance Sheet Securitizations" published in
May 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 expected losses could drive the ratings
up. Moody's expectation of pool losses could decline as a result of
a decrease in seriously delinquent loans or lower severities than
expected on liquidated loans. As a primary driver of performance,
positive changes in the US macro economy could also affect the
ratings, as can changes in servicing practices.
Down
Levels of credit protection that are insufficient to protect
investors against expected losses could drive the ratings down.
Moody's expectation of pool losses could increase as a result of an
increase in seriously delinquent loans and higher severities than
expected on liquidated loans. As a primary driver of performance,
negative changes in the US macro economy could also affect the
ratings. Other reasons for worse-than-expected performance include
poor servicing, error on the part of transaction parties,
inadequate transaction governance, and fraud.
BENEFIT STREET III: S&P Affirms B- (sf) Rating on Class D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A1-R2, A2-R2,
and B-R2 replacement notes from Benefit Street Partners CLO III
Ltd./Benefit Street Partners CLO III LLC, a CLO originally issued
in 2013 that is managed by Benefit Street Partners LLC. At the same
time, S&P withdrew its ratings on the class A1-R, A2-R, and B-R
notes, and affirmed its ratings on the class C-R and D-R notes.
On the April 28, 2021 refinancing date, the proceeds from the class
A1-R2, A2-R2, and B-R2 replacement note issuances were used to
redeem the class A1-R, A2-R, and B-R notes, as outlined in the
transaction document provisions. Therefore, S&P withdrew its
ratings on these notes in line with their full redemption and
assigned ratings to the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture. The affirmed ratings on the class C-R and D-R notes were
unaffected by the amendment.
The class D-R note does not pass our cash flow stresses at its
current rating. The affirmation reflects the note's subordination
levels and the transaction's stable performance since the downgrade
in September 2020.
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. 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."
Ratings Assigned
Benefit Street Partners CLO III Ltd./Benefit Street Partners CLO
III LLC
Replacement class A1-R2, $304.71 million: AAA (sf)
Replacement class A2-R2, $70.00 million: AA (sf)
Replacement class B-R2, $35.30 million: A (sf)
Ratings Affirmed
Benefit Street Partners CLO III Ltd./Benefit Street Partners CLO
III LLC
Class C-R: BB+ (sf)
Class D-R: B- (sf)
Ratings Withdrawn
Benefit Street Partners CLO III Ltd./Benefit Street Partners CLO
III LLC
Class A1-R to NR from 'AAA (sf)'
Class A2-R to NR from 'AA (sf)'
Class B-R to NR from 'A (sf)'
Other Outstanding Notes
Benefit Street Partners CLO III Ltd./Benefit Street Partners CLO
III LLC
Subordinated notes: Not rated
BENEFIT STREET XXIII: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Benefit Street Partners
CLO XXIII Ltd./Benefit Street Partners CLO XXIII LLC's fixed- and
floating-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Benefit Street Partners CLO XXIII Ltd./Benefit Street Partners
CLO XXIII LLC
Class A-1, $347.0 million: AAA (sf)
Class A-2, $37.0 million: AAA (sf)
Class B-1, $25.5 million: AA (sf)
Class B-2, $46.5 million: AA (sf)
Class C, $36.0 million: A (sf)
Class D, $36.0 million: BBB- (sf)
Class E, $21.0 million: BB- (sf)
Subordinated notes, $60.0 million: Not rated
BENEFIT STREET XXIII: S&P Assigns Prelim BB- (sf) Rating E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Benefit
Street Partners CLO XXIII Ltd.'s fixed- and 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 preliminary ratings are based on information as of April 26,
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 diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans that are governed by collateral
quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Benefit Street Partners CLO XXIII Ltd.
Class A-1, $347.00 million: AAA (sf)
Class A-2, $37.00 million: AAA (sf)
Class B-1, $25.50 million: AA (sf)
Class B-2, $46.50 million: AA (sf)
Class C, $36.00 million: A (sf)
Class D, $36.00 million: BBB- (sf)
Class E, $21.00 million: BB- (sf)
Subordinated notes, $60.00 million: Not rated
BSPRT 2021-FL6: DBRS Finalizes B(low) Rating on Class H Notes
-------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by BSPRT 2021-FL6 Issuer, Ltd:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)
The Issuer elected to make certain changes to the non-offered Class
G certificate after DBRS Morningstar assigned a provisional rating
of BB (sf). The resulting finalized provisional rating DBRS
Morningstar assigned to the non-offered Class G certificate in
light of the changes was BB (low) (sf).
All trends are Stable.
The initial collateral includes 21 mortgage loans, consisting of
eight whole loans and 13 fully funded senior, senior pari passu, or
pari passu participations secured by commercial or multifamily real
estate properties with an initial cut-off balance totaling $446.7
million. Twenty of the mortgages have floating rates, while one
loan has a fixed rate. The transaction is a managed vehicle, which
includes a 180-day ramp-up acquisition period and subsequent
30-month reinvestment period. The ramp-up acquisition period will
be used to increase the trust balance by $253.3 million to a total
target collateral principal balance of $700.0 million. DBRS
Morningstar assessed the $253.3 million ramp component using a
conservative pool construct, and, as a result, the ramp loans have
expected losses above the pool weighted-average (WA) loan expected
loss. During the reinvestment period, so long as the note
protection tests are satisfied and no event of default has occurred
and is continuing, the collateral manager may direct the
reinvestment of principal proceeds to acquire reinvestment
collateral interest, including funded companion participations,
meeting the eligibility criteria. The eligibility criteria, among
other things, has minimum debt service coverage ratio (DSCR),
loan-to-value (LTV), 14 Herfindahl score, and loan size
limitations. This pertains to all loans in the pool with exception
to Palms on Lamar (7.2% of pool), which is only subject to Loan
Specific Eligibility Criteria. Lastly, the eligibility criteria
stipulates Rating Agency Confirmation on ramp loans, reinvestment
loans, and a $1.0 million threshold on pari passu participation
acquisitions if a portion of the underlying loan is already
included in the pool, thereby allowing DBRS Morningstar the ability
to review the new collateral interest and any potential impacts to
the overall ratings.
For the floating-rate loans, DBRS Morningstar used the one-month
Libor index, which is based on the lower of a DBRS Morningstar
stressed rate that corresponded to the remaining fully extended
term of the loans or the strike price of the interest rate cap with
the respective contractual loan spread added to determine a
stressed interest rate over the loan term. When the cut-off
balances were measured against the DBRS Morningstar As-Is Net Cash
Flow (NCF), 18 loans, comprising 92.1% of the initial pool balance,
had a DBRS Morningstar As-Is DSCR of 1.00 times (x) or below, a
threshold indicative of default risk. Additionally, the DBRS
Morningstar Stabilized DSCR of 11 loans, comprising 67.7% of the
initial pool balance, was 1.00x or below, which is indicative of
elevated refinance risk. The properties are often transitioning
with potential upside in cash flow; however, DBRS Morningstar does
not give full credit to the stabilization if there are no holdbacks
or if other loan structural features in place are insufficient to
support such treatment. Furthermore, even with the structure
provided, DBRS Morningstar generally does not assume the assets to
stabilize above market levels.
The transaction will have a sequential-pay structure.
The sponsor for the transaction, BSPRT 2021-FL6 Holder, LLC, is an
indirect wholly owned subsidiary of Benefit Street Partners Realty
Trust, Inc. (BSPRT) and an experienced commercial real estate (CRE)
collateralized loan obligation (CLO) issuer and collateral manager.
As of September 30, 2020, BSPRT managed a commercial mortgage debt
portfolio of approximately $2.6 billion and had issued six CRE CLO
transactions. Through December 31, 2020, BSPRT had not realized any
losses on any of its CRE bridge loans. Additionally, BSPRT will
purchase and retain 100.0% of the Class F Notes, the Class G Notes,
the Class H Notes, and the Preferred Shares, which total $115.5
million, or 16.5% of the transaction total.
77.9% of the total pool comprises multifamily (62.5%), self-storage
(9.3%), and industrial (6.1%) properties. These property types have
historically shown lower defaults and losses. Multifamily
properties benefit from staggered lease rollover and generally low
expense ratios compared with other property types. While revenue is
quick to decline in a downturn because of the short-term nature of
the leases, it is also quick to respond when the market improves.
Furthermore, the pool has limited office and retail exposure,
comprising 22.1% of the pool, which have experienced considerable
disruption as a result of the Coronavirus Disease (COVID-19)
pandemic with mandatory closures, stay-at-home orders, retail
bankruptcies, and consumer shifts to online purchasing.
Additionally, the pool contains no loans backed by hotel
properties.
The business plan score (BPS) for loans DBRS Morningstar analyzed
was between 1.37 and 2.42, with an average of 2.03. On a scale of 1
to 5, a higher DBRS Morningstar BPS is indicative of more risk in
the sponsor's business plan. Consideration is given to the
anticipated lift at the property from current performance, planned
property improvements, sponsor experience, projected time horizon,
and overall complexity. Compared with similar transactions, the
subject has a relatively low average BPS, which is indicative of
lower risk.
The ongoing coronavirus pandemic continues to pose challenges and
risks to the CRE sector, and while DBRS Morningstar expects
multifamily (62.5% of the pool) to fare better than most other
property types, the long-term effects on the general economy and
consumer sentiment are still unclear. DBRS Morningstar received
coronavirus and business plan updates for all loans in the pool,
confirming that all debt service payments have been received in
full through February 2021. Furthermore, no loans are in
forbearance or other debt service relief and no loan modifications
were requested. All loans in the pool have been originated after
March 2020 or the beginning of the pandemic. Loans originated after
the pandemic include timely property performance reports and
recently completed third-party reports, including appraisals. Given
the uncertainty and elevated execution risk stemming from the
coronavirus pandemic, 13 loans, totaling 60.7% of the trust
balance, are structured with substantial upfront interest
reserves.
The transaction is managed and includes a delayed-close loan, a
ramp-up component, a reinvestment period, and a replenishment
period, which could result in negative credit migration and/or an
increased concentration profile over the life of the transaction.
The risk of negative migration is also partially offset by
eligibility criteria that outline DSCR, LTV, 14 Herfindahl minimum,
property type, and loan size limitations for ramp and reinvestment
assets. DBRS Morningstar has the ability to provide a no-downgrade
confirmation for new ramp loans, companion participations over $1.0
million, and new reinvestment loans. These loans will be analyzed
by DBRS Morningstar before they come into the pool and reviewed for
potential ratings impact. DBRS Morningstar accounted for the
uncertainty introduced by the 180-day ramp-up period by running a
ramp scenario that simulates the potential negative credit
migration in the transaction based on the eligibility criteria. The
ramp component has a higher expected loss than the weighted-average
pre-ramp pool.
DBRS Morningstar has analyzed the loans to a stabilized cash flow
that is, in some instances, above the in-place cash flow. It is
possible that the sponsors will not successfully execute their
business plans and that the higher stabilized cash flow will not
materialize during the loan term, particularly with the ongoing
coronavirus pandemic and its impact on the overall economy. A
sponsor's failure to execute the business plan could result in a
term default or the inability to refinance the fully funded loan
balance. DBRS Morningstar made relatively conservative
stabilization assumptions and, in each instance, considered the
business plan to be rational and the loan structure to be
sufficient to execute such plans. In addition, DBRS Morningstar
analyzes loss given default based on the as-is credit metrics,
assuming the loan is fully funded with no NCF or value upside.
As of the cut-off date, the pool contains 21 loans and is
concentrated by CRE CLO standards with a lower Herfindahl score of
14.85. Furthermore, the top 10 loans represent 74.7% of the pool.
The 21 loans are secured by 25 properties across 13 states, and the
properties are primarily in core markets with the overall pool's WA
DBRS Morningstar Market Rank at 3.7. The cut-off date balance will
increase from a delayed-close loan and ramp-up loans, which is
projected to occur 180 days after closing. New loans will increase
loan count and add broader diversity to the pool, raising the
Herfindahl score.
Because of the ongoing coronavirus pandemic, DBRS Morningstar was
unable to perform site inspections on any of the properties in the
pool. As a result, DBRS Morningstar relied more heavily on
third-party reports, online data sources, and information provided
by the Issuer to determine the overall DBRS Morningstar property
quality assigned for each loan. Recent third-party reports were
provided for all loans and contained property quality commentary
and photos. DBRS Morningstar made relatively conservative property
quality adjustments with only one loan, 4 West Las Olas (2.9% of
the pool), being modeled with Above Average property quality.
Furthermore, no loans received Excellent property quality
distinction and three loans, comprising 23.0% of the pool, were
modeled with Average + property quality.
Twenty loans, comprising 94.0% of the pool, have floating interest
rates and are interest only during the initial loan term, creating
interest rate risk should interest rates increase. For the
floating-rate loans, DBRS Morningstar used the one-month Libor
index, which is based on the lower of a DBRS Morningstar stressed
rate that corresponded to the remaining fully extended term of the
loans or the strike price of the interest rate cap with the
respective contractual loan spread added to determine a stressed
interest rate over the loan term. Additionally, all loans have
extension options, and, in order to qualify for these options, the
loans must meet minimum DSCR and LTV requirements. All loans are
short-term and, even with extension options, have a fully extended
loan term of five years maximum. The borrowers for 20 loans,
totaling 94.0% of the trust balance, have purchased Libor rate caps
that range between 0.50% and 3.00% to protect against rising
interest rates over the term of the loan.
The underlying mortgage loans for the transaction will pay the
floating rate, which presents potential benchmark transition risk
as the deadline approaches for the elimination of Libor. The
transaction documents provide for the transition to an alternative
benchmark rate, which is primarily contemplated to be either Term
Secured Overnight Financing Rate (SOFR) plus the applicable
Alternative Rate Spread Adjustment or Compounded SOFR plus the
Alternative Rate Spread Adjustment. There is an inherent conflict
of interest between the special servicer and the seller as they are
related entities. Given that the special servicer is typically
responsible for pursuing remedies from the seller for breaches of
the representations and warranties, this conflict could be
disadvantageous to the noteholders. While the special servicer is
classified as the enforcing transaction party, if a loan repurchase
request is received, the trustee and seller will be notified and
the seller is required to correct the material breach or defect or
repurchase the affected loan within a maximum period of 90 days.
The repurchase price would amount to the outstanding principal
balance and unpaid interest less relevant seller expenses and
protective advances made by the servicer. The Issuer retains 16.50%
equity in the transaction holding the first-loss piece.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX COMMERCIAL 2019-XL: DBRS Confirms B(low) Rating on Class J Certs
-------------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2019-XL issued by BX Commercial
Mortgage Trust 2019-XL as follows:
-- Class A at AAA (sf)
-- Class X-CP at AA (low) (sf)
-- Class X-NCP at AA (low) (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D as A (high) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (low) (sf)
-- Class J at B (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction, which remains in line with DBRS Morningstar's
expectations at issuance. The collateral for trust is a $5.6
billion first-lien mortgage loan on 406 industrial properties
totaling over 65 million square feet (sf) spread across 18 states.
As of the March 2021 remittance, the pool was paid down by $333.1
million (5.9% of the original balance) following several property
releases. The proceeds were distributed pro rata through the
capital stack, reducing the total pool balance to $5.27 billion.
Original trust loan proceeds of $5.6 billion along with $1.0
billion of mezzanine financing, a $1.9 billion balance sheet loan,
$9.4 million of assumed debt, and $2.6 billion of borrower equity
were used to facilitate the acquisition of the portfolio for
approximately $11.1 billion. The underlying loan for the subject
transaction pays interest only (IO) with a two-year initial term
and three one-year extension options. The portfolio is a part of
Blackstone's larger $18.7 billion acquisition of over 170 million
sf of U.S. industrial assets from Singapore-based GLP. Following
the acquisition, Blackstone surpassed Prologis as the world's
largest owner of industrial and distribution assets, with a
portfolio of over 356 million sf.
At issuance, the portfolio had a property Herfindahl score of over
200 by allocated loan amount, which is among the highest DBRS
Morningstar has seen for single-borrower industrial portfolios. The
properties are located across 18 U.S. states in multiple regions
and the portfolio also exhibits substantial tenant diversity and
granularity. No tenant accounted for more than 2.3% of in-place
base rent at issuance and no property accounted for more than 2.1%
of trailing 12-month (T-12) net operating income (NOI). As of Q3
2020, the T-12 debt service coverage ratio (DSCR) was reported at
1.63 times (x) with an occupancy rate of 92%, in line with the
YE2019 DSCR and occupancy rate of 1.64x and 94%, respectively.
In the analysis for these rating actions, DBRS Morningstar utilized
a net cash flow (NCF) figure of $343.3 million ($364.9 million at
issuance adjusted for property releases) and a cap rate of 6.75%
was applied, resulting in a DBRS Morningstar Value of $5.09 billion
($5.41 billion at issuance), a variance of -36.9% from the
paydown-adjusted appraised value of $8.1 billion ($8.5 billion at
issuance). The DBRS Morningstar Value implies a loan-to-value (LTV)
of 103.6%, as compared with the LTV on the adjusted appraised value
of 65.4%. The cap rate applied is at the lower end of the range of
DBRS Morningstar Cap Rate Ranges for industrial properties,
reflective of the portfolio's locations in gateway industrial
markets with high barriers to entry, asset quality, and
investment-grade tenancy. In addition, the 6.75% cap rate applied
is substantially above the implied cap rate of 4.3% based on the
Issuer's NCF and appraised value.
DBRS Morningstar made positive qualitative adjustments to the final
LTV sizing benchmarks used for this rating analysis totaling 8.0%
to account for cash flow volatility, property quality, and market
fundamentals. DBRS Morningstar also made other negative adjustments
to account for certain structural aspects: weak release provisions
and partial pro rata principal paydown upon a release of any
property or properties (up to the free payment amount and subject
to certain conditions). For the former, DBRS Morningstar decreased
its LTV thresholds at each rating category by 25 basis points; for
the latter, DBRS Morningstar decreased its thresholds at the AAA
(sf) through A (high) (sf) rating categories. DBRS Morningstar
reduced the AAA (sf) category by 1.88% and then tapered the
decrease to 1.34% at A (high) (sf).
Notes: All figures are in U.S. dollars unless otherwise noted.
BX COMMERCIAL 2021-MC: S&P Assigns Prelim B- Rating on E Certs
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BX
Commercial Mortgage Trust 2021-MC's commercial mortgage
pass-through certificates.
The note issuance is a CMBS securitization backed by a two-year,
interest-only, floating-rate commercial mortgage loan totaling
$159.1 million, subject to three, one-year extension options. The
loan is secured by the first-mortgage lien on the borrowers'
fee-simple interests in 2 & 3 MiamiCentral, which are two class A
office buildings totaling 329,260 sq. ft. located in Downtown
Miami.
The preliminary ratings are based on information as of April. 29,
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 collateral's
historic and projected performance, the sponsor's and the manager's
experience, respectively, the trustee-provided liquidity, the loan
terms, and the transaction's structure.
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
BX Commercial Mortgage Trust 2021-MC(i)
Class A, $50,350,000: AAA (sf)
Class B , $12,749,000: AA- (sf)
Class C, $9,566,500: A- (sf)
Class D, $11,732,500: BBB- (sf)
Class E, $15,931,500: BB- (sf)
Class F, $15,428,000: B-
Class G, $35,387,500: NR
V interest(ii), $7,955,000: NR
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933, to institutional accredited investors under Regulation D
and to non-U.S. persons under Regulation S.
(ii)Non-offered vertical risk retention interest, which will be
retained by Natixis Real Estate Capital LLC.
NR--Not rated.
CANADIAN COMMERCIAL 2015-3: DBRS Confirms BB(low) Rating on G Certs
-------------------------------------------------------------------
DBRS Limited confirmed the rating of the following class of
Commercial Mortgage Pass-Through Certificates, Series 2015-3 issued
by Canadian Commercial Mortgage Origination Trust 2015-3 as
follows:
-- Class G at BB (low) (sf)
The trend is Stable. DBRS Morningstar also discontinued its ratings
on Classes D, E, and F, as they have been repaid in full.
The rating confirmation reflects the increased credit support to
the bonds as a result of successful loan repayments since the last
review. At issuance, the transaction consisted of 42 fixed-rate
loans secured by 59 properties, with a trust balance of $570.1
million. As of the March 2021 remittance, only two loans remained
in the trust, with a balance of $16.6 million, representing a
collateral reduction of 97.1% due to loan repayments and scheduled
loan amortization. The remaining rated Class G bond has an
outstanding principal balance of just $4.5 million as of the March
2021 remittance.
As of the March 2021 remittance, there was one loan, St. James
Square (Prospectus ID#11, representing 74.2% of the remaining pool
balance) in special servicing. The loan is secured by a
131,906-square-foot (sf) mixed-use retail and office complex in
Winnipeg, Manitoba. The loan was previously on the servicer's
watchlist after the then second-largest tenant, Staples Canada
(22.3% of net rentable area (NRA), vacated its space upon lease
expiration in September 2017. The departure resulted in an
occupancy decline from 91.6% at YE2016 to 59.4% according to the
November 2020 rent roll provided by the servicer. The loan matured
in December 2019 and the servicer ultimately transferred the loan
to the special servicer in March 2020 after a replacement loan was
not obtained. A loan modification was negotiated, which further
extended the maturity date to January 2021, at an increased
interest rate. As of March 2021, the loan remains outstanding and
will likely require an additional loan modification.
The second remaining loan in the pool, Vic East Landing (Prospectus
ID#38, representing 25.7% of the remaining pool balance), is
secured by a 17,526-sf mixed-use retail and office property in
Regina, Saskatchewan, which is 100% occupied by two tenants. The
loan had an original maturity date of June 1, 2020, but due to
uncertainty surrounding the pandemic, and ongoing lease
negotiations with the largest tenant, Farm Credit Canada (68.4% of
NRA), which had a lease expiration in February 2021, the borrower
was unable to obtain takeout financing. The borrower was granted a
short-term extension to September 1, 2020, but was still unable to
obtain financing and the loan transferred to the special servicer
in November 2020. The borrower was later able to negotiate a
five-year renewal with Farm Credit Canada, with a new lease
expiration date in February 2026, though at a lower rental rate,
resulting in a lower projected net operating income. As of March
2021, the servicer reported that the borrower was continuing to
work toward obtaining a replacement loan, with the servicer also
looking to pursue remedies including foreclosure. Although this
loan is not tagged as specially serviced in the servicer's
reporting, it appears the loan is being handled by the special
servicing arm of the issuer.
Given the $12.1 million remaining in the unrated Class H bond for
this transaction, there is significant cushion against loss for the
two remaining loans in the pool, which combine for a balance of
$16.6 million. The cushion suggests the remaining loans would have
to experience a loss severity in excess of 70.0% for the Class H
bond to take a loss, which is well above the projected losses
assumed by DBRS Morningstar in the analysis for this review.
Notes: All figures are in Canadian dollars unless otherwise noted.
CARVANA AUTO 2021-N1: DBRS Confirms BB Rating on Class E Notes
--------------------------------------------------------------
DBRS, Inc. confirmed its provisional ratings on the following
classes of notes to be issued by Carvana Auto Receivables Trust
2021-N1, originally assigned on March 15, 2021. The confirmations
are in conjunction with DBRS Morningstar's "Global Macroeconomic
Scenarios: March 2021 Update" published on March 17, 2021:
-- $185,400,000 Class A at AAA (sf)
-- $53,600,000 Class B at AA (sf)
-- $58,200,000 Class C at A (sf)
-- $40,400,000 Class D at BBB (sf)
-- $34,400,000 Class E at BB (sf)
-- $28,000,000 Class F at B (sf)
The transaction's assumptions consider DBRS Morningstar's set of
macroeconomic scenarios for select economies related to the
Coronavirus Disease (COVID-19), available in its commentary "Global
Macroeconomic Scenarios: March 2021 Update," published on March 17,
2021. DBRS Morningstar initially published macroeconomic scenarios
on April 16, 2020, which have been regularly updated. The scenarios
were last updated on March 17, 2021, and are reflected in DBRS
Morningstar's rating analysis. The assumptions consider the
moderate macroeconomic scenario outlined in the commentary, with
the moderate scenario serving as the primary anchor for current
ratings. The moderate scenario factors in increasing success in
containment during the first half of 2021, enabling the continued
relaxation of restrictions.
Notes: All figures are in U.S. dollars unless otherwise noted.
CARVANA AUTO 2021-N1: DBRS Finalizes B(sf) Rating on Class F Notes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the following
classes of notes to be issued by Carvana Auto Receivables Trust
2021-N1:
-- $185,400,000 Class A Notes at AAA (sf)
-- $53,600,000 Class B Notes at AA (sf)
-- $58,200,000 Class C Notes at A (sf)
-- $40,400,000 Class D Notes at BBB (sf)
-- $34,400,000 Class E Notes at BB (sf)
-- $28,000,000 Class F Notes at B (sf)
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, a fully funded reserve fund, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(3) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Carvana,
LLC (Carvana) and Bridgecrest Credit Company, LLC and considers the
entities to be an acceptable originator and servicer, respectively,
of auto loans.
(4) The operational history of Carvana and the strength of the
overall company and its management team.
-- Company management has considerable experience in the consumer
lending business.
-- Carvana's platform is a technology-driven platform that focuses
on providing the customer with high-level experience, selection,
and value. Its website and smartphone app provide the consumer with
vehicle search and discovery (currently showing more than 20,000
vehicles online); the ability to trade or sell vehicles almost
instantaneously; and real-time, personalized financing. Carvana has
developed underwriting policies and procedures for use across the
lending platform that leverages technology where appropriate to
validate customer identity, income, employment, residency,
creditworthiness, and proper insurance coverage.
-- Carvana has developed multiple proprietary risk models to
support various aspects of its vertically integrated automotive
lending business. All proprietary risk models used in Carvana's
lending business are regularly monitored and tested. The risk
models are updated from time to time to adjust for new performance
data, changes in customer and economic trends, and additional
sources of third-party data.
(5) The credit quality of the collateral, which includes
Carvana-originated loans with Deal Scores of 49 or lower.
-- As of the March 7, 2021, cut-off date, the collateral pool for
the transaction is primarily composed of receivables due from
nonprime obligors with a weighted-average (WA) FICO score of 571
and WA annual percentage rate of 19.27% and a WA loan-to-value
ratio of 101.54%. Approximately 40.59%, 33.49%, and 25.92% of the
pool include loans with Carvana Deal Scores greater than or equal
to 30, between 10 and 29, and between 0 and 9, respectively.
Additionally, 0.13% of the pool is composed of obligors with FICO
scores greater than 800, 32.67% consists of FICO scores between 601
to 800, and 67.20% is from obligors with FICO scores less than or
equal to 600 or with no FICO score.
-- DBRS Morningstar analyzed the performance of Carvana's auto
loan and retail installment contract originations and static pool
vintage loss data broken down by Deal Score to determine a
projected CNL expectation for the CRVNA 2021-N1 pool.
(6) DBRS Morningstar's projected losses include the assessment of
the impact of the Coronavirus Disease (COVID-19). While
considerable uncertainty remains with respect to the intensity and
duration of the shock, the DBRS Morningstar-projected CNL includes
an assessment of the expected impact on consumer behavior. The DBRS
Morningstar CNL assumption is 17.50% based on the cut-off date pool
composition.
-- The transaction assumptions consider DBRS Morningstar's set of
macroeconomic scenarios for select economies related to the
coronavirus, available in its commentary "Global Macroeconomic
Scenarios: March 2021 Update," published on March 17, 2021. DBRS
Morningstar initially published macroeconomic scenarios on April
16, 2020, that have been regularly updated. The scenarios were last
updated on March 17, 2021, and are reflected in DBRS Morningstar's
rating analysis. The assumptions also take into consideration
observed performance during the 2008–09 financial crisis and the
possible impact of stimulus. The assumptions consider the moderate
macroeconomic scenario outlined in the commentary, with the
moderate scenario serving as the primary anchor for the current
ratings. The moderate scenario factors in increasing success in
containment during the first half of 2021, enabling the continued
relaxation of restrictions.
(7) Carvana's financial condition as reported in its annual report
on Form 10-K filed as of February 25, 2021, and 10-Q.
(8) CRVNA 2021-N1 provides for Class F Notes with an assigned
rating of B (sf). While DBRS Morningstar's "Rating U.S. Retail Auto
Loan Securitizations" methodology does not set forth a range of
multiples for this asset class for the B (sf) level, the analytical
approach for this rating level is consistent with that contemplated
by the methodology. The typical range of multiples applied in the
DBRS Morningstar stress analysis for a B (sf) rating is 1.00 times
(x) to 1.25x.
(9) The legal structure and presence of legal opinions, which
address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Carvana, that
the trust has a valid first-priority security interest in the
assets, and consistency with the DBRS Morningstar "Legal Criteria
for U.S. Structured Finance."
-- The CRVNA 2020-N1 transaction included a repurchase obligation
on each receivable if an application for title is not filed within
45 days of close or a title is not obtained within 180 days of
closing. Carvana has removed the language pertaining to the time
frame. As a result, there may be a percentage of the pool that may
not have a title by the 180-day after close mark. The risk is
mitigated by the representations made under the Receivables
Purchase Agreement in which Carvana represents that each receivable
will have a certificate of tile and if title isn't obtained it
remains a repurchase obligation to the Seller. Also, under the
Servicing Agreement, the servicer continues to represent that it
will do everything as customary practice to obtain such title.
The rating on the Class A Notes reflects 54.90% of initial hard
credit enhancement provided by subordinated notes in the pool
(53.65%) and the reserve account (1.25%). The ratings on the Class
B, C, D, E, and F Notes reflect 41.50%, 26.95%, 16.85%, 8.25%, and
1.25% of initial hard credit enhancement, respectively.
Notes: All figures are in U.S. dollars unless otherwise noted.
CARVANA AUTO 2021-P1: DBRS Finalizes BB(high) Rating on N Notes
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by Carvana Auto Receivables Trust 2021-P1:
-- $50,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $130,000,000 Class A-2 Notes at AAA (sf)
-- $130,000,000 Class A-3 Notes at AAA (sf)
-- $68,000,000 Class A-4 Notes at AAA (sf)
-- $14,000,000 Class B Notes at AA (sf)
-- $16,000,000 Class C Notes at A (sf)
-- $7,000,000 Class D Notes at BBB (sf)
-- $17,000,000 Class N Notes at BB (high) (sf)
The ratings are based on a review by DBRS Morningstar of the
following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, fully funded reserve funds, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(3) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Carvana,
LLC and Bridgecrest Credit Company, LLC and considers the entities
to be an acceptable originator and servicer, respectively, of auto
loans.
(4) The operational history of Carvana and the strength of the
overall company and its management team.
-- Company management has considerable experience in the consumer
lending business.
-- Carvana's platform is a technology-driven platform that focuses
on providing the customer with high-level experience, selection,
and value. Its website and smartphone app provide the consumer with
vehicle search and discovery (currently showing more than 20,000
vehicles online); the ability to trade or sell vehicles almost
instantaneously; and real-time, personalized financing. Carvana has
developed underwriting policies and procedures for use across the
lending platform that leverages technology where appropriate to
validate customer identity, income, employment, residency, credit
worthiness, and proper insurance coverage.
-- Carvana has developed multiple proprietary risk models to
support various aspects of its vertically integrated automotive
lending business. All proprietary risk models used in Carvana's
lending business are regularly monitored and tested. The risk
models are updated from time to time to adjust for new performance
data, changes in customer and economic trends, and additional
sources of third-party data.
(5) The credit quality of the collateral, which includes
Carvana-originated loans with a Deals Score of 50 or higher.
-- As of the February 27, 2021, cut-off date, the collateral pool
for the transaction is primarily composed of receivables due from
prime and near-prime obligors with a weighted-average (WA) FICO
score of 707 and WA annual percentage rate of 8.19% and a WA
loan-to-value ratio of 95.45%. Approximately 39.51%, 41.94%, and
18.55% of the pool include loans with CRVNA Deal Scores greater
than or equal to 80, between 60 and 79, and between 50 and 59,
respectively. Additionally, 11.95% of the pool comprises obligors
with FICO scores greater than 800, 35.92% consists of FICO scores
between 701 to 800, and 1.56% is from obligors with FICO scores
less than or equal to 600 or with no FICO score.
-- DBRS Morningstar analyzed the performance of Carvana's auto
loan and retail installment contract originations and static pool
vintage loss data broken down by Deal Score to determine a
projected CNL expectation for the CRVNA 2021-P1 pool.
(6) DBRS Morningstar's projected losses include the assessment of
the impact of the Coronavirus Disease (COVID-19). While
considerable uncertainty remains with respect to the intensity and
duration of the shock, DBRS Morningstar-projected CNL includes an
assessment of the expected impact on consumer behavior. The DBRS
Morningstar CNL assumption is 2.80% based on the cut-off date pool
composition.
-- The transaction assumptions consider DBRS Morningstar's set of
macroeconomic scenarios for select economies related to the
coronavirus, available in its commentary "Global Macroeconomic
Scenarios: March 2021 Update," published on March 17, 2021. DBRS
Morningstar initially published macroeconomic scenarios on April
16, 2020, that have been regularly updated. The scenarios were last
updated on March 17, 2021, and are reflected in DBRS Morningstar's
rating analysis. The assumptions also take into consideration
observed performance during the 2008–09 financial crisis and the
possible impact of stimulus. The assumptions consider the moderate
macroeconomic scenario outlined in the commentary, with the
moderate scenario serving as the primary anchor for current
ratings. The moderate scenario factors in increasing success in
containment during the first half of 2021, enabling the continued
relaxation of restrictions.
(7) Carvana's financial condition as reported in its annual report
on Form 10-K filed as of February 25, 2021, and 10-Q.
(8) The legal structure and presence of legal opinions, which
addresses the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Carvana, that
the trust has a valid first-priority security interest in the
assets, and consistency with the DBRS Morningstar "Legal Criteria
for U.S. Structured Finance."
-- The CRVNA 2020-P1 transaction included a repurchase obligation
on each receivable if an application for a title is not filed
within 45 days of close or a title is not obtained within 180 days
of closing. Carvana has removed the language pertaining to the
timeframe. As a result, there may be a percentage of the pool that
may not have a title by the 180-day after close mark. The risk is
mitigated by the representations made under the Receivables
Purchase Agreement in which Carvana represents that each receivable
will have a certificate of title and if a title isn't obtained it
remains a repurchase obligation to the Seller. Also, under the
Servicing Agreement, the servicer continues to represent that it
will do everything as customary practice to obtain such title.
The ratings on the Class A-1, A-2, A-3, and A-4 Notes reflect 9.42%
of initial hard credit enhancement provided by subordinated notes
in the pool (8.92%) and the reserve account (0.50%). The ratings on
the Class B, C, and D Notes reflect 6.04%, 2.19%, and 0.50% of
initial hard credit enhancement, respectively.
Notes: All figures are in U.S. dollars unless otherwise noted.
CEDAR FUNDING II: S&P Assigns B- (sf) Rating on Class F Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-RR, B-RR,
C-RR, D-1RR, D-2RR, and ERR replacement notes and the new class A-X
and F notes from Cedar Funding II CLO Ltd./Cedar Funding II CLO
LLC, a CLO originally issued in March 2013 and refinanced in June
2017 that is managed by AEGON USA Investment Management LLC. S&P
withdrew its ratings on the previously refinanced class A-1R, A-FR,
B-R, C-R, D-R, and E-R notes following payment in full on the April
22, 2021 refinancing date.
On the April 22, 2021 refinancing date, the proceeds from the class
A-RR, B-RR, C-RR, D-1RR, D-2RR, and ERR replacement notes issuances
were used to redeem the previously refinanced notes as outlined in
the transaction document provisions. Therefore, S&P withdrew its
ratings on the previously refinanced notes in line with their full
redemption, and it is assigning ratings to the replacement notes.
The replacement notes are being issued via a supplemental
indenture. The following are based on provisions in the transaction
documents and portfolio characteristics:
-- The class F notes are being added to the transaction.
-- The stated maturity will be extended 3.9 years and the
reinvestment period will be extended 4.9 years.
-- The class A-X notes will be issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first 14 payment dates.
-- 100.0% of the identified underlying collateral obligations have
credit ratings assigned by S&P Global Ratings.
-- 97.9% of the identified underlying collateral obligations have
recovery ratings assigned by S&P Global Ratings.
S&P said, "Additionally, the ratings reflect our opinion that the
credit support available is commensurate with the associated rating
levels. The replacement class B-RR, C-RR, and E-RR notes are issued
at a lower spread over three-month LIBOR than the original notes.
The replacement class A-RR notes are issued at a floating-rate
spread replacing the class A-1R floating- and A-FR fixed-rate
notes. The replacement class D-1RR and D-2RR notes are issued at a
floating-rate spread and fixed-rate coupon notes, respectively,
replacing the class D-R floating-rate notes.
"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 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 further rating actions
as we deem necessary."
Ratings Assigned
Cedar Funding II CLO Ltd./Cedar Funding II CLO LLC
Class A-X, $5.38 million: AAA (sf)
Class A-RR, $224.50 million: AAA (sf)
Class B-RR, $38.00 million: AA (sf)
Class C-RR (deferrable), $20.75 million: A (sf)
Class D-1RR (deferrable), $17.50 million: BBB- (sf)
Class D-2RR (deferrable), $5.25 million: BBB- (sf)
Class E-RR (deferrable), $10.00 million: BB- (sf)
Class F (deferrable), $4.25 million: B- (sf)
Subordinated notes, $34.75 million: NR
Ratings Withdrawn
Cedar Funding II CLO Ltd./Cedar Funding II CLO LLC
Class A-1R: to NR from 'AAA (sf)'
Class A-FR: to NR from 'AAA (sf)'
Class B-R: to NR from 'AA (sf)'
Class C-R: to NR from 'A (sf)'
Class D-R: to NR from 'BBB (sf)'
Class E-R: to NR from 'B (sf)'
NR--Not rated.
CENTERBRIDGE CREDIT 1: Moody's Gives (P)Ba3 Rating to Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of notes to be issued by Centerbridge Credit Funding 1,
Ltd. (the "Issuer" or "Centerbridge ").
Moody's rating action is as follows:
US$175,000,000 Class A Senior Secured Fixed Rate Notes due 2039
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$42,000,000 Class B Senior Secured Fixed Rate Notes due 2039 (the
"Class B Notes"), Assigned (P)Aa3 (sf)
US$22,750,000 Class C Mezzanine Secured Deferrable Fixed Rate Notes
due 2039 (the "Class C Notes"), Assigned (P)A3 (sf)
US$15,750,000 Class D Mezzanine Secured Deferrable Fixed Rate Notes
due 2039 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$24,500,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2039 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes, and the Class E Notes are referred to herein,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CDO's portfolio and structure.
Centerbridge Credit Funding 1 is a managed cash flow CDO. The
issued notes will be collateralized primarily by corporate bonds
and loans. At least 30% of the portfolio must consist of senior
secured loans (or participation interests therein), senior secured
notes, and eligible investments, and up to 15% of the portfolio may
consist of second lien loans.
Centerbridge Credit Funding 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 up to 50% of unscheduled principal
payments and proceeds from sales of credit risk assets. This is the
Manager's first CDO.
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: $350,000,000
Diversity Score: 41
Weighted Average Rating Factor (WARF): 3175
Weighted Average Coupon (WAC): 4.75%
Weighted Average Recovery Rate (WARR): 39.8%
Weighted Average Life (WAL): 11 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 regard 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.
CIFC FUNDING 2019-II: S&P Assigns Prelim BB- Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CIFC Funding
2019-II Ltd./CIFC Funding 2019-II LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of April 26,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
CIFC Funding 2019-II Ltd./CIFC Funding 2019-II LLC
Class A-N(i), $0.00 million: AAA (sf)
Class A-L loans(i), $248.53 million: AAA (sf)
Class A-R, $61.47 million: AAA (sf)
Class B-N(i), $0.00 million: AA (sf)
Class B-L loans(i), $18.00 million: AA (sf)
Class B-R, $52.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $49.96 million: Not rated
(i)The class A-L B-L loans will be issued pursuant to the class A-L
and B-L credit agreements, respectively. The aggregate principal
amount of each can be converted (in whole or in part) to class A-N
or B-N notes, respectively (but cannot be converted back to loans
following this).
CITIGROUP 2016-GC36: Fitch Lowers Class E Certs to 'CCC'
--------------------------------------------------------
Fitch has downgraded four and affirmed nine classes of Citigroup
Commercial Mortgage Trust (CGCMT) 2016-GC36 commercial mortgage
pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
CGCMT 2016-GC36
A-3 17324TAC3 LT AAAsf Affirmed AAAsf
A-4 17324TAD1 LT AAAsf Affirmed AAAsf
A-5 17324TAE9 LT AAAsf Affirmed AAAsf
A-AB 17324TAF6 LT AAAsf Affirmed AAAsf
A-S 17324TAJ8 LT AAAsf Affirmed AAAsf
B 17324TAK5 LT A+sf Downgrade AA-sf
C 17324TAM1 LT A-sf Affirmed A-sf
D 17324TAN9 LT B-sf Downgrade BBsf
E 17324TAQ2 LT CCCsf Downgrade B-sf
EC 17324TAL3 LT A-sf Affirmed A-sf
F 17324TAS8 LT CCCsf Affirmed CCCsf
X-A 17324TAG4 LT AAAsf Affirmed AAAsf
X-D 17324TAY5 LT B-sf Downgrade BBsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades reflect increased loss
expectations for the pool since Fitch's last rating action,
primarily on the specially serviced Glenbrook Square loan (8.9% of
pool) and the South Plains Mall loan (2.8%). Fitch has designated
20 loans (51.2%) as Fitch Loans of Concern (FLOC), including two
specially serviced loans (9.7%). Fitch's current ratings
incorporate a base case loss of 10.20%. The Negative Rating
Outlooks reflect losses that could reach 12.60% when factoring in
additional pandemic-related stresses and a potential outsized loss
on the South Plains Mall loan.
The largest contributor to loss expectations and largest increase
in loss since the last rating action is the specially serviced
Glenbrook Square loan (8.9%), which is secured by a super-regional
mall located in Fort Wayne, IN. The loan transferred to special
servicing in July 2020 for payment default and was 60 days
delinquent as of April 2021. According to the special servicer, the
borrower initially requested a transition of the property back to
the noteholder, which is currently being evaluated along with a
possible loan modification.
Fitch's base case loss on this loan has increased to 61% from 40%
at the prior rating action; the loss considers a discount to the
updated September 2020 appraisal value and implies a 20.6% cap rate
to the YE 2019 NOI.
Collateral anchors include Macy's and JCPenney. The collateral
anchor Carson's and noncollateral anchor Sears both closed their
stores at the property in 2018, and the Sears store has reportedly
been demolished. Collateral occupancy declined to 80.4% as of
December 2020 from 82.3% in March 2019 and 96.8% in September 2017.
The servicer previously indicated that the sponsor, Brookfield
Property Partners, entered into a new 10-year lease with Round 1
for 50% of the former Carson's space. Fitch has an outstanding
inquiry to the servicer for updates on the lease, as the tenant is
not shown on the rent roll or mall website.
Additionally, prior to the pandemic, there were plans to redevelop
the former Sears site into a development including HomeGoods and
Dave & Buster's, but construction halted on the project in mid-2020
and has yet to resume. Comparable in-line sales for tenants
occupying less than 10,000sf were $381 per sf (psf) as of YE 2020,
down from $436 psf at YE 2019, $415 psf as of TTM September 2018
and $414 psf at YE 2017.
The next largest increase in loss since the prior rating action is
the South Plains Mall loan (2.8%), which is secured by a
super-regional mall located in Lubbock, TX. The loan is sponsored
by Pacific Premier Retail Trust LLC, a joint venture between The
Macerich Company and a subsidiary of GIC Realty Private Limited.
Fitch's base case loss has increased to 15% from 11% at the prior
rating action, and is based on a 12% cap rate and 10% haircut to YE
2019 NOI. Fitch also performed an additional sensitivity that
applied a potential outsized loss of approximately 32%, which is
based on a 20% cap rate and 20% haircut to YE 2019 NOI; this
sensitivity scenario contributed to the Negative Rating Outlooks.
Fitch's loss accounts for upcoming lease rollover, declining
in-line tenant anchor sales and the continued vacancy of the
noncollateral Sears anchor space.
Collateral anchors include JCPenney, Dillard's Women, Dillard's Men
& Children and a noncollateral former Sears, which closed in late
2018. The borrower took control of the Sears space in July 2019,
but has yet to present a full development plan. At issuance, it was
planned that $20 million would be spent to convert the 80,000sf
first floor of Sears into a Dick's Sporting Goods/Field & Stream
concept and reduce the size of the Sears space to the 50,000sf
upper level. According to current servicer commentary, the borrower
stated that the current redevelopment plan is progressing well and
it is awaiting a few final components before the plan is ready for
approval. The Sears space was temporarily leased by Spirit
Halloween in fall 2020. The borrower also requested coronavirus
relief and is working with the lender toward a possible relief
solution.
Collateral occupancy was 90.1% as of December 2020, compared with
92.7% in September 2020 and 95.9% in March 2019. Near-term lease
rollover includes 7.6% of the NRA in 2021, 29.5% in 2022 and 7.7%
in 2023. The 2022 rollover is mostly concentrated in the
expirations of both Dillard's stores (combined 25.9%) in January
2022. Comparable in-line sales for tenants less than 10,000sf were
reported at $418 psf as of YE 2020, compared with $502 psf as of
TTM June 2019 and $461 psf as of TTM August 2018.
The two Dillard's stores reported combined YE 2020 sales of $118
psf, compared with $172 psf as of TTM June 2019 and $177 psf as of
TTM August 2018. JCPenney reported YE 2020 sales of $40 psf, down
from $93 psf as of TTM June 2019 and $96 psf as of TTM August 2018.
Premiere Cinemas Theater reported YE 2020 sales of $156,149 per
screen, down significantly from $537,000 per screen as of TTM June
2019 and $469,000 per screen as of TTM August 2018.
Increased Credit Enhancement: As of the April 2021 remittance
reporting, the pool's aggregate principal balance was paid down by
6.5% to $1.08 billion from $1.16 billion at issuance. Defeasance
increased to 4.3% of the pool (five loans) as of April 2021 from
1.4% (three loans) at the prior rating action, which includes one
of the top 15 loans (GSA Portfolio; 2.4%). Seven loans (29.7%) are
full term, interest only; and two loans (0.7%) are partial interest
only and have yet to begin amortizing, compared with 42.3% of the
original pool at issuance.
The transaction is expected to pay down by 10.3% based on scheduled
loan maturity balances. Since the prior rating action, one loan
(6725 Sunset Office; $21 million) was repaid at maturity in January
2021.
Additional Stresses Applied due to Coronavirus Exposure: Loans
secured by retail, hotel and multifamily properties represent
26.6%, 11.3% and 0.8% of the pool, respectively. Fitch's analysis
applied additional coronavirus-related stresses on six retail loans
(9.1%), five hotel loans (10.5%) and two mixed use loans, Austin
Block 21 and 215 West 34th Street & 218 West 35th Street (totaling
13.6%) with hotel and retail components; these additional stresses
contributed to the Negative Rating Outlooks.
The retail loans have a weighted average (WA) NOI debt service
coverage ratio (DSCR) of 1.68x and can withstand an average 40.4%
decline to NOI before DSCR falls below 1.00x. The hotel loans have
a WA NOI DSCR of 2.06x and can withstand an average 51.4% decline
to NOI before DSCR falls below 1.00x. The multifamily loans have a
WA NOI DSCR of 2.22x and can withstand an average 54.9% decline to
NOI before DSCR falls below 1.00x.
RATING SENSITIVITIES
The Negative Rating Outlooks reflect downgrade potential due to
performance concerns on the FLOCs, particularly the two regional
mall loans. The Stable Rating Outlooks reflect the increasing CE
and expected continued amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the two
regional mall loans and other FLOCs, coupled with additional
paydown and/or defeasance. Upgrades to classes B, C and EC
would likely occur with significant improvement in CE and/or
defeasance and/or the stabilization of the Glenbrook Square
and South Plains Mall loans, in addition to other properties
affected by the coronavirus pandemic, 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. Classes D, X-D, E and F are
unlikely to be upgraded absent significant performance
improvement on the South Plains Mall loan, other FLOCs and
higher recoveries than expected on the Glenbrook Square loan.
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. Downgrades to classes A-3
through A-AB are not likely due to the position in the capital
structure, but may occur should interest shortfalls affect
these classes. A downgrade of one category to classes A-S and
X-A is possible should all of the loans susceptible to the
coronavirus pandemic suffer losses and both the Glenbrook
Square and South Plains Mall loans experience outsized losses
or if interest shortfalls occur.
-- Downgrades to classes B, C and EC also may occur should all of
the loans susceptible to the coronavirus pandemic suffer
losses and both the Glenbrook Square and South Plains Mall
loans experience outsized losses. Downgrades to classes D and
X-D would occur should loss expectations increase from
continued performance decline of the FLOCs, loans susceptible
to the pandemic not stabilizing, additional loans default or
transfer to special servicing, higher losses incurred on the
specially serviced loans than expected and/or the Glenbrook
Square and South Plains Mall loans experience outsized losses.
-- Downgrades to classes E and 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, additional classes may be
assigned Negative Outlooks and/or 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.
CITIGROUP 2021-J1: S&P Assigns Prelim B (sf) Rating on B-5 Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Citigroup
Mortgage Loan Trust 2021-J1's $318.1 million mortgage pass-through
certificates.
The issuance is an RMBS transaction backed by first-lien,
fixed-rate fully amortizing residential mortgage loans, secured
primarily by single-family residential properties, planned-unit
developments, condominiums, and two-family residential properties
to prime borrowers. The pool has 373 loans, which are all qualified
mortgage loans.
The preliminary ratings are based on the term sheet dated April 26,
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 credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework for this
transaction;
-- The mortgage aggregator, Citigroup Global Markets Realty
Corp.;
-- The geographic concentration;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- The impact that the economic stress brought on by COVID-19, 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(i)
Citigroup Mortgage Loan Trust 2021-J1
Class A-1, $202,788,000: AAA (sf)
Class A-1-IO, $202,788,000(ii): AAA (sf)
Class A-1-IOX, $202,788,000(ii): AAA (sf)
Class A-1A, $202,788,000: AAA (sf)
Class A-1-IOW, $202,788,000(ii): AAA (sf)
Class A-1W, $202,788,000: AAA (sf)
Class A-2, $67,596,000: AAA (sf)
Class A-2-IO, $67,596,000(ii): AAA (sf)
Class A-2-IOX, $67,596,000(ii): AAA (sf)
Class A-2A, $67,596,000: AAA (sf)
Class A-2-IOW, $67,596,000(ii): AAA (sf)
Class A-2W, $67,596,000(ii): AAA (sf)
Class A-3, $270,384,000: AAA (sf)
Class A-3-IO, $270,384,000(ii): AAA (sf)
Class A-3-IOX, $270,384,000(ii): AAA (sf)
Class A-3A, $270,384,000: AAA (sf)
Class A-3-IOW, $270,384,000(ii): AAA (sf)
Class A-3W, $270,384,000: AAA (sf)
Class A-4, $33,239,000: AAA (sf)
Class A-4-IO, $33,239,000(ii): AAA (sf)
Class A-4-IOX, $33,239,000(ii): AAA (sf)
Class A-4A, $33,239,000: AAA (sf)
Class A-4-IOW, $33,239,000(ii): AAA (sf)
Class A-4W, $33,239,000: AAA (sf)
Class A-5, $303,623,000 AAA (sf)
Class A-5-IO, $303,623,000(ii): AAA (sf)
Class A-5-IOX, $303,623,000(ii): AAA (sf)
Class A-5A, $303,623,000: AAA (sf)
Class A-5-IOW, $303,623,000(ii): AAA (sf)
Class A-5W, $303,623,000: AAA (sf)
Class B-1, $5,408,000: AA (sf)
Class B-1-IO, $5,408,000(ii): AA (sf)
Class B-1-IOX, $5,408,000(ii): AA (sf)
Class B-1-IOW, $5,408,000(ii): AA (sf)
Class B-1W, $5,408,000: AA (sf)
Class B-2, $2,545,000: A (sf)
Class B-2-IO, $2,545,000(ii): A (sf)
Class B-2-IOX, $2,545,000(ii): A (sf)
Class B-2-IOW, $2,545,000(ii): A (sf)
Class B-2W, $2,545,000: A (sf)
Class B-3, $3,022,000: BBB (sf)
Class B-3-IO, $3,022,000(ii): BBB (sf)
Class B-3-IOX, $3,022,000(ii): BBB (sf)
Class B-3-IOW, $3,022,000(ii): BBB (sf)
Class B-3W, $3,022,000: BBB (sf)
Class B-4, $954,000: BB (sf)
Class B-5, $1,431,000: B (sf)
Class B-6, $1,114,249: Not rated
Class A-IO-S, $318,097,249: Not rated
Class R: Not rated
(i)The collateral and structural information in this report
reflect the term sheet dated April 20, 2021.
(ii)Notional balance.
CITIGROUP COMMERCIAL 2013-GC15: DBRS Cuts Class F Certs Rating to C
-------------------------------------------------------------------
DBRS Limited downgraded the ratings of the Commercial Mortgage
Pass-Through Certificates, Series 2013-GC15 issued by Citigroup
Commercial Mortgage Trust 2013-GC15 as follows:
-- Class D to BB (sf) from BBB (low) (sf)
-- Class X-C to B from BB (high) (sf)
-- Class E to B (low) (sf) from BB (sf)
-- Class F to C (sf) from B (high) (sf)
With this review, DBRS Morningstar removed Class F from Under
Review with Negative Implications, where it was placed on August 6,
2020.
In addition, DBRS Morningstar confirmed the remaining classes as
follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
Additionally, DBRS Morningstar changed the trends on Classes D, E,
and X-C to Negative from Stable. Class F has a rating that does not
carry a trend. All other remain are Stable.
The downgrades and Negative trends are largely the result of a
sizable loss for one loan that reduced credit support for the
lowest rated bonds, as further discussed below, and the increased
risk of loss to the trust for some of the loans in the pool,
particularly the two largest loans in special servicing as further
discussed below.
As of the March 2021 remittance, 78 of the original 97 loans remain
in the pool, representing a collateral reduction of 35.9% since
issuance. In addition, 12 loans, representing 12.0% of the current
pool balance, are fully defeased. Additionally, there are 15 loans,
representing 27.5% of the current trust balance, on the servicer's
watchlist as of the March 2021 remittance. The servicer is
monitoring these loans for a variety of reasons, including low debt
service coverage ratio (DSCR) and occupancy issues; however, the
primary reason for the increase of loans on the watchlist is the
Coronavirus Disease (COVID-19)-driven stress for retail and
mixed-use properties, with watchlisted loans backed by those
property types generally reporting a low DSCR.
As of the March 2021 remittance, the pool has five loans,
representing 11.4% of the pool in special servicing, including 735
Sixth Avenue (Prospectus ID#6; 4.7% of the pool), Walpole Shopping
Mall loan (Prospectus ID#20, 2.3% of the pool), HGI Shreveport & HI
Natchez (Prospectus ID#29; 1.7% of the pool), HGI Victorville
(Prospectus ID#38; 1.4% of the pool), and O'Malley Square
(Prospectus ID#41; 1.3% of the pool).
The largest loan in special servicing, 735 Sixth Avenue (Prospectus
ID#6; 4.7% of the pool), is secured by the ground- and
mezzanine-floor retail portion of a 40-story multifamily building
in New York's Chelsea neighborhood. The property has struggled
since the loss of David's Bridal (65.5% of the net rentable area
(NRA)) and T-Mobile (15.2% of the NRA), which vacated the property
at their respective lease expirations in late 2018, driving
occupancy down to approximately 18.8%. The loan ultimately
transferred to special servicing in February 2019 and a foreclosure
was filed in October 2019. After the loss of the two major tenants,
the DSCR dropped to approximately 0.40 times. Because of the
building's restrictions on restaurant tenants, the property has had
issues backfilling the space, despite its central location in
Manhattan.
The remaining tenants include Oasis Nails & Spa (9.1% of the NRA
through November 2028) and Gourmet Bay Spirits (6.1% of the NRA
expired August 2020). A March 2020 appraisal estimated an as-is
value of $14.0 million, down 69.2% from the $45.5 million value at
issuance. However, given the increased stressed for retail space in
New York City amid the pandemic, it is quite possible the value has
fallen even further since the March 2020 appraisal date. As such,
DBRS Morningstar assumed a significant haircut to the as-is value
in the liquidation scenario applied to this loan in the analysis
for this review, resulting in a loss severity in excess of 80%.
The second-largest specially serviced loan is the Walpole Shopping
Mall loan (Prospectus ID#20, 2.3% of the pool), which is secured by
a 397,971 square foot (sf) anchored retail center in Walpole,
Massachusetts, about 20 miles outside of downtown Boston. The loan
is a $16.5 million pari passu participation in a $60.9 million
senior loan and was transferred to the special servicer in May 2020
due to a coronavirus relief request. Occupancy at the property
dropped to 89% after Office Max, formerly the third-largest tenant,
vacated at its lease expiration in January 2020. A 2020 appraisal
valued the property at $50.9 million, which is about $10.0 million
below the senior loan balance, and DBRS Morningstar assumed a loss
in this analysis.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP MORTGAGE 2021-J1: Fitch Rates B-5 Tranche 'B+(EXP)'
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Citigroup Mortgage
Loan Trust 2021-J1 (CMLTI 2021-J1).
DEBT RATING
---- ------
CMLTI 2021-J1
A-1 LT AAA(EXP)sf Expected Rating
A-1-IO LT AAA(EXP)sf Expected Rating
A-1-IOX LT AAA(EXP)sf Expected Rating
A-1A LT AAA(EXP)sf Expected Rating
A-1-IOW LT AAA(EXP)sf Expected Rating
A-1W LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-2-IO LT AAA(EXP)sf Expected Rating
A-2-IOX LT AAA(EXP)sf Expected Rating
A-2A LT AAA(EXP)sf Expected Rating
A-2-IOW LT AAA(EXP)sf Expected Rating
A-2W LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-IO LT AAA(EXP)sf Expected Rating
A-3-IOX LT AAA(EXP)sf Expected Rating
A-3A LT AAA(EXP)sf Expected Rating
A-3-IOW LT AAA(EXP)sf Expected Rating
A-3W LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-IO LT AAA(EXP)sf Expected Rating
A-4-IOX LT AAA(EXP)sf Expected Rating
A-4A LT AAA(EXP)sf Expected Rating
A-4-IOW LT AAA(EXP)sf Expected Rating
A-4W LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-IO LT AAA(EXP)sf Expected Rating
A-5-IOX LT AAA(EXP)sf Expected Rating
A-5A LT AAA(EXP)sf Expected Rating
A-5-IOW LT AAA(EXP)sf Expected Rating
A-5W LT AAA(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-1-IO LT AA(EXP)sf Expected Rating
B-1-IOX LT AA(EXP)sf Expected Rating
B-1-IOW LT AA(EXP)sf Expected Rating
B-1W LT AA(EXP)sf Expected Rating
B-2 LT A+(EXP)sf Expected Rating
B-2-IO LT A+(EXP)sf Expected Rating
B-2-IOX LT A+(EXP)sf Expected Rating
B-2-IOW LT A+(EXP)sf Expected Rating
B-2W LT A+(EXP)sf Expected Rating
B-3 LT BBB+(EXP)sf Expected Rating
B-3-IO LT BBB+(EXP)sf Expected Rating
B-3-IOX LT BBB+(EXP)sf Expected Rating
B-3-IOW LT BBB+(EXP)sf Expected Rating
B-3W 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
A-IO-S LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 373 fixed-rate mortgages (FRMs)
with a total balance of approximately $318.1 million as of the
cutoff date. The loans were originated by various mortgage
originators and Fay Servicing, LLC (Fay) will be the servicer.
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. Per
Fitch's calculation methodology, the loans are seasoned an average
of five months. The pool has a weighted average (WA) original FICO
score of 782, which is indicative of very high credit quality
borrowers. Approximately 91% of the loans have an original FICO
score of 750 or above. In addition, the original WA combined
loan-to-value ratio (CLTV) of 64% represents substantial borrower
equity in the property and reduced default risk.
Shifting Interest Structure (Mixed): 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
to 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.
Full Advancing (Mixed): Citigroup Global Markets Realty Corp.
(CGMRC) will provide full advancing for the life of the
transaction. To the extent CGMRC fails to make an advance, U.S.
Bank as Trust Administrator, will be obligated to advance such
amounts to the trust. While this helps the liquidity of the
structure, it also increases the expected loss due to unpaid
servicer advances.
Subordination Floor (Positive): A CE or senior subordination floor
of 1.35% has been considered to mitigate potential tail-end risk
and loss exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Also, a junior subordination floor
of 1.20% will be maintained to mitigate tail risk, which arises as
the pool seasons and fewer loans are outstanding. Additionally, the
stepdown tests do not allow principal prepayments to subordinate
bondholders in the first five years following deal closing.
Updated Economic Risk Factor (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 coronavirus 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."
ESG Impact (Positive): CMLTI 2021-J1 has an ESG Relevance Score of
'+4' for Transaction Parties & Operational Risk. Operational risk
is well controlled for in CMLTI 2021-J1 and include strong R&W and
transaction due diligence as well as a strong aggregator which
resulted in a reduction in expected losses.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the metropolitan statistical area (MSA) level.
Sensitivity analysis was conducted at the state and national level
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:
-- The 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 41.1% at 'AAA'. 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:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. 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.
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 SitusAMC. The third-party due diligence described in
Form 15E focused on credit, compliance, data integrity, and
property valuation. Fitch considered this information in its
analysis and it did not have an effect on Fitch's analysis or
conclusions.
The entirety (100%) of the pool received a final grade of 'A' or
'B', which confirms no incidence of material exceptions.
ESG CONSIDERATIONS
CMLTI 2021-J1: Transaction Parties & Operational Risk: 4
CMLTI 2021-J1 has an ESG Relevance Score of '+4' for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in CMLTI 2021-J1 and include strong R&W and transaction due
diligence as well as a strong aggregator which resulted in a
reduction in expected losses.
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.
COLT 2021-3R MORTGAGE: Fitch Gives 'B(EXP)' Rating to B2 Certs
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed certificates to be issued by COLT 2021-3R Mortgage
Loan Trust (COLT 2021-3R).
DEBT RATING
---- ------
COLT 2021-3R
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA(EXP)sf Expected Rating
A3 LT A(EXP)sf Expected Rating
M1 LT BBB(EXP)sf Expected Rating
B1 LT BB(EXP)sf Expected Rating
B2 LT B(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed certificates issued
by Colt 2021-3R Mortgage Trust, (Colt 2021-3R) as indicated. The
certificates are supported by 250 loans with a balance of $134.05
million as of the cutoff date.
Loans in the pool were originated by Caliber Home Loans, Inc.
(Caliber), and 100% of the pool comprises collateral from a
previously issued COLT transaction. Approximately 58% of the pool
is designated as nonqualified mortgage (NonQM), 24% consists of
higher-priced qualified mortgage (HPQM) and 16.4% are safe harbor
QM (SHQM). For the remainder, the ability to repay (ATR) rule does
not apply.
KEY RATING DRIVERS
Non-QM Credit Quality (Mixed): The pool, as calculated by Fitch,
has a weighted average (WA) model credit score of 726, a WA
combined loan to value ratio (CLTV) of 75.0% and a sustainable loan
to value ratio (sLTV) of 84.7%. Of the pool, 37% had a debt to
income (DTI) ratio of over 43%.
The pool has WA seasoning of just over two years, based on
origination. The loans have benefited from a positive home price
environment and a generally strong pay history. Updated exterior
broker price opinions (BPOs) were provided on all but one loan,
which received an AVM.
Fitch only treated less than 11% of the pool as having less than
full documentation, which included asset depletion loans and loans
originated to nonpermanent resident aliens. The pool did not
include any bank statement loans. A majority of loans were
underwritten to full documentation standards according to Appendix
Q. Under the new QM definition, many of the loans would qualify as
SHQM, if originated today.
Payment Forbearance (Mixed): The pool is seasoned approximately 25
months in aggregate. The pool is approximately 90% current and 10%
delinquent. Over the last 2 years, 84.5% of loans have been clean
current. Additionally, 10.4% of loans have a prior modification.
A total of 72 borrowers in the pool have requested Covid-19 payment
relief plans. Of those, only 19 still remain delinquent. Two of the
remaining borrowers are on active relief, with the others being
either re-instated or now are current. Separately, three borrowers
never requested forbearance but are delinquent. The pool's other
forbearance plans are granted by the servicer, and borrowers will
be counted as delinquent; however, the servicer will not advance
delinquent principal and interest (P&I) during the forbearance
period.
Modified Sequential Payment Structure (Mixed): The structure
distributes principal pro rata among the senior certificates while
shutting out the subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event,
delinquency trigger event or credit enhancement (CE) trigger event
occurs in a given period, principal will be distributed
sequentially to class A-1, A-2 and A-3 certificates until they are
reduced to zero.
Compared to previous new origination COLT transactions, this
transaction features a weaker delinquency trigger. There is no
delinquency trigger for the first six months of the transaction.
Additionally, between months 7 and 36, the delinquency trigger is
25%, which is 5% higher compared to previous new origination COLT
transactions (non-refinance). The delinquency trigger is 30% for
months 37-60, and after month 60, the trigger is set to 35%. The
weaker delinquency trigger could result in more leakage to the A-2
and A-3 classes, which exposes more risk to the A-1 ('AAAsf')
class. The triggers are consistent with COLT 2021-2R.
Advances of delinquent P&I will be made on the mortgage loans for
the first 180 days of delinquency, to the extent such advances are
deemed recoverable. If the P&I advancing party fails to make a
required advance, the master servicer (Wells Fargo) will be
obligated to make such advance. The servicer or master servicer
will not advance delinquent P&I during the forbearance period.
Excess Cash Flow (Positive): The transaction benefits from a
material amount of excess cash flow that provides benefit to the
rated certificates before being paid out to class X certificates.
The excess is available to pay timely interest and protect against
realized losses, resulting in a CE amount that is less than Fitch's
loss expectations for all classes except for the A1. To the extent
the collateral weighted average coupon (WAC) and corresponding
excess are reduced through a rate modification, Fitch would view
the impact as credit neutral, as the modification would reduce the
borrower's probability of default, resulting in a lower loss
expectation.
As a sensitivity to Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt A modification
%) of the performing loans. Although the WAC reduction stress is
based on historical modification rates, Fitch did not include the
WAC reduction stress in its testing of the delinquency trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macro and regulatory environment. A portion of
borrowers will likely be impaired but not ultimately default.
Further, this approach had the largest impact on the Backloaded
Benchmark scenario, which is also the most probable outcome, as
defaults and liquidations are not likely to be extensive over the
next 12-18 months given the ongoing borrower relief and eviction
moratoriums.
Updated Economic Risk Factor (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 coronavirus 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."
ESG Relevance: Colt 2021-3R has an ESG Relevance Score of '4' for
Transaction Parties and Operational Risk. Operational risk is well
controlled for in Colt 2021-3R, including strong transaction due
diligence as well as 'RPS1-' Fitch-rated servicer, which resulted
in a reduction in expected losses and is relevant to the rating.
RATING SENSITIVITIES
Fitch's analysis 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 may be considered in the surveillance of the transaction. Two
sets of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the subject
pool.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative stress sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in
addition to the model-projected 42.0% at 'AAAsf'. The analysis
indicates that there is some potential rating migration with
higher MVDs, compared with the model projection.
Factors that could, individually or collectively, lead to 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 positive home price growth with no assumed
overvaluation.
-- The analysis assumes positive home price growth of 10.0%.
Excluding the senior classes that are already 'AAAsf', the
analysis indicates there is potential positive rating
migration for all of the rated classes. This section provides
insight into the model-implied sensitivities the transaction
faces when one assumption is modified, while holding others
equal. The 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 also added a
coronavirus sensitivity analysis that contemplates a more
severe and prolonged economic stress caused by a reemergence
of infections in the major economies, before a slow recovery
begins in 2Q21. Under this severe scenario, Fitch expects the
ratings to be affected 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.
CRITERIA VARIATION
There was one criteria variation to Fitch's "U.S. RMBS Rating
Criteria." Fitch expects an updated tax and title search to be
conducted for transactions in which more than 10% of the deal
comprises seasoned loans (i.e. more than two years' seasoned).
Fitch was comfortable with the lack of an updated search given that
the loans were held with the same servicer since origination and
were previously securitized, while the servicer would have been
required to advance on these amounts to maintain the trust's
priority.
Also, upon the cleanup call being exercised, they would have repaid
themselves from the proceeds. Furthermore, the seasoning is only a
few months outside of the window in which Fitch would expect an
updated search to be conducted. As a result, Fitch did not make any
adjustments to its loss expectations.
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. The third-party due diligence described in Form
15E focused on three areas, a compliance review, a credit review,
and a valuation review, and was conducted on 100% of the loans in
the pool. Fitch considered this information in its analysis and
believes the overall results of the review generally reflected
strong underwriting controls.
100% of loans were graded 'A' or 'B', which indicates strong
origination processes with no presence of material exceptions.
Exceptions on loans with 'B' grades were immaterial and either
identified strong compensating factors or were mostly accounted for
in Fitch's loan loss model.
Fitch considered all the above information in its analysis, and, as
a result, the overall 'AAAsf' expected loss was reduced by 0.40%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria" (May 2020).
LSRMF Acquisitions I, LLC engaged AMC to perform the review. Loans
reviewed under this engagement were given compliance, credit and
valuation grades, and assigned initial grades for each
subcategory.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company, and no material discrepancies were noted.
ESG CONSIDERATIONS
COLT 2021-3R: Transaction Parties & Operational Risk: 4+
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.
COMM 2013-CCRE11: DBRS Confirms B(sf) Rating on Class F Certs
-------------------------------------------------------------
DBRS, Inc. confirmed the following classes of Commercial Mortgage
Pass-Through Certificates, Series 2013-CCRE11 issued by COMM
2013-CCRE11 Mortgage Trust:
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at B (high) (sf)
-- Class F at B (sf)
All trends are Stable. Classes F and X-C were removed from Under
Review with Negative Implications where they were placed on August
6, 2020.
The rating confirmations reflect the stable performance of the
transaction, which has remained in line with DBRS Morningstar's
expectations at issuance when the transaction consisted of 46 loans
with an original trust balance of $1.3 billion. As of the March
2021 remittance report, 45 loans remain in the transaction with a
current trust balance of $1.1 billion, representing a collateral
reduction of approximately 12.9% since issuance resulting from
amortization and the payoff of one loan. In addition, 13 loans
totaling $29.7 million have defeased.
The 380 Lafayette Street (Prospectus ID#22; 1.2% of the pool) loan
is the only one in special servicing. This loan is secured by a
15,000-sf ground level restaurant/cafe in the Bowery submarket of
Manhattan. The loan transferred to special servicing in June 2020
for payment default. The single-tenant restaurant, whose lease runs
through 2028, was closed during part of 2020 before reopening in
August for outdoor dining and carry-out business. The borrower
submitted a proposal to amend the lease to pay percentage rents for
the remainder of the lease term, however, the special servicer has
not agreed to the proposed lease modifications at this time. As of
Q3 2020, the property was operating with a debt service coverage
ratio (DSCR) of 1.15 times (x). DBRS Morningstar analyzed this loan
with an elevated probability of default for the purposes of this
review.
Twelve loans, representing 49.2% of the current trust balance, are
on the servicer's watchlist. DBRS Morningstar's primary concern is
with the Oglethorpe Mall (Prospectus ID#5; 7.7% of the pool), which
is secured by a 626,966-sf portion of a 942,726-sf regional mall in
Savannah, Georgia. The Brookfield-sponsored mall is anchored by
Belk (noncollateral), Macy's, and JCPenney. Notable junior anchors
include Barnes & Noble, DSW, and Old Navy. The former noncollateral
Sears space remains vacant after Sears vacated in 2018.
Furthermore, the junior anchor Stein Mart vacated in 2020 following
the company's bankruptcy filing. While YE2019 was down 4% since
issuance, the property was 95% occupied as of Q3 2020 and covering
with a 1.47x DSCR.
At issuance, DBRS Morningstar assigned an investment-grade shadow
rating to One Wilshire (Prospectus ID#6; 7.3% of the pool). With
this review, DBRS Morningstar confirmed the performance of these
loans remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2013-CCRE6: DBRS Confirms BB(low) Rating on Class F Certs
--------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2013-CCRE6 issued by COMM
2013-CCRE6 Mortgage Trust as follows:
-- Class A-3FL at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (high) (sf)
-- Class C at AA (sf)
-- Class PEZ at AA (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class F at BB (low) (sf)
Due to concerns with the second-largest loan in the pool, The
Avenues (Prospectus ID#3, 12.3% of the pool), and the specially
serviced loan, Embassy Suites Lubbock (Prospectus ID#18, 2.1% of
the pool), DBRS Morningstar changed the trends on Classes E and F
to Negative from Stable. All other trends remain Stable.
According to the March 2021 remittance, 38 of the original 48 loans
remain in the trust with an aggregate balance of $895.4 million,
representing a collateral reduction of 40.1% since issuance. In
addition to the significant paydown since the transaction's
closing, eight loans, representing 5.3% of the pool, are fully
defeased. Thirteen loans, representing 39.3% of the pool, are on
the servicer's watchlist and one loan, representing 2.1% of the
pool, is in special servicing. The watchlisted loans are generally
being monitored for tenant rollover, low debt service coverage
ratios (DSCRs) and/or occupancy, trigger events, or Coronavirus
Disease (COVID-19)-related forbearance requests.
The transaction's largest watchlisted loan, The Avenues, is secured
by a portion of a 1.1 million square foot regional mall in
Jacksonville, Florida. The loan was added to the servicer's
watchlist due to occupancy decline after the mall's largest
collateral anchor, Sears (20.2% of the net rentable area (NRA)),
closed in December 2019. As of Q3 2020, occupancy has dropped to
61%. The mall's remaining anchors include Forever 21 (19.4% of NRA,
lease expires January 2023), Dillard's (noncollateral), Belk
(noncollateral), and JCPenney (noncollateral; as part of JCPenney's
emergence from bankruptcy, this location was sold to an affiliate
of the loan sponsor). Within the last year, the mall's owner and
operator, Simon Property Group (Simon), recategorized the mall
within its portfolio, excluding it from what Simon deems to be its
core assets. The collateral's cash flow continues to trend lower,
dropping 25% below the Issuer's underwritten cash flow. Although
DSCR remains healthy at over 3.0 times as of Q3 2020, credit risk
appears to be elevated in comparison with issuance expectations and
a value decline is probable. Given the occupancy and cash flow
concerns, DBRS Morningstar analyzed this loan with an elevated
probability of default.
The transaction's only specially serviced loan, Embassy Suites
Lubbock, is secured by a 156-room full-service hotel six miles from
downtown Lubbock, Texas. The loan transferred to special servicing
in June 2020 and has been delinquent ever since. The property was
closed at the onset of the pandemic and has yet to reopen. Special
servicer commentary notes that the receiver took possession of the
property in October 2020 and is having repairs completed in
anticipation of reopening to stabilize operations prior to listing
for sale. An updated appraisal as of August 2020 valued the
property at $19.3 million, a 37.7% decline from the issuance value
of $31.0 million. For this review, DBRS Morningstar liquidated the
loan from the trust, which resulted in an implied loss severity in
excess of 35%.
At issuance, DBRS Morningstar shadow-rated the Federal Center Plaza
loan investment grade based on the collateral property's desirable
location, significant tenant investment, below-market rents, and
added value of the property's redevelopment parcel. With this
review, DBRS Morningstar confirms that the performance of this loan
remains consistent with investment-grade loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2013-CCRE8: DBRS Confirms B(high) Rating on Class F Certs
--------------------------------------------------------------
DBRS, Inc. confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2013-CCRE8 issued by COMM
2013-CCRE8 Mortgage Trust as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SBFL at AAA (sf)
-- Class A-SBFX at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (high) (sf)
-- Class X-C at BB (low) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since issuance, when the transaction consisted of
59 loans with an original trust balance of $1.4 billion. As of the
March 2021 remittance, 51 loans remained in the trust with a
balance of $1.0 billion, representing a collateral reduction of
27.5% resulting from loan repayments, scheduled loan amortization,
and two liquidated loans. The pool benefits from 15 loans,
representing 22.3% of the pool, that have fully defeased.
Four loans, representing 7.6% of the pool, are in special
servicing. The largest loan in special servicing is El Paseo South
Gate (Prospectus ID#10; 3.9% of the pool), which is secured by the
fee interest in a 298,696-square-foot (sf) anchored retail center
in South Gate, California, approximately 11 miles from downtown Los
Angeles. The loan transferred to special servicing in February 2021
after the borrower requested relief because of the Coronavirus
Disease (COVID-19) pandemic. The property has been severely
affected by the pandemic, as two of the property's three largest
tenants have been closed for most of the pandemic. The largest
tenant, Regal Entertainment (Regal; 36.3% of net rentable area
(NRA)), has remained closed since the pandemic started (although
Regal's parent company recently announced plans to reopen all
locations in April 2021), while the third-largest tenant, Planet
Fitness (5.5% of NRA), reopened in March 2021. The property's
second-largest tenant, La Curacao, occupies 35.9% of NRA leased
through 2024. While the year-end 2019 net cash flow was 5% lower
than issuance, the property has maintained strong occupancy of 99%
and a year-end 2019 debt service coverage ratio (DSCR) of 1.43
times. DBRS Morningstar analyzed this loan with an elevated
probability of default for purposes of this review.
The second-largest specially serviced loan, iPark Hudson Building
(Prospectus ID#19; 1.8% of the pool), transferred to special
servicing in July 2020 for payment default and has been delinquent
since April 2020. The loan is secured by a 150,138-sf multitenant
office building in Yonkers, New York. The property had performed
well prior to the coronavirus pandemic and faces minimal rollover
concerns as three of the property's four largest tenants have lease
expirations in 2027, while the second-largest tenant's lease
expires in 2025. In 2020, the loan sponsor broke ground on a $100
million film and television studio within the iPark Hudson campus,
which will feature 70,000 sf of studio space as well as additional
office space. The servicer notes that the borrower is attempting to
refinance the loan, and an updated appraisal completed in September
2020 valued the property at $39 million, which implies a
loan-to-value ratio of 46%.
Ten loans, representing 16.2% of the current trust balance, are on
the servicer's watchlist. These loans are generally being monitored
for low DSCRs that have been driven by disruptions related to the
coronavirus pandemic. Among the watchlisted loans, DBRS
Morningstar's primary concern is the Westin San Diego loan
(Prospectus ID#4; 6.0% of the pool), which is secured by a 436-room
full-service hotel in downtown San Diego. The loan had previously
transferred to special servicing in April 2020 for imminent default
resulting from coronavirus pandemic-related issues and returned to
the master servicer unchanged in May 2020 after the borrower
withdrew its relief request. The hotel's performance has languished
in recent years, and this poor performance was likely exacerbated
by the pandemic. New supply concerns, coupled with the failed
extension of the San Diego Convention Center, likely contributed to
the decline in performance. In addition, the hotel performed below
its competitive set in all three metrics rankings, based on a
December 2019 report by Smith Travel Research. The loan remains
current and with the master servicer, although the special
servicer's commentary has indicated an imminent transfer for
several months dating back to late 2020.
At issuance, DBRS Morningstar assigned an investment-grade shadow
rating to 375 Park Avenue (Prospectus ID#1; 20.8% of the pool).
With this review, DBRS Morningstar confirmed that the performance
of these loans remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2013-CCRE9: Fitch Lowers Rating on Class F Debt to 'Csf'
-------------------------------------------------------------
Fitch Ratings has downgraded ratings for three classes and affirmed
ratings for nine classes of COMM 2013-CCRE9 Mortgage Trust.
DEBT RATING PRIOR
---- ------ -----
COMM 2013-CCRE9
A-3 12625UBB8 LT AAAsf Affirmed AAAsf
A-3FL 12625UBD4 LT AAAsf Affirmed AAAsf
A-3FX 12625UBG7 LT AAAsf Affirmed AAAsf
A-4 12625UBF9 LT AAAsf Affirmed AAAsf
A-M 12625UAC7 LT AAAsf Affirmed AAAsf
A-SB 12625UBA0 LT AAAsf Affirmed AAAsf
B 12625UAE3 LT AA-sf Affirmed AA-sf
C 12625UAG8 LT A-sf Affirmed A-sf
D 12625UAJ2 LT BB-sf Downgrade BBB-sf
E 12625UAL7 LT CCsf Downgrade CCCsf
F 12625UAN3 LT Csf Downgrade CCCsf
X-A 12625UBC6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increased Loss Expectations; Higher Certainty of Loss on the
Specially Serviced Assets: Loss expectations increased since the
last rating action due to significantly higher loss expectations on
Valley Hills Mall. There are 18 Fitch Loans of Concern (FLOCs; 32%
of the pool), including six loans (16.9%) in special servicing
primarily due to declining performance or expected performance
declines due to the coronavirus pandemic. Since the last Fitch
rating action, the specially serviced assets have updated appraisal
valuations and servicer's workout plans have progressed to
foreclosure on the retail assets.
Fitch's ratings assume a base case loss expectation of 9.3%. The
Negative Rating Outlooks reflect that losses could reach 9.9% if
loans impacted by the pandemic do not stabilize. The higher losses
reflect additional pandemic related stresses as well as the pool's
43.7% retail concentration, which includes three regional malls
(Northridge Mall, Valley Hills Mall and Sarasota Square; 17.9%)
within the Top 15.
Specially Serviced Loans/Assets and Fitch Loans of Concern: The
largest contributor to loss expectations and loan with largest
increase in expected loss is the specially serviced loan Valley
Hills Mall (6.4%). It is secured by 936,682-sf regional mall
(325,166-sf collateral) located in Hickory, NC. The property is
anchored by Belk, JCPenney and Dillard's, none of which are part of
the collateral. Former anchor tenant Sears closed in 2020.
Occupancy declined to 74% at YE17 from 90% at YE16 following the
loss of large tenants. Occupancy has shown signs of rebounding at a
reported 84% at YE18 and 83% at YE19. An updated rent roll and
financials were requested, but have not been provided.
The loan transferred to special servicing in September 2020 due to
payment default. Fitch's loss expectations of 60% consider the
uncertainty of the property's ability to perform back in line with
prior historical levels and the pandemic's impact on long-term
value. Fitch's expected losses are based on a discount to the
updated appraisal value, which reflects an implied cap rate of 25%,
which is consistent with similar defaulted mall properties.
The second largest contributor to loss expectations, Sarasota
Square (3%), is a 1 million-sf regional mall (512,849 sf
collateral) anchored by non-collateral tenant JC Penney located in
Sarasota, FL. The loan transferred to the special servicer in April
2019 due to imminent default. Former non-collateral tenants Sears
and Macy's vacated in 2017, which resulted in co-tenancy triggers.
Collateral occupancy declined to 81% at YE18 from 91.2% at YE17,
while NOI DSCR declined to 2.13x from 2.86x. An updated rent roll
and financials were requested but have not been provided. The
property temporarily closed and several tenants provided notice of
their intent to vacate in 2020 due to the coronavirus pandemic;
according to the mall's website the property is now open.
Foreclosure proceedings are expected to begin in the near term.
Fitch's loss expectations of 70% are based on a discount to the
most recent appraisal value which reflects an implied cap rate of
30%.
The third largest contributor to loss expectations, North Oaks
(2.7%), is secured by a 448,740-sf power center located in Houston,
TX. The property is anchored by Hobby Lobby, Ross Dress for Less
and Big Lots. The loan transferred to the special servicer in June
2020 due to payment default. Occupancy has been declining over the
past several years: 88% (YE16), 80% (YE17), 69% (YE18) and 72%
(YE19). In 2018, TJ Maxx (6.1%) vacated prior to its March 31, 2019
lease expiration and Staples (4.5%) vacated upon its June 30, 2018
lease expiration. Foreclosure proceedings are expected to begin in
the near term. Fitch's loss expectations of 36% are based on a
discount to the most recent appraisal value and reflects an implied
cap rate of 15%.
The largest non-specially serviced FLOC and largest non-defeased
asset in the pool, Northridge Mall (8.6%), is secured by 1
million-sf enclosed regional mall (587,484-sf collateral) located
in Salinas, CA. The property is anchored by JCPenney and
non-collateral tenant Macy's. Additional large non-collateral
tenants include Century Theatres, Big Lots and Big 5 Sporting
Goods. Collateral occupancy remained high at 97.8% as of September
2020 compared to 98.7% at YE19. The borrower has expressed a need
for relief due to the Covid-19 crisis. NOI DSCR was a reported
3.07x as of YTD Sept. 30, 2020 compared to 2.72x at YE19 and 2.30x
at YE18.
Increased Credit Enhancement Since Issuance: As of the April 2021
distribution date, the pool's aggregate balance has been reduced by
29.2% to $915.6 million from $1.3 billion at issuance. Two loans
totaling $100 million pre-paid since the last rating action. Seven
loans comprising 23.2% of the pool are full interest-only and 16
loans representing 29.2% of the pool were partial interest-only and
have since exited their interest only period. The remaining 46
loans (48.4%) are amortizing.
Coronavirus Exposure: Significant economic impact to certain
hotels, retail and multifamily properties, is expected due to the
pandemic and the lack of clarity at this time on the potential
length of the impact. Twenty-seven loans (43.7%) are secured by
retail properties, eight loans (10.9%) are secured by hotel
properties and 10 loans (10.5%) is secured by a multifamily
property. Fitch applied additional coronavirus-related stresses to
five retail loans (4.4%) and four hotel loans; however, the
additional stress did not affect the ratings. Fitch will continue
to monitor any declines in loan performance and will adjust ratings
and Rating Outlooks accordingly.
Asset Concentration: The largest property-type concentration is
retail at 43.7%; three regional malls represent 17.9% and all three
are in the top 15. Industrial and Hotel represent the second and
third property types at 14.7% and 10.9%, respectively. Multifamily
represents the fourth largest property type at 10.5%.
Maturity Concentration: All loans will mature in 2023.
RATING SENSITIVITIES
The downgrades and negative outlooks reflect concerns with pool
high retail concentration (43.7%) and higher certainty of loss on
the specially serviced assets (16.9%). The Stable Rating Outlooks
on senior classes reflect the increasing CE and expected continued
amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance. Upgrades of one category to classes B and C
would occur with significant improvement in CE and/or
defeasance; however, adverse selection and increased
concentrations, further underperformance of the FLOCs, or
higher than expected losses on the specially serviced loans
could cause this trend to reverse. An upgrade of class D is
considered unlikely and would be limited based on sensitivity
to concentrations or the potential for future concentration.
-- Classes would not be upgraded above 'Asf' if there is
likelihood for interest shortfalls. An upgrade to class D by a
category isn't likely but possible if there are better than
expected recoveries on specially serviced loans, the
performance of the remaining pool is stable and/or properties
vulnerable to the coronavirus return to pre-pandemic levels
and there is sufficient credit enhancement to the class.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming or
specially serviced loans. Downgrades to the senior classes are
not likely due to increased credit enhancement but could occur
if interest shortfalls occur or if a high proportion of the
pool defaults and expected losses increase significantly.
Downgrades to classes B, C and D, which have Negative Rating
Outlooks, would occur and be one category or more if overall
pool losses increase substantially, performance of the FLOCs
deteriorate further and properties vulnerable to the
coronavirus fail to stabilize to pre-pandemic levels and/or
losses on the specially serviced loans are higher than
expected.
-- Further downgrades to classes E and F will occur as losses are
realized. The Negative Rating Outlooks on classes B, C and D
may be revised back to Stable if performance of the FLOCs
improve and/or loss expectation with respect to specially
serviced assets improve.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that a greater
percentage of classes may be assigned a Negative Rating Outlook or
those with Negative Rating Outlooks will be downgraded one or more
categories.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
COMM 2013-CCRE9: Exposure to Social Impacts: 4
The ESG score reflects sustained structural shift in secular
preferences affecting consumer trends, occupancy trends, etc.,
which, in combination with other factors, affects the rating.
COMM 2014-LC17: DBRS Cuts Class F Certs Rating to C(sf)
-------------------------------------------------------
DBRS Limited downgraded five classes of Commercial Mortgage
Pass-Through Certificates, Series 2014-LC17 issued by COMM
2014-LC17 Mortgage Trust as follows:
-- Class X-C to BB (high) (sf) from BBB (sf)
-- Class D to BB (sf) from BBB (low) (sf)
-- Class X-D to B (low) (sf) from BB (low) (sf)
-- Class E to CCC (sf) from B (high) (sf)
-- Class F to C (sf) from CCC (sf)
In addition, DBRS Morningstar removed Classes X-D, E, F, and G from
Under Review with Negative Implications where they were placed on
August 6, 2020.
DBRS Morningstar confirmed its ratings on the remaining classes as
follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class G at C (sf)
DBRS Morningstar discontinued its rating on Class X-E as the
applicable reference obligation now has a C (sf) rating.
Classes C, D, X-B, X-C, and X-D have Negative trends. The trends
for all other classes are Stable, with the exception Classes E, F,
and G, which have ratings that do not carry trends. DBRS
Morningstar also designated Classes F and G as having Interest in
Arrears.
The rating downgrades and Negative trends are primarily the result
of increased losses expected for the two largest loans in special
servicing, as further discussed below. As of the March 2021
remittance, the Trust reported an aggregate principal balance of
$897.5 million, representing a collateral reduction of 27.4% since
issuance, with 58 of the original 71 loans remaining in the pool.
In addition, nine loans, representing 8.3% of the current trust
balance, are fully defeased. The Trust is concentrated by property
type, with 24.2% of the pool secured by office properties, 22.4% by
lodging properties, and 21.9% by retail assets.
As of the March 2021 remittance, there are five loan in special
servicing, representing 5.2% of the current trust balance. The
largest loan in special servicing is World Houston Plaza
(Prospectus ID#20, 1.8% of the current trust balance). The loan is
secured by an office property in suburban Houston, approximately 17
miles north of the central business district and just south of the
George Bush Intercontinental Airport. The loan transferred to
special servicing in June 2017 for imminent default and the Trust
took title of the property in January 2018. An updated appraisal
completed in February 2020 valued the property at $8.05 million,
down 70.0% from the appraised value of $27.0 million at issuance.
As of the trailing 12 months (T-12) ended September 30, 2020,
occupancy was 27.0% and the debt service coverage ratio (DSCR) was
-0.49 times (x), compared with the T-12 ended December 31, 2019,
where occupancy was 27.0% and DSCR was 1.01x. Based on the updated
appraisal, the loan was liquidated in the analysis for this review,
resulting in a loss severity in excess of 85.0%.
The second-largest loan in special servicing is Paradise Valley
(Prospectus ID#26, 1.5% of the current trust balance). The loan is
secured by the borrower's fee-simple interest in an
87,304-square-foot anchored retail property in Phoenix, within
proximity to the Paradise Valley Mall. The loan transferred to
special servicing in August 2020 due to imminent monetary default
and, as of the March 2021 remittance, is over 90 days delinquent.
The servicer notes that the borrower is seeking to turn over keys
to the property, with the servicer working to process a nonjudicial
foreclosure. Although the Coronavirus Disease (COVID-19) pandemic
exacerbated existing stress for the property, the performance had
been down from issuance for several years following the loss of the
former largest tenant, The RoomStore, which filed for bankruptcy in
2015 and vacated in 2016. As of the T-3 ended March 31, 2020,
financials, the property was 53.4% occupied and the loan reported a
DSCR of 0.94x, compared with the YE2019 DSCR of 1.07x and the
YE2018 DSCR of 1.22x. An updated appraisal has not been obtained to
date. Based on a significant haircut to the issuance value, the
loan was liquidated in the analysis for this review, reflecting a
loss severity approaching 65.0%.
As of the March 2021 remittance, there are 12 loans on the
servicer's watchlist, representing 34.1% of the pool. The largest
loan in the pool, Loews Miami Beach Hotel (Prospectus ID#1, 12.4%
of the pool), is on the watchlist for performance declines as well
as the borrower's coronavirus relief request, which was submitted
and approved in the summer of 2020. The loan has a pari passu
structure, with loan pieces contributed to the subject and two
other DBRS Morningstar-rated transactions in COMM 2014-CCRE21
Mortgage Trust and COMM 2014-UBS5 Mortgage Trust. The loan is
secured by a 790-key full-service hotel located in Miami.
The servicer granted relief in the form of a deferral of monthly
furniture, fixture, and equipment reserve payments from May 2020
through July 2020, with the deferred amounts to be repaid over a
nine-month period beginning in August 2020. As of the March 2021
remittance, the borrower was in compliance with the terms of the
forbearance. As of the T-12 ended September 30, 2020, the loan
reported a DSCR of 1.07x and an occupancy of 53.46%, which is down
significantly from YE2019 when the loan reported a DSCR of 3.21x
and an occupancy of 85.40%. Given the property's prime location
within South Beach, the hotel is well positioned to capture demand
as leisure and business travel continue to increase over the next
few years.
Another watchlisted loan in the top 10, 50 Crosby Drive (Prospectus
ID#7, 3.3% of the pool), is secured by a Class A office building in
Bedford, Massachusetts. The loan was previously in special
servicing after the single tenant, Acme Packet, Inc. (a subsidiary
of Oracle America, Inc.), exercised its early termination option
and vacated the property in April 2020. As of March 2021, the
property remains vacant. The loan was returned to the master
servicer as a corrected loan in December 2020 after a modification
was approved by the special servicer that converted the loan to
interest only (IO) for 12 months starting in October 2020. During
the IO period, monthly reserve deposits to the replacement and
rollover reserves will not be required. The loan was reported
current with the March 2021 remittance, when the servicer reported
approximately $5.3 million held between the cash trap reserve
established following the tenant's early termination notice and the
rollover reserve. Given the collateral property's status as fully
vacant in a secondary market, a probability of default penalty was
applied to increase the expected loss in the analysis for this
review.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2014-UBS3: DBRS Confirms BB(sf) Rating on Class F Certs
------------------------------------------------------------
DBRS, Inc. confirmed all classes of Commercial Mortgage
Pass-Through Certificates, Series 2014-UBS3 issued by COMM
2014-UBS3 Mortgage Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class X-C at BB (high) (sf)
-- Class F at BB (sf)
-- Class X-D at B (sf)
-- Class G at B (low) (sf)
As part of this review, DBRS Morningstar removed Classes G and X-D
from Under Review with Negative Implications where it had placed
them on August 6, 2020. All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since the last review. At issuance, the trust
comprised of 49 fixed rate loans secured by 81 commercial,
leased-fee, and multifamily properties with a trust balance of
$1.06 billion. Per the March 2021 remittance report, there were 41
loans secured by 70 properties remaining in the trust with a trust
balance of $856.8 million, representing a 18.9% collateral
reduction since issuance. Two loans were liquidated from the trust
in 2019, resulting in a $15.6 million loss to the nonrated Class H.
DBRS Morningstar previously downgraded Classes G and X-D in March
2020 because of the reduced credit support following the realized
losses. Over the previous 12 months, no loans have been repaid and
one loan, North Penn Business Park (Prospectus ID#18 – 2.2% of
the trust balance), was fully defeased, bringing the total deal
defeasance to five loans or 6.4% of the trust balance.
The trust is concentrated by loan size as the largest 15 loans
comprise 80.5% of the trust balance and there are four loans,
representing 32.1% of the trust balance, structured with full-term
IO payments. The trust benefits from loans secured by urban
properties as three loans, totaling 28.6% of the trust balance,
have DBRS Morningstar Market Ranks of 6 or greater. There is no
near-term maturity risk as the earliest loan maturity date is in
October 2023.
There are only two loans, comprising 1.1% of the trust balance, in
special servicing as of the March 2021 remittance report. The
special servicer is in the process of forbearance discussions with
both loan borrowers. Thirteen loans, secured by 21.7% of the trust
balance, were on the servicer's watchlist; however, two of the
three largest watchlist loans are on the watchlist solely for
deferred maintenance. DBRS Morningstar was previously concerned
with the largest watchlisted loan, Southfield Town Center
(Prospectus ID#4 – 8.8% of the trust balance), as the Class B
office property in Southfield, Michigan realized a considerable net
cash flow (NCF) decrease in 2019 following occupancy rate declines
since issuance. The borrower was able to increase the property's
occupancy rate from 64.7% in December 2017 to 74.7% in September
2020 and the annualized trailing nine-month ending September 30,
2020, NCF rebounded to a satisfactory $16.8 million, slightly
greater than the issuer's underwritten NCF of $16.4 million at
issuance. While the submarket exhibits a high vacancy rate, the
property does not have any major upcoming lease expirations and
DBRS Morningstar anticipates that the collateral's performance will
be stable in the near term.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-CCRE24: Fitch Lowers Class F Debt Rating to 'CCC'
-----------------------------------------------------------
Fitch Ratings has downgraded two classes and affirmed nine classes
of Deutsche Bank Securities, Inc.'s COMM 2015-CCRE24 Mortgage Trust
(COMM 2015-CCRE24).
DEBT RATING PRIOR
---- ------ -----
COMM 2015-CCRE24
A-4 12593JBE5 LT AAAsf Affirmed AAAsf
A-5 12593JBF2 LT AAAsf Affirmed AAAsf
A-M 12593JBH8 LT AAAsf Affirmed AAAsf
A-SB 12593JBC9 LT AAAsf Affirmed AAAsf
B 12593JBJ4 LT AA-sf Affirmed AA-sf
C 12593JBK1 LT A-sf Affirmed A-sf
D 12593JBL9 LT BBB-sf Affirmed BBB-sf
E 12593JAL0 LT B-sf Downgrade BB-sf
F 12593JAN6 LT CCCsf Downgrade B-sf
X-A 12593JBG0 LT AAAsf Affirmed AAAsf
X-C 12593JAC0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: Despite generally stable loss
expectations, the downgrades to classes E and F reflect the further
certainty of expected losses and the transfer of four loans (10.80%
of the pool) to special servicing since Fitch's last rating action.
Fitch has designated six loans (20.6% of the pool) as Fitch Loans
of Concern (FLOCs) due to upcoming tenant rollover, lack of
stabilization, or continued performance declines.
Fitch's current ratings incorporate a base case loss of 6.50%. The
Negative Rating Outlooks on classes B through F assume losses could
reach 7.50% and reflect additional coronavirus-related stresses.
The largest FLOC and second largest contributor of losses is Eden
Roc loan (7.5%), which is secured by a 631-key, full-service hotel
in Miami Beach, FL. The property was closed from March to early
June 2020 due to the pandemic. As of YTD September 2020, occupancy,
ADR and RevPAR were 36%, $294 and $106, respectively, compared with
72.7%, $277 and $201 at YE 2019. The borrower was granted
forbearance in August 2020, allowing for the suspension of monthly
FF&E reserve contributions between June and December 2020, and has
requested an extension of this provision. Fitch's analysis included
a 26% stress to the YE 2019 NOI to reflect the impact of the
pandemic on performance.
The second largest FLOC, the third largest contributor of losses,
and the largest specially serviced loan is Palazzo Verdi (5.76%),
secured by a 302,245 square foot office building in Grennwood
Village, CO. The former largest tenant which occupied 72% of net
rentable area vacated their space upon expiration in October 2020.
The loan transferred to the special servicer in November 2020 due
to default and has been delinquent ever since. Fitch's analysis
applied a haircut to a recent appraisal value.
Westin Portland (4.20%), secured by a 205-unit full service hotel
located in downtown Portland, OR, transferred to special servicing
in June 2020 due to payment default and has remained delinquent
since the April 2020 payment. The Oregon Moratorium prevents the
lender from taking any enforcement actions and the borrower has
indicated that they will begin making payments once the moratorium
has been lifted. The hotel, which no longer operates under the
Westin flag, underwent an eight month renovation and re-opened in
August 2017 under a new boutique name: The Dossier Hotel. Occupancy
declined as rooms were taken offline during construction, but never
rebounded to pre-renovation levels. Market conditions in Portland
remain soft due to new supply combined with the coronavirus
pandemic. While this loan was a FLOC prior to the coronavirus
outbreak, current conditions will add to the property's performance
challenges. The YE 2019 NOI debt service coverage ratio (DSCR) was
0.81x with an occupancy of 77.8%, a decrease from the YE 2018 NOI
DSCR of 1.02x and occupancy of 80%. Fitch's analysis applied a
haircut to a recent appraisal value.
Embassy Suites Denver Tech Center (2.28%) has been flagged as a
FLOC due to declining performance metrics, primarily attributable
to reduced travel related to the coronavirus pandemic. While the
loan remains current, performance metrics as of YE 2020 have
declined to an occupancy of 35% and NCF DSCR of -0.08x compared
with an occupancy of 78% and NCF DSCR of 1.70x at YE 2019. Fitch's
analysis included a 26% stress to the YE 2019 NOI to reflect the
impact of the pandemic on performance.
Minimal Changes to Credit Enhancement: As of the March 2021
distribution date, the pool's aggregate principal balance was paid
down by 8.95% to $1.264 billion from $1.388 billion at issuance.
Five loans (3.72% of the pool) are fully defeased. Since the last
rating action, one loan (issuance balance of $6.7 million) was
repaid in full prior to maturity. There have been no realized
losses since issuance. Interest shortfalls of approximately
$555,053 are currently contained to the unrated class H
certificate.
Alternative Loss Considerations: Fitch performed a sensitivity
which applies paydown of loans that pass both term and maturity
default stresses ($459.2 million) and applies paydown of defeased
collateral ($47.1 million). This sensitivity scenario also applied
additional coronavirus related stresses and contributes to the
affirmation of the 'AAA' rated classes and Stable Outlooks.
Coronavirus Exposure: Ten loans (20.65% of the pool) are secured by
hotel properties and 22 loans (22.16% of the pool) are secured by
retail properties which are considered more susceptible to
disruptions from the coronavirus pandemic. Additional
coronavirus-related stresses were applied to eight hotel loans
(15.24% of the pool), three retail loans (7.99% of the pool), and
one multifamily loan (0.79% of the pool).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- 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 credit enhancement and/or defeasance and with
the stabilization of performance on the FLOCs and/or the
properties affected by the coronavirus pandemic. Classes would
not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls.
-- An upgrade of class D is not likely until the later years in
the transaction and only if performance of the FLOCs have
stabilized and the performance of the remaining pool is
stable. Classes E and F are unlikely to be upgraded absent
significant performance improvement for the FLOCs and higher
recoveries than expected on the specially serviced loans.
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. Downgrades to classes rated
'AAAsf' and 'AA-sf' may occur should interest shortfalls
affect these classes, additional loans become FLOCs or if the
loans impacted by the coronavirus pandemic fail to recover.
-- Downgrades to classes B and C are possible should the
specially serviced loans incur greater than expected losses.
Class D may be downgraded should loss expectations increase
due to further performance decline for the FLOCs. Downgrades
to classes E and F may occur should additional loans transfer
to special servicing or performance of the FLOCs fail to
return to pre-pandemic levels.
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 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.
COMM 2015-CCRE27: DBRS Confirms B(sf) Rating on Class X-E Certs
---------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-CCRE27 issued by COMM
2015-CCRE27 Mortgage Trust as follows:
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-D at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-E at B (sf)
-- Class G at B (low) (sf)
With this review, DBRS Morningstar also removed Classes E, X-D, F,
X-E, and G from Under Review with Negative Implications, where they
were placed on August 6, 2020. The trends on Classes X-D, F, X-E,
and G are Negative, while all other trends are Stable.
The Negative trends reflect the increased risk to the trust in the
concentration of loans in special servicing and on the servicer's
watchlist. As of the March 2021 reporting, 10 loans (representing
22.4% of current trust balance) are currently in special servicing,
including three in the top 15 (representing 15.8% of the current
trust balance). Eight of these 10 loans were transferred to the
special servicer since the start of the Coronavirus Disease
(COVID-19) pandemic. There are 14 loans (representing 16.3% of
current trust balance) on the servicer's watchlist, including three
top 15 loans. The watchlisted loans are being monitored for various
reasons including low debt service coverage ratios (DSCRs),
activation of cash traps, occupancy declines, upcoming tenant
rollover, and coronavirus-related borrower relief requests.
At issuance, the transaction consisted of 65 loans secured by 96
commercial properties, with an original trust balance of $931.6
million. As of the March 2021 remittance, 62 loans remained in the
trust with an outstanding trust balance of $816.7 million,
reflecting a collateral reduction of 12.5% since issuance because
of the repayment of two loans, scheduled loan amortization of the
trust, and the liquidation of one loan. The trust benefits from
nine loans (10.4% of the current trust balance) that are fully
defeased. The three largest property-type concentrations are
multifamily (33.2% of the pool), retail (20.9% of the pool), and
office (20.1% of the pool).
At issuance, DBRS Morningstar assigned an investment-grade shadow
rating to one loan, 11 Madison Avenue (Prospectus ID#1, 7.8% of the
current trust balance). With this review, DBRS Morningstar
confirmed that the performance of this loan remains consistent with
investment-grade loan characteristics.
The largest loan in special servicing, the NMS Los Angeles
Multifamily Portfolio (Prospectus ID #2, 8.0% of the current trust
balance), is secured by a portfolio of six multifamily properties,
totaling 384 units, all within Los Angeles County, California. The
loan transferred to special servicing in July 2020, following the
borrower's request for relief because of the coronavirus pandemic.
As of the March 2021 reporting, the loan was late for the March
payment, but less than 30 days delinquent, and the special servicer
is awaiting further information from the borrower to evaluate the
borrower's relief request. According to the trailing nine months
ended September 30, 2020, reporting, the DSCR was 1.19 times (x).
This compares with the YE2019 DSCR of 2.40x.
The portfolio performance was quite strong before the coronavirus
pandemic, as the coverage was typically well above the issuance
DSCR of 1.31x. The occupancy rate reported for September 2020 of
79.7% compares with 88.0% at YE2019 and 94.0% at YE2018, suggesting
the reason for the borrower's relief request is lower revenues
and/or lower collections for tenants still in place. As the loan
has generally remained current or within 30 days of the payment due
date since the transfer to special servicing, the borrower appears
to be committed to the loan, and DBRS Morningstar expects a return
to the master servicer will be executed at some point in the near
to moderate term.
The second-largest loan in special servicing, Midwest Shopping
Center Portfolio (Prospectus ID#6, 4.2% of the current trust
balance) is secured by a portfolio of six anchored retail centers
totaling 889,413 square feet (sf) in Iowa (two properties, 45.5% of
the net rentable area (NRA)), Illinois (two properties, 27.6% of
the NRA), Oklahoma (15.2% of the NRA), and Missouri (11.7% of the
NRA). The loan was transferred to the special servicer in July
2020, following the borrower's request for relief because of the
coronavirus pandemic. According to the special servicer, the
borrower has been uncooperative and a mechanic's lien has been
filed against one or more properties in the portfolio, but no
details have been provided to date. Negotiations between the
special servicer remain ongoing and a receiver is being evaluated.
As of the March 2021 reporting, the loan was listed as 60 days
delinquent.
It is noteworthy that the loan sponsor, Natin Paul, the chief
executive officer and founder of World Class Capital Group, LLC,
has been under investigation by the FBI since 2019, according to
various online news articles. The Texas Tribune reported on October
7, 2020, that Paul's home and office had been raided in 2019 by FBI
and U.S. Department of Treasury agents, but noted no criminal
charges had been filed as of the date of the article. Paul and his
firm have been widely reported to be in financial distress since
2019, with several ongoing lawsuits and bankruptcy cases. On
February 9, 2021, the Austin Business Journal reported an
arbitration ruling against Paul in the amount of $1.9 million, and
a later story by the same paper, dated March 2, 2020, noted ongoing
hearings surrounding the allegations that former Texas attorney
general Ken Paxton used his office to assist Paul's business
dealings.
Prior to transfer to special servicer, this loan had been on the
servicer's watchlist since November 2019 for watchlist triggers
including lease expirations, the borrower's failure to submit
financial statements, and the occurrence of a servicing trigger
event (cash trap). The servicer was monitoring January 2020 lease
expirations for five tenants representing 34.4% of the total NRA.
All but one of those five tenants in Office Max renewed and the
portfolio occupancy rate at April 2020 was reported at 81.9%, down
from 90.0% at issuance. The YE2019 DSCR was 1.43x, compared with
1.34x at YE2018 and the DBRS Morningstar DSCR at issuance of
1.37x.
Given the outstanding issues for the sponsor and the uncertainty
surrounding the workout for this loan, the risks are significantly
increased from issuance, a contributing factor for the Negative
trends as previously detailed.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-LC21: DBRS Cuts Class F Certs Rating to CCC(sf)
---------------------------------------------------------
DBRS, Inc. downgraded one class of the Commercial Mortgage
Pass-Through Certificates, Series 2015-LC21 issued by COMM
2015-LC21 Mortgage Trust as follows:
-- Class F to CCC (sf) from B (low) (sf)
DBRS Morningstar also confirmed the following classes:
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BB (sf)
-- Class E at BB (low) (sf)
In addition, DBRS Morningstar discontinued its rating on Class X-E
as it references a class with a CCC (sf) rating.
DBRS Morningstar removed Classes E, F, and X-D from Under Review
with Negative Implications, where they were placed on August 6,
2020. Class F has a rating that does not carry a trend. All other
classes have Stable trends. The downgrade is reflective of a loss
incurred by the trust since the last review, as well as anticipated
losses upon resolution of several specially serviced loans.
As of the March 2021 remittance, the pool's balance had been
reduced to $1.1 billion from $1.3 billion at issuance, a collateral
reduction of 18.6%. This resulted from the payoff of nine loans
including the pool's largest loan at issuance, the $87.0 million
Courtyard by Marriott Portfolio, which paid off in February 2020.
There are nine loans, representing 8.4% of the pool, with the
special servicer. The largest specially serviced loan is the
Anchorage Business Park loan (Prospectus ID#11, 2.1% of the pool)
which is secured by a 176,799 square-foot (sf) Class C office
property in Anchorage, Alaska. The property has struggled
maintaining anticipated occupancy levels and reported 81% occupancy
at midyear 2020 compared with the issuance level of 86%. The 2019
net cash flow (NCF) was 40% below the Issuer's level and the debt
service coverage ratio (DSCR) has been below breakeven for several
years. The servicer's commentary indicated that the borrower
intends to return the title to the lender. DBRS Morningstar
liquidated the loan as part of this analysis and expects a loss
upon resolution.
There are an additional 25 loans, representing 32.9% of the pool,
on the servicer's watchlist. These loans are being monitored for
various reasons, including low DSCRs or occupancy, tenant rollover
risk, and/or Coronavirus Disease (COVID-19) pandemic-related
forbearance requests.
The largest loan remaining in the pool is the Courtyard by Marriott
Pasadena (Prospectus ID#2, 6.2% of the pool), which is secured by a
314-room limited-service hotel in Pasadena, California. It briefly
transferred to the special servicer in April 2020 for
coronavirus-related default. The 2019 NCF was already 13% below the
2018 NCF and 7% below the Issuer's level, resulting from a
combination of increased expenses and decreased revenue. A
forbearance was granted in August 2020 which allowed the borrower
to use furniture, fixtures, and equipment reserves to cover loan
payments from September 2020 through November 2020. The loan was
returned to the master servicer and has remained current as it is
being monitored on the watchlist.
Another loan of concern is the Honeywell Building loan (Prospectus
ID#27, 1.6% of the pool), which is secured by a 156,784-sf office
property in Houston, about 16 miles west of the central business
district. The main tenant, Honeywell, which occupied 85% of the
property, vacated at its December 2019 lease expiration, and
occupancy declined to only 7% as of the December 2020 financials.
The loan has remained current but faces substantial hurdles in its
re-leasing efforts.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2019-WCM: DBRS Confirms Class B(low) Rating on Class G Certs
-----------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2019-WCM issued by COMM 2019-WCM
Mortgage Trust as follows:
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The ratings confirmations reflect the overall stable performance of
the transaction, which remains in line with DBRS Morningstar's
expectations at issuance. The collateral for the underlying loan
consists of the fee-simple interests in 10 multifamily properties
totalling 2,297 units across seven markets in three states,
including Washington (43% of the portfolio), California (42% of the
portfolio), and Arizona (15% of the portfolio). The $415.0 million
loan was used to refinance the existing debt of $305.0 million, pay
closing costs of $7.2 million, and return equity of $102.8 million.
The loan is interest only (IO) throughout, with a two-year initial
term and three one-year extension options. The mortgages are
cross-collateralized and cross-defaulted.
The sponsor for this transaction is Blackstone, a large global
alternative asset manager. The properties are owned by affiliates
of Blackstone Real Estate Partners Fund VIII and were acquired
between December 2015 and November 2016 for almost $428.9 million.
Blackstone continues to demonstrate its broad experience and
ability to identify opportunistic assets and invest the resources
necessary to improve performance. Following the acquisition of the
portfolio, the sponsor invested an additional $30.4 million, or
$13,235 per unit, into property improvements, including $12.3
million on deferred maintenance and asset preservation
requirements, $3.6 million for replacement of capital items, and
$14.6 million renovating the units.
The properties are located in markets that have historically shown
strong multifamily fundamentals with an average vacancy rate of
4.9% based on appraisal data. Market fundamentals within the
portfolio have remained stable during the Coronavirus Disease
(COVID-19) pandemic. According to the Q3 2020 financials, the
portfolio was 96.1% occupied compared with the 94.2% occupancy rate
reported at YE2019.
Based on unit count, the portfolio is largely concentrated in
Tacoma and Phoenix, which represent 31.6% and 26.1% of the
allocated loan balance, respectively. According to Reis, the Q4
2020 vacancy for the Tacoma metro market is 2.8%, the same as Q4
2019, while the vacancy rate for the Phoenix metro market is 5.1%,
up slightly from 4.7% the year prior. The other properties are
located in other desirable markets, such as San Diego, Seattle,
Inland Empire, San Francisco, and Los Angeles, which are displaying
Q4 2020 vacancy rates as reported by Reis of 4.0%, 6.1%, 5.0%,
3.6%, and 4.5%, respectively, all generally in line with previous
years' reporting. The Reis data suggests that the markets for the
subject portfolios have performed well amid the disruptions of the
coronavirus pandemic, which also appears to be reflected in the
stable occupancy rates for the portfolio as a whole as of the most
recent September 2020 figures analyzed by the servicer. As such,
DBRS Morningstar expects the portfolio to continue to generate
sustainable cash flow over the loan term.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2021-LBA: DBRS Finalizes B(low) Rating on Class G Certs
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2021-LBA issued by COMM 2021-LBA Mortgage Trust (COMM 2021-LBA) as
follows:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable. Class J and Class HRR are not rated (NR).
The subject transaction consists of a portfolio of 18
industrial/logistics properties located across seven states being
recapitalized by a newly formed joint venture (JV) between LBA
Realty Fund VI, L.P. (LBA) and GIC (Realty) Private Limited (GIC),
the sovereign wealth fund of Singapore. DBRS Morningstar previously
analyzed and assigned ratings to certificates in connection with a
similar recapitalization sponsored by a JV partnership between LBA
and Blackstone (BX Trust 2021-LBA).
The portfolio benefits from its position across several
strong-performing gateway industrial markets, including
Philadelphia, Northern New Jersey, Los Angeles, Sacramento,
Chicago, and Salt Lake City. Collectively, the portfolio's markets
have a weighted-average (WA) availability rate of 6.4%, which is
below the Q3 2020 national average of approximately 7.6% according
to CBRE Econometric Advisers (EA). Gateway industrial markets serve
as key distribution points in the global supply chain, are near
major population centers, and generally exhibit greater liquidity
and stability in times of economic stress.
The entire portfolio is classified as warehouse/distribution
product, which was generally confirmed by DBRS Morningstar site
tours on a sampling of the portfolio. Furthermore, only 8.1% of the
portfolio's square footage is composed of office space, which is on
the lower end of the range for recently analyzed industrial
portfolios.
The transaction benefits from strong cash flow stability
attributable to a significant proportion of credit tenant leases
across the portfolio. Approximately 43.1% of the DBRS Morningstar
in-place base rent is attributable to investment-grade (IG)
tenants, including several high investment-grade rated entities.
Furthermore, if the sponsor is successful in executing an Amazon
lease for the 3825 Forsyth property, the portfolio's proportion of
in-place base rent derived from IG tenants would be in excess of
52.0%.
The borrower sponsors, a JV partnership between LBA and GIC, are
contributing approximately $238.2 million in cash equity as a part
of the transaction to recapitalize the portfolio. DBRS Morningstar
generally views acquisition loans with significant amounts of cash
equity more favorably, given the stronger alignment of economic
incentives when compared with cash-out financings.
The DBRS Morningstar LTV on the trust loan is significant at
106.7%. The high leverage point, combined with the lack of
amortization, could potentially result in elevated refinance risk
and/or loss severities in an EOD.
The portfolio has a WA year built of approximately 1985, which is
significantly older than other recently analyzed industrial
portfolios. Older properties tend to have lower clear heights and
often lack the benefits of modern building technology and HVAC
systems. Accordingly, the portfolio's WA clear heights are
approximately 26 feet, which are less favorable than other recently
analyzed portfolios, which have averaged closer to 27 feet.
Eleven of the portfolio's 18 properties are leased to single-tenant
users, therefore reducing tenant diversity and granularity. The
properties collectively comprise approximately 48.0% of the DBRS
Morningstar in-place base rent (exclusive of the prospective Amazon
lease for 3825 Forsyth). This proportion of single-tenant
properties is higher than other recently analyzed transactions.
However, as mentioned above, a sizable portion of the portfolio is
leased to IG tenants, which offsets some of the single-tenant
risk.
The mortgage loan has a partial pro rata/sequential-pay structure,
which allows for pro rata paydowns for the first 20.0% of the
unpaid principal balance. DBRS Morningstar considers this structure
to be credit negative, particularly at the top of the capital
stack. Under a partial pro rata paydown structure, deleveraging of
the senior notes through the release of individual properties
occurs at a slower pace compared with a sequential-pay structure.
DBRS Morningstar applied a penalty to the transaction's capital
structure to account for the pro rata nature of certain
prepayments.
The borrower can also release individual properties subject to
customary requirements. However, the prepayment premium for the
release of individual assets is generally 105.0% of the allocated
loan amount for the first 20.0% of the original principal balance
of the mortgage loan and 110.0% thereafter. DBRS Morningstar
considers the release premium to be weaker than a generally
credit-neutral standard of 115.0% and, as a result, applied a
penalty to the transaction's capital structure to account for the
weak deleveraging premium.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2016-C6: Fitch Lowers 2 Tranches to 'CCC'
-----------------------------------------------
Fitch Ratings has downgraded and removed from Rating Watch Negative
four classes; assigned Negative Rating Outlooks on two of those
classes and affirmed nine classes of Credit Suisse Commercial
Mortgage Trust's CSAIL 2016-C6 Commercial Mortgage Trust
Pass-Through Certificates.
DEBT RATING PRIOR
---- ------ -----
CSAIL 2016-C6
A-4 12636MAD0 LT AAAsf Affirmed AAAsf
A-5 12636MAE8 LT AAAsf Affirmed AAAsf
A-S 12636MAJ7 LT AAAsf Affirmed AAAsf
A-SB 12636MAF5 LT AAAsf Affirmed AAAsf
B 12636MAK4 LT AA-sf Affirmed AA-sf
C 12636MAL2 LT A-sf Affirmed A-sf
D 12636MAV0 LT BBB-sf Affirmed BBB-sf
E 12636MAX6 LT B-sf Downgrade BB-sf
F 12636MAZ1 LT CCCsf Downgrade B-sf
X-A 12636MAG3 LT AAAsf Affirmed AAAsf
X-B 12636MAH1 LT AA-sf Affirmed AA-sf
X-E 12636MAP3 LT B-sf Downgrade BB-sf
X-F 12636MAR9 LT CCCsf Downgrade B-sf
Classes A-1, A-2 and A-3 are paid in full. Fitch does not rate
classes X-NR or class NR. The rating of class X-D was previously
withdrawn.
KEY RATING DRIVERS
Increased Loss Expectations and Specially Serviced Loans: The
downgrades reflect the increase in specially serviced loans since
the prior rating action, a higher certainty of loss on some of
these assets and an increase in loss expectations for Fitch Loans
of Concern (FLOCs). Five loans (17.5% of the current pool balance)
are currently in special servicing, all of which have transferred
over the past 12 months. In total, 18 loans (39.5%) including the
specially serviced loans are considered FLOCs for declines in
performance largely due to the coronavirus pandemic. Fitch does not
expect all of these loans to suffer a loss and will continue to
monitor the loans as servicers proceed to one of either a
modification, forbearance or disposition.
Fitch's current ratings incorporate a base case loss of 9.60%. The
Negative Rating Outlooks reflect additional coronavirus-related
stresses as well as an outsized loss on the Quaker Bridge Mall,
which assumes losses could reach 12.90%.
The largest five contributors to loss are Quaker Bridge Mall, Jay
Scutti Plaza, Lofton Place Apartments, Holiday Inn & Suites Ann
Arbor, and Holiday Inn Express Little Rock.
Quaker Bridge Mall (11.4% of the pool) is secured by a 357,221 sf
regional mall located in Lawrenceville, NJ that transferred to
special servicing in November 2020 as a result of the impact from
the coronavirus pandemic. 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 which is based on a
discount to the most recent appraisal, 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.
Jay Scutti Plaza (4.1% of the pool) is secured by a 288,971 sf
community shopping center built in 1991 and located in Rochester,
NY. The largest tenants are Value City Furniture (17.3% net
rentable area [NRA] - expiry February 2027), Burlington (16.2%),
expiry February 2030, HomeGoods (7% NRA - expiry September 2027);
Petco (5% NRA - expiry Jan. 31, 2022); La-Z-Boy (5% NRA - expiry
May 31, 2025). The property's occupancy declined to 84% as of
September 2020 from 99.6% in September 2019. There is approximately
upcoming rollover of 6.7% in 2021 and 8.9% in 2022.
The borrower requested relief and the loan transferred to special
servicing effective May 22, 2020 after tenants requested various
forms of payment relief for future months. However, the loan was
not modified as the borrower brought the loan current and rescinded
their relief requests. Fitch's expected loss of 17.7% account for
expected decline in performance due to the coronavirus pandemic and
reflects a 15% stress to YE 2019 NOI.
Lofton Place Apartments (2.6% of the pool) is secured by a garden
style multifamily property consisting of 258 units located in Fort
Worth, TX. The loan is currently on the master servicer's watchlist
as the borrower has had difficulty with tenants' rent collections
and others that moved out without notice and damage the property.
The property manager has been replaced, and the borrower is
concentrating on rent collection and quality tenants. The property
is 90.7% occupied with average rent $861 compared to 94.6% an
average rent of $859 prior year. The most recent NOI debt-service
coverage ratio (DSCR) as of YE 2020 is 1.10x slightly below 1.16x
YE 2019 and 1.58x YE 2017.
Per Reis as of 4Q20, the Fort Worth multifamily market metro
vacancy rate is 4.7% with average asking rent $1,032. The North
Arlington submarket vacancy rate is 4.1% with average asking rent
$928. Fitch's expected loss is 46.2% and is based on a 15% stress
to YE 2019, which reflects the expected decline in performance due
to the coronavirus pandemic.
Holiday Inn & Suites Ann Arbor (1.5% of the pool) is secured by a
107-key limited-service hotel located in Ann Arbor, MI, south of
the University of Michigan campus and downtown Ann Arbor. Per the
Dec. 31, 2019 operating statement analysis, effective gross income
has increased 5.6% when compared to YE 2018. This is mostly due to
a 5.9% increase in room revenue. The previous declines in
performance were due to the property undergoing a property
improvement plan (PIP); renovations to the lobby and guestrooms
have been completed.
Fitch requested an update from the master servicer to see if
borrower has requested coronavirus relief but did not received a
response. The most recent servicer reported NOI DSCR as of YE 2019
is 0.93x up from 0.62x YE 2018 but below 1.38x YE 2017 and 1.67x at
issuance. A recent Smith Travel Research (STR) report was requested
of the servicer, but not received. Fitch's expected loss is 48% and
is based on a 26% stress to YE 2019 to account for expected decline
in performance due to the coronavirus pandemic.
Holiday Inn Express Little Rock (1.3% of the pool) is secured by a
150-key limited-service hotel located in Little Rock, AK. The
borrower sent the master servicer a relief request due to
coronavirus in April 2020. The loan was transferred to special
servicing on May 4, 2020 due to imminent monetary default. Borrower
reconsidered their request and decided to bring the loan current
and pay all legal expenses and special servicing fees. Loan was
returned to master servicer effective May 26, 2020. The most recent
servicer reported NOI DSCR as of YE 2019 is 0.77x down from 1.69x
YE 2018 and 1.66x at issuance.
A recent STR report was requested of the master servicer, but not
received. Fitch's expected loss of 64% is based on a 26% stress to
YE 2019 NOI to account for expected decline in performance due to
the coronavirus pandemic.
Increased Credit Enhancement (CE): As of the March 2021
distribution date, the pool's aggregate balance has been reduced by
23.7% to $585.6 million, from $767.5 million at issuance. Two loans
(1.0%) are defeased. At issuance, based on the scheduled balance at
maturity, the pool was scheduled to paydown 7.5%. Five loans
representing 30.8% of the pool are full-term interest only, and 24
loans representing 47.8% of the pool are partial interest only. The
remainder of the pool consists of 17 balloon loans representing
21.4% of the pool, with loan terms of five to 10 years.
Regional Mall Concerns and Alternative Loss Scenario: The Quaker
Bridge Mall (11.4% of the pool) loan is secured by a 357,221 sf
regional mall located in Lawrenceville, NJ that transferred to
special servicing in November 2020 as a result of the impact of the
coronavirus pandemic. The loan has been delinquent five times in
the past 12 months and is currently 90+ days delinquent. The
borrower, Simon Property Group, and the servicer are negotiating
terms of payment relief. Fitch's analysis included a 34% base case
loss, and an additional sensitivity of a 50% loss to reflect the
potential for continued performance declines and the historically
low recovery values for regional malls.
Additional Stresses Applied Due to Coronavirus Exposure: As a
result of property performance deterioration due to the
coronavirus, there has been an increase in defaults and transfers
to special servicing, leading to an increase in Fitch's loss
expectations. Significant economic impact to certain hotels, retail
and multifamily properties, is expected due to the pandemic and the
lack of clarity at this time on the potential length of the impact.
Loans secured by hotel, retail and multifamily properties represent
12.7% (six loans), 24.8% (13 loans) and 21.9% (14 loans);
respectively.
Fitch's analysis applied additional coronavirus-related stresses on
three hotel loans (6%), six retail loans (7.5%) and three
multifamily loans (5%) to account for potential cash flow
disruptions due to the coronavirus pandemic; this contributed to
the Negative Rating Outlooks.
RATING SENSITIVITIES
The downgrades reflect the concerns with the FLOCs, most notably
the specially serviced loan, Quaker Bridge Mall. The Negative
Rating Outlooks reflect potential future downgrades should the
coronavirus continue to negatively affect performance.
Although near-term performance impact is expected on many
properties, lack of clarity about the length 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. Forbearance,
payment deferrals and/or loan modifications may be employed by
servicers to retain borrowers and return loans to performing;
however, it remains uncertain whether many of these loans will be
resolved or whether they will successfully refinance even if they
are resolved. The Stable Outlooks on classes A-4 through A-SB
reflect the increasing CE, defeasance and expected continued
amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance. Upgrades to classes B and C would likely
occur with significant improvement in CE and/or defeasance;
however, adverse selection and increased concentrations,
further underperformance of the FLOCs or higher than expected
losses on the specially serviced loan could cause this trend
to reverse. An upgrade of class D, rated 'BBB-sf', is
considered unlikely and would be limited based on sensitivity
to concentrations or the potential for future concentration.
-- Classes would not be upgraded above 'Asf' if there is
likelihood for interest shortfalls. An upgrade to classes E
and F are not likely until the later years of the transaction
and only if the performance of the remaining pool is stable
and/or properties vulnerable to the coronavirus return to pre
pandemic levels, and there is sufficient credit enhancement to
the class.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming or
specially serviced loans. Downgrades to classes A-4, A-5, A-S
and A-SB, B and C are not expected due to higher CE, but may
occur at the 'AAsf' and 'AAAsf' categories should interest
shortfalls occur.
-- Downgrades to classes D and E would occur should overall pool
losses increase and/or one or more large FLOCs have an
outsized loss. A downgrade to class F would occur should loss
expectations increase due to loans transferring to special
servicing and/or properties vulnerable to the coronavirus fail
to return to pre-pandemic levels.
In addition to its baseline scenario, Fitch also envisions a
downside scenario where the health crisis is prolonged beyond 2021;
should this scenario play out, Fitch expects that a greater
percentage of classes may be assigned a Negative Rating Outlook or
those with Negative Rating Outlooks will be downgraded one or more
categories. 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.
CSMC TRUST 2018-RPL4: Fitch Assigns B Rating on Class M-7 Tranche
-----------------------------------------------------------------
Fitch Ratings has assigned ratings to CSMC 2018-RPL4 Trust.
DEBT RATING
---- ------
CSMC 2018-RPL4 Trust
A LT AAAsf New Rating
A-1 LT AAAsf New Rating
A-1A LT AAAsf New Rating
A-1X LT AAAsf New Rating
A-2 LT AAAsf New Rating
A-3 LT A+sf New Rating
B-1 LT AAAsf New Rating
B-1-IO LT AAAsf New Rating
B-2 LT A+sf New Rating
B-2-IO LT AAAsf New Rating
B-3 LT NRsf New Rating
B-4 LT NRsf New Rating
B-5 LT NRsf New Rating
M-1 LT AAAsf New Rating
M-1A LT AAAsf New Rating
M-1X LT AAAsf New Rating
M-2 LT AAAsf New Rating
M-2A LT AAAsf New Rating
M-2X1 LT AAAsf New Rating
M-2X2 LT AAAsf New Rating
M-3 LT AAsf New Rating
M-3A LT AAsf New Rating
M-3X1 LT AAsf New Rating
M-3X2 LT AAsf New Rating
M-4 LT A+sf New Rating
M-4A LT A+sf New Rating
M-4X1 LT A+sf New Rating
M-4X2 LT A+sf New Rating
M-5 LT BBBsf New Rating
M-5A LT BBBsf New Rating
M-5X LT BBBsf New Rating
M-6 LT BBsf New Rating
M-6A LT BBsf New Rating
M-6X LT BBsf New Rating
M-7 LT Bsf New Rating
M-8 LT NRsf New Rating
PT LT NRsf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
CSMC 2018-RPL4 is supported by a pool of re-performing mortgage
loans (RPL). The transaction was originally issued in the second
quarter of 2018 and was not rated at deal close. In tandem with
this rating assignment, the transaction is being modified to i.)
add classes A, A-1A, A-1X, M-1, M-1A, M-1X, M-2, M-2A, M-2X1,
M-2X2, M-3, M-3A, M-3X1, M-3X2, M-4, M-4A, M-4X1, M-4X2, M-5, M-5A,
M-5X, M-6, M-6A, M-6X, M-7 and M-8; ii.) allow principal collection
to be redirected to cover any potential interest shortfalls on the
classes A-1A, M-1A, M-2A, and M-3A; iii.) using interest payment
otherwise allocable to the class M-8 to fund an account that may be
used for potential repurchases and; iv.) adding certain constraints
on which institutions can act as an "Eligible Account".
KEY RATING DRIVERS
Coronavirus Impact Addressed (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-19 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."
RPL Credit Quality (Mixed): The collateral consists of 3,842
seasoned performing and re-performing first and second lien loans,
totaling $965 million, and seasoned approximately 177 months in
aggregate. The pool is 88.1% current and 11.9% DQ. Over the last
two years, 77.6% of loans have been clean current. Additionally,
67.7% of loans have a prior modification. The borrowers have weaker
credit profiles (695 FICO and 45% DTI) but relatively low leverage
(72% sLTV). The pool consists of 92.6% of loans where the borrower
maintains a primary residence, while 7.4% are investment properties
or second home.
Geographic Concentration (Neutral): Approximately 48% of the pool
is concentrated in California. The largest MSA concentration is in
the Los Angeles MSA (15.2%), followed by the San Francisco MSA
(8.2%) and the Washington MSA (7.6%). The top three MSAs account
for 31% of the pool. As a result, there was no adjustment for
geographic concentration.
Transaction Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
No Servicer Advancing (Mixed): The servicers will not be advancing
delinquent monthly payments of principal and interest (P&I).
Because P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust,
the loan-level loss severities (LS) are less for this transaction
than for those where the servicer is obligated to advance P&I.
Low Operational Risk (Positive): Operational risk is well
controlled for in this transaction. Credit Suisse has an
established operating history acquiring single family residential
loans. Select Portfolio Servicing, Inc. (SPS), rated 'RPS1-' by
Fitch, is the named servicer for the transaction. Fitch lowered the
expected losses at the 'AAAsf' rating category by 126 bps to
reflect the strong servicer counterparty. Issuer retention of at
least 5% of the bonds also helps ensure an alignment of interest
between both the issuer and investor.
R&Ws Have Limited Representations and Warranties (Negative): The
loan-level representations and warranties (R&Ws) are consistent
with a Tier 3 framework. The tier assessment is based on the
limited loan level R&Ws that are typically mitigated with 100% due
diligence review. However, due diligence was only performed on 16%
of the transaction pool, and a breach reserve account was
established that replaces the Sponsor's responsibility to cure any
R&W breaches following the established sunset period. Fitch
increased its loss expectations by 195 bps at the 'AAAsf' rating
category to reflect both the limitations of the R&W framework as
well as the non-investment-grade counterparty risk of the
provider.
Due Diligence Review Results (Negative): A third-party due
diligence review was performed on approximately 16% of the loans in
the transaction pool. The review was performed by SitusAMC, which
is assessed by Fitch as an 'Acceptable - Tier 1' TPR firm. The due
diligence results indicated moderate operational risk with
approximately 8% of loans receiving a final grade of 'C' or 'D'.
Approximately 4% of the sample are subject to loss severity
adjustments for missing or estimated final HUD-1 documents
necessary for testing compliance with predatory lending
regulations. These regulations are not subject to statute of
limitations unlike the majority of compliance exceptions, which
ultimately exposes the trust to added assignee liability risk.
Since due diligence was performed on a sample, Fitch extrapolated
the compliance results to the remaining loan population that did
not receive due diligence to reflect the absence of predatory
lending testing. Fitch adjusted its loss expectation at the 'AAAsf'
rating category by 22 bps in aggregate to account for this added
risk.
Limited Title and Lien Search (Negative): 100% of the pool received
a tax and title lien search using a Corelogic Lien Report Lite
(Lite) product. Unlike a more orthodox title search, the Lite
product primarily acts as a cursory tax and title lien search and
may not be able to fully confirm all lien positions. The report
indicated that approximately 89% of the transaction pool in 1st
lien position, while the remaining loans 11% of loans were either
not confirmed to be in 1st lien position or did not receive a hit
on the cursory search. These loans were treated as 2nd liens in
Fitch's loss model and received 100% loss severity treatment to
reflect to possibility that these lien positions are not
prioritized for proceeds in the event of liquidation. The 'AAAsf'
expected loss levels increased by 8 basis points to reflect this
lien treatment.
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.. 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 40.4% at 'AAA'. 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.
Factors 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 positive home price growth of
10% with no assumed overvaluation. 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.
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.
CRITERIA VARIATION
There is one variation to the U.S. RMBS Rating Criteria, which
relates to the outdated FICO scores for the transaction. The FICOs
were updated at the time of the transaction close, which is more
than the six-month window in which Fitch looks for updated values.
The stale values have no impact on the levels as the performance
has been fairly stable since they were pulled. Additionally, while
outdated, the values better capture the borrower's credit after the
modification and their initial default. To the extent the borrower
has underperformed it will be reflected in the paystring which
would have a much more meaningful impact on the levels.
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 SitusAMC. The third-party due diligence described in
Form 15E focused on a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or
anti-predatory laws, as well as the Truth In Lending Act (TILA) and
Real Estate Settlement Procedures Act (RESPA). The due diligence
company performed a review on 16% of the loans. The sample size is
consistent with published Fitch criteria for due diligence from a
single source originator. A CoreLogic tax and title lite was
performed on 100% of the loans and 100% LS was applied to any loans
that were not fully identified to be in 1st lien position. Fitch
considered this information in its analysis and, as a result, Fitch
increased its loss expectations by approximately 30 bps at the
'AAAsf' rating category.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
DBUBS 2011-LC2: DBRS Confirms B(sf) Rating on 2 Classes of Certs
----------------------------------------------------------------
DBRS, Inc. upgraded its rating on the following class of Commercial
Mortgage Pass-Through Certificates, Series 2011-LC2 issued by DBUBS
2011-LC2 Mortgage Trust:
-- Class D to A (low) (sf) from BBB (sf)
DBRS Morningstar confirmed its ratings on the remaining classes as
follows:
-- Class A-4 at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class C at AA (high) (sf)
-- Class E at BB (sf)
-- Class FX at B (sf)
-- Class X-B at B (sf)
-- Class F at B (low) (sf)
With this review, Classes F, FX, and X-B were removed from Under
Review with Negative Implications, where they were placed on August
6, 2020. DBRS Morningstar changed the trend on Class C to Positive
from Stable. All other classes have Stable trends.
The upgrades reflect the stable performance of the transaction,
which has remained in line with DBRS Morningstar's expectations, as
well as the significant paydown since issuance. At issuance, the
transaction consisted of 67 loans with an original trust balance of
$2.1 billion. As of the March 2021 remittance report, only 18 loans
remained in the transaction with a trust balance of $608.7 million,
representing a collateral reduction of approximately 71.6% since
issuance that resulted from amortization, the payoff of 48 loans,
and the liquidation of one loan, which resulted in a loss of $7.7
million to the nonrated Class G.
Two loans, representing 7.7% of the pool balance, are in special
servicing. DBRS Morningstar's primary concern is with the Magnolia
Hotel Houston (Prospectus ID#16; 5.6% of pool), which is secured by
a 314-key full-service hotel (Marriott Tribute collection) located
in the Houston CBD. The loan transferred to special servicing in
July 2020. The hotel's performance was languishing for several
years and was further exacerbated by the pandemic. The loan was
operating below a breakeven debt service coverage ratio (DSCR) for
each of the past three years with the year-end 2019 net cash flow
reported at 49% below the issuance level. The borrower requested a
short-term forbearance, but according to the most recent servicing
commentary, negotiations have stalled with the borrower consenting
to receivership. For purposes of this analysis, the loan was
liquidated from the trust with an assumed loss severity in excess
of 40%.
The second-largest specially serviced loan, Louisiana Tower
(Prospectus ID#33; 2.1% of pool), transferred to special servicing
in February 2021. The loan is secured by the leasehold interest in
a 21-story Class B office building in Shreveport, Louisiana. The
property's occcupancy declined to 68% in 2017 and has remained
relatively unchanged to date. As a result of the occupancy decline,
the loan has been performing below breakeven since 2017 and most
recently reported a trailing-nine-months DSCR of 0.99 times as of
Q3 2020. Backfilling the vacant space will be challenging given the
amount of supply within the Shreveport CBD, which is tied in part
to the energy sector. According to Reis, the Shreveport CBD
submarket reported a vacancy rate of 21.3% as of Q4 2020, which
reflects an 100 basis point increase from the prior quarter.
Fourteen loans, representing 90.8% of the current trust balance,
are on the servicer's watchlist. The majority of the loans are
being monitored for upcoming maturity risk as the pool's remaining
18 loans mature by Q2 2020. Outside of the specially serviced
loans, the majority of the loans pose minimal maturity risk due
strong credit matrics as only one loan has an estimated debt yield
lower than 10% based on the current loan balance and most recent
full-year net cash flow.
Notes: All figures are in U.S. dollars unless otherwise noted.
DEERPATH CAPITAL 2021-1: S&P Assigns Prelim 'BB-' on E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class X-R, A-R, A-L
loans, A-L notes, B-R, B-L loans, B-L notes, C-R, D-R, and E-R
notes from OHA Credit Funding 2 Ltd./OHA Credit Funding 2 LLC, a
CLO originally issued in April 2019 that is managed by Oak Hill
Advisors L.P. The replacement notes were issued via a supplemental
indenture.
The ratings reflect S&P's opinion that the credit support available
is commensurate with the associated rating levels.
On the April 21, 2021 refinancing date, the proceeds from the
issuance of the replacement notes were used to redeem the original
notes. S&P withdrew the ratings on the original notes and assigned
ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which, in addition to outlining the terms of the replacement notes,
also include the following provisions:
-- The replacement class X-R, A-R, A-L loans, A-L notes, B-R, B-L
loans, B-L notes, C-R, D-R, and E-R notes were issued at a lower
spread over three-month LIBOR than the original notes.
-- The reinvestment period was extended two years.
-- There is a two-year non-call period.
-- The stated maturity was extended three years.
-- The class X-R notes issued in connection with this refinancing
are expected to be paid down using interest proceeds during the
first eight payment dates beginning with the payment date in July
2021.
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.
"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
OHA Credit Funding 2 Ltd./OHA Credit Funding 2 LLC
Class X-R, $3.00 million: AAA (sf)
Class A-R, $111.60 million: AAA (sf)
Class A-L loans, $260.40 million: AAA (sf)
Class A-L notes(i) $0.00million: AAA (sf)
Class B-R, $42.00 million: AA (sf)
Class B-L loans, $42.00 million: AA (sf)
Class B-L notes(ii), $0.00 million: AA (sf)
Class C-R (deferrable), $36.00 million: A (sf)
Class D-R (deferrable): $36.00 million: BBB- (sf)
E-R (deferrable), $22.50 million: BB- (sf)
Subordinated notes, $50.90 million: Not rated
(i)The class A-L notes will not have an outstanding principal
amount on the closing date. It may be increased to up to
U.S.$260,400,000 in aggregate upon the exercise of the conversion
option, which will convert the class A-L loans into the class A-L
notes pursuant to Section 2.6(o) of the indenture, and the
outstanding principal amount of the class A-L loans may be reduced
accordingly. The class A-L loans are not being issued pursuant to
this Indenture. At the election of a class A-L lender, all or a
portion of the outstanding principal amount of the class A-L loans
held by such class A-L lender may be converted into class A-L
notes, in which case the aggregate outstanding amount of the class
A-L notes will be increased by the amount of the class A-L Loans so
converted.
(ii)The class B-L notes will not have an outstanding principal
amount on the closing date. It may be increased to up to
U.S.$42,000,000 in aggregate upon the exercise of the conversion
option, which will convert the class B-L loans into the class B-L
notes pursuant to Section 2.6(o) of the indenture, and the
outstanding principal amount of the class B-L loans may be reduced
accordingly. The class B-L loans are not being issued pursuant to
this indenture. At the election of a class B-L lender, all or a
portion of the outstanding principal amount of the class B-L loans
held by such class B-L lender may be converted into class B-L
notes, in which case the aggregate outstanding amount of the class
B-L notes will be increased by the amount of the class B-L loans so
converted.
DT AUTO 2021-2: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to DT Auto Owner Trust
2021-2's asset-backed notes series 2021-2.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect:
-- The availability of over 62.5%, 57.3%, 49.1%, 42.1%, and 36.0%
credit support for the class A, B, C, D, and E notes, respectively,
based on stressed break-even cash flow scenarios (including excess
spread). These credit support levels provide over 2.17x, 1.98x,
1.62x, 1.35x, and 1.19x coverage of S&P's expected net loss range
of 27.75%-28.75% for the class A, B, C, D, and E notes,
respectively. Credit enhancement also covers cumulative gross
losses of over 89.3%, 81.8%, 75.5%, 64.8%, and 55.4%, respectively,
assuming a 30% recovery rate for the class A and B notes, and a 35%
recovery rate for class C, D, and E notes.
-- The timely interest and principal payments by the legal final
maturity dates made under stressed cash flow modeling scenarios
that we deem appropriate for the assigned ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(1.35x S&P's expected loss level), all else being equal, its
ratings will be within the credit stability limits specified by
section A.4 of the Appendix contained in S&P Global Rating
Definitions.
-- The collateral characteristics of the subprime pool being
securitized, including a high percentage (approximately 78%) of
obligors with higher payment frequencies (more than once a month),
which S&P expects will result in a somewhat faster paydown on the
pool.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage-of-receivables basis) as the pool
amortizes.
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 Assigned
DT Auto Owner Trust 2021-2
Class A, $235.00 million : AAA (sf)
Class B, $54.50 million : AA (sf)
Class C, $55.00 million : A (sf)
Class D, $57.00 million : BBB (sf)
Class E, $33.50 million : BB- (sf)
EAGLE RE 2021-1: Moody's Assigns B3 Rating to Cl. B-2 Notes
-----------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to nine
classes of mortgage insurance credit risk transfer notes issued by
Eagle Re 2021-1 Ltd.
Eagle Re 2021-1 Ltd. is the fifth transaction issued under the
Eagle Re program, which transfers to the capital markets the credit
risk of private mortgage insurance (MI) policies issued by Radian
Guaranty Inc. (Radian, the ceding insurer) on a portfolio of
residential mortgage loans. The notes are exposed to the risk of
claims payments on the MI policies, and depending on the notes'
priority, may incur principal and interest losses when the ceding
insurer makes claims payments on the MI policies.
On the closing date, Eagle Re 2021-1 Ltd. (the issuer) and the
ceding insurer will enter into a reinsurance agreement providing
excess of loss reinsurance on mortgage insurance policies issued by
the ceding insurer on a portfolio of residential mortgage loans.
Proceeds from the sale of the notes will be deposited into the
reinsurance trust account for the benefit of the ceding insurer and
as security for the issuer's obligations to the ceding insurer
under the reinsurance agreement. The funds in the reinsurance trust
account will also be available to pay noteholders, following the
termination of the trust and payment of amounts due to the ceding
insurer. Funds in the reinsurance trust account will be used to
purchase eligible investments and will be subject to the terms of
the reinsurance trust agreement.
Following the instruction of the ceding insurer, the trustee will
liquidate assets in the reinsurance trust account to (1) make
principal payments to the notes as the insurance coverage in the
reference pool reduces due to loan amortization or policy
termination, and (2) reimburse the ceding insurer whenever it pays
MI claims after the Class B-3 coverage level is written off. While
income earned on eligible investments is used to pay interest on
the notes, the ceding insurer is responsible for covering any
difference between the investment income and interest accrued on
the notes' coverage levels.
The complete rating actions are as follows:
Issuer: Eagle Re 2021-1 Ltd.
Cl. M-1A, Assigned A3 (sf)
Cl. M-1B, Assigned Baa1 (sf)
Cl. M-1C, Assigned Baa3 (sf)
Cl. M-2A, Assigned Ba2 (sf)
Cl. M-2B, Assigned Ba3 (sf)
Cl. M-2C, Assigned B1 (sf)
Cl. M-2, Assigned Ba3 (sf)
Cl. B-1, Assigned B2 (sf)
Cl. B-2, Assigned B3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expect this insured pool's aggregate exposed principal
balance to incur a baseline scenario mean loss of 1.66%, a baseline
scenario median loss of 1.36%, and a loss of 14.66% at a stress
level consistent with Moody's Aaa ratings. The aggregate exposed
principal balance is the product, for all the mortgage loans
covered by MI policies, of (i) the unpaid principal balance of each
mortgage loan, (ii) the MI coverage percentage.
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 consumer assets from a gradual and unbalanced
recovery in US economic activity. As a result, the degree of
uncertainty around Moody's forecasts is unusually high. Moody's
increased its model-derived median expected losses by 7.5% (6.6%
for the mean) and Moody's Aaa loss by 2.5% to reflect the likely
performance deterioration resulting from the slowdown in US
economic activity due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments we made on pools from deals issued after the onset
of the pandemic until February 2021. Moody's reduced adjustments
reflect the fact that the loan pool in this deal does not contain
any loans to borrowers who are not currently making payments. For
newly originated loans, post-COVID underwriting takes into account
the impact of the pandemic on a borrower's ability to repay the
mortgage. For seasoned loans, as time passes, the likelihood that
borrowers who have continued to make payments throughout the
pandemic will now become non-cash flowing due to COVID-19 continues
to decline.
In addition, Moody's considered that for this transaction, similar
to other mortgage insurance credit risk transfer deals, payment
deferrals are not claimable events and thus are not treated as
losses; rather they would only result in a loss if the borrower
ultimately defaults after receiving the payment deferral and a
mortgage insurance claim is filed.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's calculated losses on the pool using Moody's US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the cut-off date. Loan-level
adjustments to the model results included, but were not limited to,
adjustments for origination quality.
Collateral Description
All of the mortgage loans have an insurance coverage effective date
on or after August 1, 2020, through December 31, 2020. The
reference pool consists of 166,656 prime, fixed- and
adjustable-rate, one-to-four unit, first-lien fully-amortizing
conforming mortgage loans with a total insured loan balance of
approximately $50 billion. All loans in the reference pool had a
loan-to-value (LTV) ratio at origination that was greater than 80%
with a weighted average of 90.5%. The borrowers in the pool have a
weighted average FICO score of 752, a weighted average
debt-to-income ratio of 35.5% and a weighted average mortgage rate
of 2.97% by unpaid balance. The weighted average risk in force (MI
coverage percentage) is approximately 22.3% of the reference pool
unpaid principal balance. The aggregate exposed principal balance
is the portion of the pool's risk in force that is not covered by
existing quota share reinsurance through unaffiliated parties.
The weighted average LTV of 90.5% is far higher than those of
recent private label prime jumbo deals, which typically have LTVs
in the high 60's range, however, it is in line with those of recent
MI CRT transactions. All these insured loans in the reference pool
were originated with LTV ratios greater than 80%. 100% of insured
loans were covered by mortgage insurance at origination with 99.6%
covered by BPMI and 0.4% covered by LPMI based on risk in force.
Underwriting Quality
Moody's took into account the quality of Radian's insurance
underwriting, risk management and claims payment process in Moody's
analysis.
Radian's underwriting requirements address credit, capacity
(income), capital (asset/equity) and collateral. It has a licensed
in-house appraiser to review appraisals.
Lenders submit mortgage loans to Radian for insurance either
through delegated underwriting or non-delegated underwriting
program. Under the delegated underwriting program, lenders can
submit loans for insurance without Radian re-underwriting the loan
file. Radian issues an MI commitment based on the lender's
representation that the loan meets the insurer's underwriting
requirement. Radian allows exceptions for loans approved through
both its delegated and non-delegated underwriting programs. Lenders
eligible under the delegated program must be pre-approved by
Radian's risk management group and are subject to targeted internal
quality assurance reviews. Under the non-delegated underwriting
program, insurance coverage is approved after full-file
underwriting by the insurer's underwriters. As of January 2021,
approximately 67% of the loans in Radian's overall portfolio are
insured through delegated underwriting, 28% through non-delegated
underwriting and 5% through contract underwriting. Radian broadly
follows the GSE underwriting guidelines via DU/LP, subject to few
additional limitations and requirements.
Servicers provide Radian monthly reports of insured loans that are
more than 60-days delinquent prior to any submission of claims.
Claims are typically submitted when servicers have taken possession
of the title to the properties. Radian's claims review process
include loan files, payment history, quality review results, and
property value. Radian sends first document request letter to
Servicer within 35 days of receipt of claim, and may take
additional 10 day period after receipt of response to first
document request to make additional requests. Claims are paid
within 60 days after all required documents are submitted.
Radian performs an internal quality assurance review on a sample
basis of delegated and non- delegated underwritten loans. Radian
selects a random and targeted sample of loans for review, and
assesses each loan file for data accuracy, underwriting quality and
process integrity.Third party vendors are utilized in the quality
assurance reviews as well as re-verifications and investigations.
Vendors must meet stringent approval requirements.
Third-Party Review
Radian engaged Opus Capital Markets Consultants, LLC to perform a
data analysis and diligence review of a sampling of mortgage loans
files submitted for mortgage insurance. This review included
validation of credit qualifications, verification of the presence
of material documentation as applicable to the mortgage insurance
application, updated valuation analysis and comparison, and a
tape-to-file data integrity validation to identify possible data
discrepancies. The scope does not include a compliance review.
The scope of the third-party review is weaker than other MI CRT
transactions we rated because the sample size was small (only 341
of the total loans in the initial reference pool as of January
2021, or 0.20% by loan count). Once the sample size was determined,
the files were selected randomly to meet the final sample count of
341 files out of a total of 168,020 loan files.
In spite of the small sample size and a limited TPR scope for Eagle
Re 2021-1, Moody's did not make an additional adjustment to the
loss levels because (1) the underwriting quality of the insured
loans is monitored under the GSEs' stringent quality control system
and (2) MI policies will not cover any costs related to compliance
violations.
The loans are reviewed on a quarterly basis and depending on the
timing of the transaction relative to the quarterly review, the
loans from that production may or may not be included. The TPR
available sample does not cover a subset of pool that have MI
coverage effective date on and after October 2020, representing
approximately 57% of the pool by loan count. Moody's did not make
any adjustment because Moody's found no material difference in
credit characteristics between the post-October 2020 subset and the
pre-October 2020 subset, including the percentage of loans with MI
policies underwritten through non-delegated underwriting program,
which ceding insurer requires full loan origination file and
performs independent re- underwriting and quality assurance.
Moody's took this into consideration in Moody's TPR review.
Scope and results. The third-party due diligence scope focuses on
the following:
Appraisals: The third-party diligence provider also reviewed
property valuation on 341 loans in the sample pool. A Freddie Mac
Home Value Explorer ("HVE") was ordered on the entire population of
341 files. If the resulting value of the AVM was less than 90% of
the value reflected on the original appraisal, or if no results
were returned, a Broker Price Opinion ("BPO") was ordered on the
property. If the resulting value of the BPO was less than 90% of
the value reflected on the original appraisal, an Appraisal Review
appraisal was ordered on the property. Among the 341 loans, one (1)
loan was not assigned any grade by the third-party review firm and
all other loans were graded A. The third-party diligence provider
was not able to obtain property valuations on one mortgage loan due
to the inability to complete the field review assignment during the
due diligence review period.
Credit: The third-party diligence provider reviewed credit on 341
loans in the sample pool. Most of the loans were graded A. There
were three loans with final grade of "C".
Data integrity: The third-party review firm was provided a data
file with loan level data, which was audited against origination
documents to determine the accuracy of data found within the data
tape. Per the due diligence report, there are twelve discrepancy
findings under four fields: DTI, maturity date, original loan
amount, and product type. The discrepancies are considered to be
non-material.
Reps & Warranties Framework
The ceding insurer does not make any representations and warranties
to the noteholders in this transaction. Since the insured mortgages
are predominantly GSE loans, the individual sellers would provide
exhaustive representations and warranties to the GSEs that are
negotiated and actively monitored. In addition, the ceding insurer
may rescind the MI policy for certain material misrepresentation
and fraud in the origination of a loan, which would benefit the MI
CRT noteholders.
Transaction Structure
The transaction structure is very similar to GSE CRT transactions
that Moody's have rated. The ceding insurer will retain the senior
coverage level A, coverage level B-3 and coverage level B-4 at
closing. The offered notes benefit from a sequential pay structure.
The transaction incorporates structural features such as a
12.5-year maturity and a sequential pay structure for the non-
senior tranches, resulting in a shorter expected weighted average
life on the offered notes. The notes will be subject to redemption
prior to the maturity date at the option of the ceding insurer upon
the occurrence of an optional termination event, including a
clean-up call event and an optional call.
Funds raised through the issuance of the notes are deposited into a
reinsurance trust account and are distributed either to the
noteholders, when insured loans amortize or MI policies terminate,
or to the ceding insurer for reimbursement of claims paid when
loans default. Interest on the notes is paid from income earned on
the eligible investments and the coverage premium from the ceding
insurer. Interest on the notes will accrue based on the outstanding
balance of the notes, but the ceding insurer will only be obligated
to remit coverage premium based on each note's coverage level.
Credit enhancement in this transaction is comprised of
subordination provided by mezzanine and junior tranches. The rated
Class M-1A, Class M-1B, Class M-1C, Class M-2A, Class M-2B, Class
M-2C, Class B-1 and Class B-2 offered notes have credit enhancement
levels of 5.75%, 5.00%, 3.50%, 3.17%, 2.83%, 2.50%, 2.25% and
2.00%, respectively. The credit risk exposure of the notes depends
on the actual MI losses incurred by the insured pool. MI losses are
allocated in a reverse sequential order starting with the coverage
level B-4. Investment deficiency amount losses are allocated in a
reverse sequential order starting with the Class B-2 notes (or
Class B-3, if reopened after closing).
The floating rate note coupons reference SOFR which will be based
on compounded SOFR or Term SOFR, as applicable. Following the
occurrence of a benchmark transition event, a benchmark replacement
will be determined by the issuer, and such benchmark replacement
will replace SOFR and will be the benchmark for the next following
accrual period and each accrual period thereafter (unless and until
a subsequent benchmark transition event is determined to have
occurred). Any determination made by the issuer with respect to the
occurrence of a benchmark transition event or a benchmark
replacement, and any calculation by the indenture trustee of the
applicable benchmark for an accrual period, will be final and
binding on the certificateholders in the absence of manifest
error.
So long as the senior coverage level is outstanding, and no
performance trigger event occurs, the transaction structure
allocates principal payments on a pro-rata basis between the senior
and non-senior reference tranches. Principal is then allocated
sequentially amongst the non- senior tranches. Principal payments
are all allocated to senior reference tranches when trigger event
occurs.
A trigger event with respect to any payment date will be in effect
if the coverage level amount of coverage level A for such payment
date has not been reduced to zero and either (i) the preceding
three month average of the sixty-plus delinquency amount for that
payment date equals or exceeds 75.00% of Class A subordination
amount or (ii) the subordinate percentage (or with respect to the
first payment date, the original subordinate percentage) for that
payment date is less than the target CE percentage (minimum C/E
test: 7.50%).
Premium Deposit Account (PDA)
The premium deposit account will benefit the transaction upon a
mandatory termination event (e.g. the ceding insurer fails to pay
the coverage premium and does not cure, triggering a default under
the reinsurance agreement), by providing interest liquidity to the
noteholders, when combined with the income earned on the eligible
investments, of approximately 70 days while the reinsurance trust
account and eligible investments are being liquidated to repay the
principal of the notes.
On the closing date, the ceding insurer will establish a cash and
securities account (the PDA) and make deposit amount to the account
following the premium deposit event trigger. The premium deposit
event will be triggered (1) with respect to any class of notes, if
the rating of that class of notes exceeds the insurance financial
strength (IFS) rating of the ceding insurer or (2) with respect to
all classes of notes, if the ceding insurer's IFS rating falls
below Baa2. If the note ratings exceed that of the ceding insurer,
the insurer will be obligated to deposit into and maintain in the
premium deposit account the required PDA amount only for the notes
that exceeded the ceding insurer's rating. If the ceding insurer's
rating falls below Baa2, it will be obligated to deposit the
required PDA amount for all classes of notes.
The required PDA amount for each class of notes and each month is
equal to the excess, if any, of (i) the coupon rate of the note
multiplied by (a) the applicable funded percentage, (b) the
coverage level amount for the coverage level corresponding to such
class of notes and (c) a fraction equal to 70/360, over (ii) two
times the investment income collected (but not yet distributed) on
the eligible investments.
Moody's believe the requirement that the PDA be funded only upon a
rating trigger event does not establish a linkage between the
ratings of the notes and the IFS rating of the ceding insurer
because, 1) the required PDA amount is small relative to the entire
deal, 2) the risk of PDA not being funded could theoretically occur
only if the ceding insurer suddenly defaults, causing a rating
downgrade from investment grade to default in a very short period,
which is a highly unlikely scenario, and 3) even if the insurer
becomes insolvent, there would be a strong incentive for the
insurer's insolvency regulator to continue to make the interest
payments to avoid losing reinsurance protection provided by the
deal.
Claims Consultant
To mitigate risks associated with the ceding insurer's control of
the trust account and discretion to unilaterally determine the MI
claims amounts (i.e. ultimate net losses), the ceding insurer will
engage Opus Capital Markets Consultants, LLC, as claims consultant,
to verify MI claims and reimbursement amounts withdrawn from the
reinsurance trust account once the coverage level of Class B-3 has
been written down. The claims consultant will review on a quarterly
basis a sample of claims paid by the ceding insurer covered by the
reinsurance agreement. In verifying the amount, the claims
consultant will apply a permitted variance to the total paid loss
for each MI Policy of +/- 2%. The claims consultant will provide a
preliminary report to the ceding insurer containing results of the
verification. If there are findings that cannot be resolved between
the ceding insurer and the claims consultant, the claims consultant
will increase the sample size. A final report will be delivered by
the claims consultant to the trustee, the issuer and the ceding
insurer. The issuer will be required to provide a copy of the final
report to the noteholders and the rating agencies.
RMBS transactions where there is typically some level of
independent third party oversight by the trustee, the master
servicer and/or the securities administrator, MI CRT transactions
typically do not have such oversight. As noted, the ceding insurer
not only has full control of the trust account but can also
determine, at its discretion, the MI claims amount. The ceding
insurer will then direct the trustee to withdraw the funds to
reimburse for the claims paid. Since the trustee is not required to
verify the MI claims amount, there could be a scenario where funds
are withdrawn from the reinsurance trust account in excess of the
amounts necessary to reimburse the ceding insurer. As such, Moody's
believe the claims consultant in this transaction will provide the
oversight to mitigate such risks.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2020.
FREDDIE MAC 2021-DNA3: S&P Assigns BB-(sf) on Class B-1 Notes
-------------------------------------------------------------
S&P Global Ratings assigned ratings to Freddie Mac STACR REMIC
Trust 2021-DNA3's notes.
The note issuance is an RMBS transaction backed by 100% conforming
residential mortgage loans.
The ratings reflect:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The REMIC structure, which reduces the counterparty exposure to
Freddie Mac for periodic principal and interest payments, but also
pledges the Freddie Mac support (as a highly rated counterparty) to
cover any shortfalls on interest payments and make up for any
investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which enhances the notes' strength, in S&P's view;
-- The enhanced credit risk management and quality control
processes Freddie Mac uses in conjunction with the underlying
representations and warranties framework; and
-- The impact that the COVID-19 pandemic is likely to have on the
U.S. economy and housing market, and the additional structural
provisions included to address corresponding forbearance and
subsequent defaults.
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 Assigned
Freddie Mac STACR REMIC Trust 2021-DNA3
Class A-H(i), $43,470,051,557: NR
Class M-1, $211,000,000: A- (sf)
Class M-1H(i), $11,923,341: NR
Class M-2, $317,000,000: BBB- (sf)
Class M-2A, $158,500,000: BBB+ (sf)
Class M-2AH(i), $8,692,505: NR
Class M-2B, $158,500,000: BBB- (sf)
Class M-2BH(i), $8,692,505: NR
Class M-2R, $317,000,000: BBB- (sf)
Class M-2S, $317,000,000: BBB- (sf)
Class M-2T, $317,000,000: BBB- (sf)
Class M-2U, $317,000,000: BBB- (sf)
Class M-2I, $317,000,000: BBB- (sf)
Class M-2AR, $158,500,000: BBB+ (sf)
Class M-2AS, $158,500,000: BBB+ (sf)
Class M-2AT, $158,500,000: BBB+ (sf)
Class M-2AU, $158,500,000: BBB+ (sf)
Class M-2AI, $158,500,000: BBB+ (sf)
Class M-2BR, $158,500,000: BBB- (sf)
Class M-2BS, $158,500,000: BBB- (sf)
Class M-2BT, $158,500,000: BBB- (sf)
Class M-2BU, $158,500,000: BBB- (sf)
Class M-2BI, $158,500,000: BBB- (sf)
Class M-2RB, $158,500,000: BBB- (sf)
Class M-2SB, $158,500,000: BBB- (sf)
Class M-2TB, $158,500,000: BBB- (sf)
Class M-2UB, $158,500,000: BBB- (sf)
Class B-1, $211,000,000: BB- (sf)
Class B-1A, $105,500,000: BB+ (sf)
Class B-1AR, $105,500,000: BB+ (sf)
Class B-1AI, $105,500,000: BB+ (sf)
Class B-1AH(i), $5,961,671: NR
Class B-1B, $105,500,000: BB- (sf)
Class B-1BH(i), 5,961,671: NR
Class B-2, $211,000,000: NR
Class B-2A, $105,500,000: NR
Class B-2AR, $105,500,000: NR
Class B-2AI, $105,500,000: NR
Class B-2AH(i), $5,961,671: NR
Class B-2B, $105,500,000: NR
Class B-2BH(i), $5,961,671: NR
Class B-3H(i), $111,461,671: NR
(i)Reference tranche only and will not have corresponding notes.
Freddie Mac retains the risk of these tranches.
NR--Not rated.
GLS AUTO 2020-1: S&P Affirms 'BB- (sf)' Rating on Class D Notes
---------------------------------------------------------------
S&P Global Ratings raised its ratings on 21 classes and affirmed
its ratings on 8 classes from GLS Auto Receivables Trust 2017-1 and
2018-1, and GLS Auto Receivables Issuer Trust 2018-2, 2018-3,
2019-1, 2019-2, 2019-3, 2019-4, and 2020-1.
S&P said, "The rating actions reflect the transactions' collateral
performance to date and our expectations regarding future
collateral performance, including an upward adjustment in remaining
cumulative net losses (CNLs) to account for the COVID-19
pandemic-induced recession. The rating actions also account for our
view of each transaction's structure and credit enhancement.
Additionally, we incorporated secondary credit factors, including
credit stability, payment priorities under various scenarios, and
sector- and issuer-specific analyses. Considering all of these
factors, we believe the notes' creditworthiness is consistent with
the raised and affirmed ratings.
"In general, all series are performing better than our prior
revised expectations. Series 2019-4 and 2020-1 are performing
better than our prior revised expectations and in line with our
initial expectations. As a result, we lowered our loss expectations
on all series. For each of these transactions, we factored in an
upward adjustment to remaining losses that could result from
elevated unemployment levels associated with the current COVID-19
pandemic-induced recession. The monthly extension rates for the
transactions under review spiked to 9.93%-12.83% in April 2020 due
to the increase in disaster-related extensions that the company
provided to its customers; however, extensions have since
stabilized and are currently trending at pre-COVID-19 pandemic
levels as of the April 2021 distribution date."
Table 1
Collateral Performance (%)
As of the April 2021 distribution date
GLS Auto Receivables Trust
Pool Current 60+ day
Series Mo. factor CNL delinq. Extensions
2017-1 46 17.11 14.80 8.96 2.03
2018-1 40 24.35 11.69 6.13 2.41
GLS Auto Receivables Issuer Trust
2018-2 34 31.67 11.14 4.85 2.74
2018-3 30 37.54 9.92 4.60 2.54
2019-1 26 43.01 9.68 4.31 2.89
2019-2 23 48.80 7.87 4.09 3.23
2019-3 20 56.26 6.16 3.58 2.89
2019-4 17 62.21 4.94 2.93 2.97
2020-1 14 69.32 3.59 2.93 2.62
Mo.--Month.
CNL--Cumulative net loss.
Delinq.—Delinquencies.
Table 2
CNL Expectations (%)
GLS Auto Receivables Trust
Original Former Revised
lifetime lifetime lifetime
Series CNL exp. CNL exp.(i) CNL exp.(ii)
2017-1 21.00-22.00 18.75-19.75 Up to 15.50
2018-1 21.00-22.00 17.50-18.50 14.50-15.00
GLS Auto Receivables Issuer Trust
2018-2 19.50-20.50 18.75-19.75 15.75-16.75
2018-3 19.50-20.50 18.75-19.75 16.00-17.00
2019-1 19.25-20.25 20.00-21.00 18.00-19.00
2019-2 19.25-20.25 20.00-21.00 18.00-19.00
2019-3 19.25-20.25 N/A 18.25-19.25
2019-4 18.50-19.50 20.00-21.00 18.50-19.50
2020-1 18.50-19.50 20.00-21.00 18.50-19.50
(i)Series 2017-1 through 2019-2 previously revised in October 2020.
Series 2019-4 and 2020-1 previously revised in November 2020.
(ii)As of April 2021.
CNL exp.--Cumulative net loss expectations.
N/A--Not Applicable.
Each transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. Each also has
credit enhancement in the form of a non-amortizing reserve account,
overcollateralization, subordination for the higher-rated tranches,
and excess spread. The credit enhancement for each transaction is
at the specified target or floor, and each class' credit support
continues to increase as a percentage of the amortizing collateral
balance.
The rating actions reflect S&P's view that the total credit support
as a percentage of the amortizing pool balance, compared with its
expected remaining losses, is commensurate with each raised and
affirmed rating.
Table 3
Hard Credit Support (%)
As of the April 2021 distribution date
GLS Auto Receivables Trust
Total hard Current total hard
credit support credit support
Series Class at issuance(i) (% of current)(i)
2017-1 C 20.80 99.76
2017-1 D 11.80 44.13
2018-1 B 19.75 68.91
2018-1 C 11.50 35.03
GLS Auto Receivables Issuer Trust
2018-2 B 30.85 90.58
2018-2 C 18.75 52.37
2018-2 D 9.50 23.16
2018-3 B 30.45 78.47
2018-3 C 19.10 48.23
2018-3 D 9.50 22.66
2019-1 B 30.00 70.97
2019-1 C 18.25 43.66
2019-1 D 8.75 21.57
2019-2 A 44.65 94.86
2019-2 B 29.25 63.30
2019-2 C 17.60 39.43
2019-2 D 8.75 21.30
2019-3 A 44.65 85.81
2019-3 B 28.95 57.91
2019-3 C 16.95 36.58
2019-3 D 7.50 19.78
2019-4 A 42.60 76.42
2019-4 B 27.95 52.87
2019-4 C 16.15 33.91
2019-4 D 6.85 18.96
2020-1 A 42.15 68.78
2020-1 B 27.50 47.64
2020-1 C 15.70 30.62
2020-1 D 5.50 15.91
(i)Calculated as a percentage of the total gross receivable pool
balance, consisting of a reserve account, overcollateralization,
and, if applicable, subordination.
S&P said, "We considered the current hard credit enhancement
compared with the expected remaining CNLs for those classes for
which hard credit enhancement alone--without credit to the stressed
excess spread--was sufficient, in our opinion, to raise or affirm
the ratings on the notes. For other classes, we incorporated a cash
flow analysis to assess the loss coverage level, giving credit to
stressed excess spread. Our various cash flow scenarios included
forward-looking assumptions on recoveries, timing of losses, and
voluntary absolute prepayment speeds that we believe are
appropriate given each transaction's performance to date. Aside
from our break-even cash flow analysis, we also conducted
sensitivity analyses for these series to determine the impact that
a moderate ('BBB') stress scenario would have on our ratings if
losses began trending higher than our revised base-case loss
expectation.
"In our view, the results demonstrated that all of the classes have
adequate credit enhancement at the raised and affirmed rating
levels. We will continue to monitor the performance of all
outstanding transactions to ensure that the credit enhancement
remains sufficient, in our view, to cover our CNL expectations
under our stress scenarios for each of the rated classes."
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 RAISED
GLS Auto Receivables Trust
Rating
Series Class To From
2017-1 D AAA (sf) BBB+ (sf)
2018-1 B AAA (sf) AA (sf)
2018-1 C AA (sf) BBB (sf)
GLS Auto Receivables Issuer Trust
Rating
Series Class To From
2018-2 C AAA (sf) A (sf)
2018-2 D BB+ (sf) BB- (sf)
2018-3 B AAA (sf) AA+ (sf)
2018-3 C AA (sf) A (sf)
2018-3 D BB (sf) BB- (sf)
2019-1 B AAA (sf) AA (sf)
2019-1 C A+ (sf) A- (sf)
2019-2 B AAA (sf) AA- (sf)
2019-2 C A (sf) A- (sf)
2019-3 A AAA (sf) AA (sf)
2019-3 B AA (sf) A (sf)
2019-3 C A- (sf) BBB (sf)
2019-4 A AAA (sf) AA (sf)
2019-4 B AA- (sf) A (sf)
2019-4 C BBB+ (sf) BBB (sf)
2020-1 A AAA (sf) AA (sf)
2020-1 B A+ (sf) A (sf)
2020-1 C BBB+ (sf) BBB (sf)
RATINGS AFFIRMED
GLS Auto Receivables Trust
Series Class Rating
2017-1 C AAA (sf)
2018-2 B AAA (sf)
GLS Auto Receivables Issuer Trust
Series Class Rating
2019-1 D BB- (sf)
2019-2 A AAA (sf)
2019-2 D BB- (sf)
2019-3 D BB- (sf)
2019-4 D BB- (sf)
2020-1 D BB- (sf)
GOLDMAN SACHS 2011-GC5: Fitch Lowers Class F Certs to 'Csf'
-----------------------------------------------------------
Fitch Ratings has downgraded three classes and affirmed three
classes of Goldman Sachs Commercial Mortgage Capital, LP, series
2011-GC5 commercial mortgage pass-through certificates. Two classes
remain on Rating Watch Negative.
DEBT RATING PRIOR
---- ------ -----
GSMS 2011-GC5
A-4 36191YBB3 LT AAAsf Affirmed AAAsf
A-S 36191YAE8 LT AAAsf Rating Watch Maintained AAAsf
B 36191YAG3 LT Asf Downgrade AAsf
C 36191YAJ7 LT Bsf Downgrade BBsf
D 36191YAL2 LT CCCsf Affirmed CCCsf
E 36191YAN8 LT CCsf Affirmed CCsf
F 36191YAQ1 LT Csf Downgrade CCsf
X-A 36191YAA6 LT AAAsf Rating Watch Maintained AAAsf
KEY RATING DRIVERS
High Loss Expectations from Regional Mall Loans: The downgrades
reflect high loss expectations primarily from three loans secured
by regional malls in special servicing and one performing regional
mall loan, all of which mature in 2021 Fitch does not expect any of
these loans to repay at their respective maturities, which may
result in foreclosure or a modification/extension. Fitch's base
case loss expectations are 22.3%, which may increase should
performance of the malls decline further or should the 1551
Broadway loan have difficulty refinancing at maturity.
The Rating Watch Negative on class A-S reflects concerns with the
refinance risk associated with the upcoming July 2021 maturity of
the largest loan in the pool (1551 Broadway - 25.9% of the pool).
The loan is secured by a 25,600-square-foot (sf) retail building
located in Times Square in Manhattan. The property was constructed
in 2008 and has been 100% occupied by American Eagle, which has a
lease expiration of February 2024. The collateral also includes a
250-foot rentable LED signage tower. The retail space covers three
stories and the signage is spread across 12 separate screens and
14,500 square feet. According to media reports in January 2020, the
American Eagle space has been marketed for lease. The store has
remained temporarily closed due to the coronavirus pandemic.
The largest specially serviced loan (and second largest loan in the
pool) is Park Place Mall (23.8% of the pool). The loan is secured
by 478,333 square foot (sf) of a 1.1 million-sf regional mall
located in Tucson, AZ. The property was built in 1974 and renovated
in 2001. The property was previously anchored by a Dillard's,
Macy's and Sears (Seritage owned) all non-collateral. The Sears
closed in July 2018 and the Macy's closed in May 2020. The former
Sears has been redeveloped and replaced with Round 1 Bowling and
Entertainment and additional retail. The collateral is currently
anchored by a 20-screen Century movie theater with a lease
expiration in August 2021. As of YE20, inline tenant sales for
tenants less than 10,000 sf declined to $315 per square foot (psf)
from $415 at YE19, $405 psf at YE18, $397 psf at YE17 and $416 psf
at YE16. The loan transferred to special servicing in September
2020 due to hardships caused by the pandemic. The borrower
(Brookfield) has indicated they no longer intend on providing
further equity to the property. The loan is currently 30 days
delinquent. The servicer is dual tracking foreclosure and a loan
modification. Fitch modeled a base case loss on the loan of 64% due
to the vacant anchors, declining performance and limited lender and
investor demand for regional mall assets.
The second largest specially serviced loan is Parkdale Mall &
Crossing (10.5% of the pool), which is secured by 743,175 sf of a
1.4 million sf regional mall located in Beaumont, TX. The property
is anchored by a non-collateral Dillard's, JCPenney and Sears. The
Sears store closed in February 2020 and a previous non-collateral
Macy's also closed in March 2017. The Sears space remains vacant.
The Macy's space has since been leased to Dick's Sporting Goods,
HomeGoods and Five Below. The collateral is anchored by a 12-screen
Hollywood Theater. As of June 2021, the property's occupancy
declined to 83.8% from 84.3% at YE19 and 91.6% at YE18 due to the
departure of multiple tenants, Additionally, tenant sales have also
declined and remained in the low $200 per square foot (psf) range.
The loan transferred in February 2021 for Imminent Default due to
the upcoming March 2021 maturity date. The borrower (CBL
Properties) has requested a maturity extension but negotiations are
ongoing. Fitch modeled a loss of 51%.
The fourth and fifth largest loans in the pool are also secured by
regional malls are Fitch Loans of Concern due to performance
declines and refinancing concerns. The Ashland Town Center loan
(5%) is secured by a 434,131 sf retail property located in Ashland,
KY. The collateral is secured by JCPenney, Belk and Cinemark. The
loan will mature in July 2021 and the servicer is currently in
discussions with the borrower (Washington Prime Group) regarding an
extension. The Champlain Centre loan (4.2%) is secured by a 484,556
sf retail property located in Plattsburgh, NY. The property is
shadow anchored by a non-collateral Target. The collateral was
previously anchored by Sears, which closed in 2016 and the space
was partially leased to major tenant Hobby Lobby. The loan, which
is sponsored by Pyramid Companies, has transferred again in April
2021 after previously being in special servicing in 2020. Fitch has
concerns with the loan due to declining sales and refinance risk
associated the May 2021 maturity.
Pool Concentration; Alternative Loss Consideration: There are 21
loans remaining in the pool, all of which will mature between May
and August 2021. Due to the increasing concentration of the pool,
Fitch performed a look-through analysis in addition to its base
case scenario, which grouped the remaining loans based on the
likelihood of repayment. The downgrades to classes B and C reflect
this analysis and a scenario in which the four regional malls are
the only remaining loans in the pool.
Defeasance/Improved Credit Enhancement Since Issuance: Four loans
(13%) are fully defeased. As of the April 2021 distribution date,
the pool's aggregate balance has been reduced by 56.1% to
$695.9 million from $1.7 billion at issuance. The pool has
experienced $6.5 million (0.4% of original pool balance) in
realized losses to date from the liquidation of one specially
serviced asset. Interest shortfalls are currently affecting
nonrated class G.
Coronavirus Exposure: There are four loans (7.5%) secured by hotel
properties, including the specially serviced Holiday Inn Express
Anchorage; the base case analysis applied an additional stress to
one of the performing hotel loans to account for potential cash
flow disruptions due to the coronavirus pandemic. There are 10
non-defeased loans (74%) secured by retail properties, including
the regional mall loans. Fitch's base case analysis applied
additional stresses and high loss expectations to these regional
mall loans due to their vulnerability to the coronavirus pandemic,
declining performance and refinancing concerns. These additional
stresses contributed to the downgrades as well as the Negative
Rating Outlooks on classes B and C.
RATING SENSITIVITIES
Downgrades of one category or more are possible for classes A-S and
X-A, which remain on Rating Watch Negative due to the uncertainty
with the refinance of the 1551 Broadway loan.
The downgrades and Negative Rating Outlooks on class B and C
reflect performance concerns and refinance risk associated with the
Fitch Loans of Concern (FLOCs). Repayment of those classes is
reliant on the four regional mall loans.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- While not expected to occur, factors that could lead to
upgrades would include stable to improved asset performance,
coupled with additional pay down and/or defeasance. Upgrades
to Classes B and C would only occur if performance of the
FLOCs improve considerably or if loans are resolved with
better than expected losses.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses due to underperforming loans
or should additional loans transfer to specially servicing.
Downgrades to Class A-4 are not likely due to the high credit
enhancement and defeasance. Downgrades to classes on RWN are
likely if the 1551 Broadway loan fails to repay at maturity.
Downgrades to the classes C through F would occur if the
performance of the Fitch Loans of Concern continues to decline
and 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
GSMS 2011-GC5: Exposure to Social Impacts: 4
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.
GS 2021-NQM1: S&P Assigns Prelim B(sf) Rating on Class B-2 Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GS
Mortgage-Backed Securities Trust 2021-NQM1's mortgage pass-through
certificates.
The certificate issuance is an RMBS securitization backed by
first-lien, fixed- and adjustable-rate, fully amortizing
residential mortgage loans (some with interest-only periods) to
prime and non-prime borrowers, generally secured by single-family
residential properties, planned-unit developments, condominiums and
two- to four-family residential properties. The loans are mainly
nonqualified or exempt mortgage loans.
The preliminary ratings are based on information as of April 29,
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 pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework for this
transaction;
-- The mortgage aggregator;
-- The geographic concentration; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
S&P Global Ratings 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(i) Assigned
GS Mortgage-Backed Securities Trust 2021-NQM1
Class A-1, $185,925,000: AAA (sf)
Class A-2, $17,681,000: AA (sf)
Class A-3, $30,113,000: A (sf)
Class M-1, $17,128,000: BBB (sf)
Class B-1, $11,327,000: BB (sf)
Class B-2, $6,078,000: B (sf)
Class B-3, $8,011,690: Not rated
Class A-IO-S, (ii): Not rated
Class X, (ii): Not rated
Risk retention, $14,540,194(iii): Not rated
Class R, not applicable: Not rated
(i)The information in this report reflects the preliminary private
placement memorandum dated April 24, 2021. The preliminary ratings
address the ultimate payment of interest and principal.
(ii)The notional amount will equal the non-retained interest
percentage of the aggregate stated principal balance of the
mortgage loans as of the first day of the related due period, which
initially is $276,263,690.
(iii)The risk retention class is sized to approximately 5.0% of the
collateral balance and will be entitled to payments from the
retained interest available funds.
GS MORTGAGE 2012-GCJ7: DBRS Cuts Class F Certs Rating to C
----------------------------------------------------------
DBRS Limited downgraded ratings for three classes of Commercial
Mortgage Pass-Through Certificates, Series 2012-GCJ7 issued by GS
Mortgage Securities Trust, Series 2012-GCJ7 as follows:
-- Class D to BB (sf) from BBB (low) (sf)
-- Class E to CCC (sf) from B (high) (sf)
-- Class F to C (sf) from CCC (sf)
DBRS Morningstar removed Classes E and F from Under Review with
Negative Implications where they were placed on August 6, 2020.
DBRS Morningstar also designated those classes as having Interest
in Arrears. DBRS Morningstar changed the trend on Class D to
Negative from Stable, while Classes E and F have been assigned
ratings that do not carry any trends.
DBRS Morningstar also discontinued its rating on Class X-B because
the lowest-rated reference obligation, Class F, was downgraded to C
(sf).
In addition, DBRS Morningstar confirmed the ratings on the
remaining classes as follows:
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
The trends on all classes with confirmed ratings are Stable.
According to the March 2021 remittance, 54 of the original 79 loans
remain in the trust, representing a collateral reduction of 47.4%
since issuance. In addition, 20 loans, representing 20.8% of the
current pool balance, are fully defeased. The pool is fairly
concentrated by property type, with 27.1% of the pool secured by
retail properties and 25.1% of the pool secured by office
properties. Five loans, representing 5.4% of the current pool
balance, are in special servicing and 10 loans, representing 18.3%
of the current pool balance, are on the servicer's watchlist. The
watchlisted loans are being monitored for tenant rollover, low debt
service coverage ratios (DSCRs) and/or occupancy issues, upcoming
loan maturity, or Coronavirus Disease (COVID-19)-related
forbearance requests. One new loan to the watchlist as of March
2021 is the 940 8th Avenue loan (Prospectus ID#32, 1.5% of the
pool), which is being monitored for delinquency. The loan was
previously on the servicer's watchlist for the borrower's relief
request submitted as a result of the coronavirus pandemic, but was
later removed and it does not appear a modification was approved.
The loan has reported less than 30 days delinquent for the last
year and, as of the March 2021 remittance, remained outstanding for
the March 2021 payment.
The rating downgrades and Negative trends reflect the increased
risk of loss to the trust from the largest specially serviced loan,
Shoppes on Main (Prospectus ID#12, 3.7% of the pool). The loan is
secured by a nine-story retail property located within the central
business district of White Plains, New York. The first three floors
are configured for retail space, with a six-story parking garage
spanning the top of the structure. At issuance, the property was
occupied by two tenants in Walmart and Burlington, both of which
have since vacated. The lease for Walmart is still active and
expires in July 2021. Walmart continues to pay rent on the dark
space and, since the property became fully vacant in 2019, there
has been no leasing activity.
The loan transferred to special servicing in January 2020 for
imminent monetary default and, as of the February 2021 remittance,
the loan was over 121 days delinquent. A cash trap was triggered by
Walmart's departure and Burlington's nonrenewal and the servicer
reports the funds captured as part of the trap are being used to
pay operating expenses and to pay debt service on the subject loan.
The servicer is currently evaluating workout options and the
resolution date is unknown. According to the September 2020
appraisal, the property's as-is value was $10.8 million, which is
an 81.1% decline from the issuance value of $57.0 million and well
below the senior loan balance of $31.9 million. As part of this
review, DBRS Morningstar assumed a liquidation scenario for this
loan, resulting in a loss severity in excess of 95.0%.
The largest watchlisted loan, 110 Plaza San Diego (Prospectus ID#9,
5.5% of the pool), is secured by a Class B office property in
western portion of Downtown San Diego. This loan is on the
watchlist because of a low DSCR, with Q3 2020 financials reporting
a DSCR of 1.02 times (x). The historical coverage ratios have been
sustained below the DBRS Morningstar DSCR at issuance of 1.15x due
to occupancy declines from issuance. The property's occupancy rate
has generally hovered in the low 70.0% range for several years and
there is potential for further occupancy loss as the second-largest
tenant is scheduled to expire later this year, in July 2021. The
submarket is generally soft and, according to Reis, vacancy was at
17.0% as of Q4 2020, up from 15.3% for Q4 2019. Given the increased
risks from issuance, this loan was analyzed with a probability of
default (POD) penalty to increase the expected loss in the analysis
for this review.
The Arrowhead Promenade loan (Prospectus ID#45, 1.3% of the pool)
is also on the servicer's watchlist. The loan is secured by an
anchored retail centre located in Glendale, Arizona, and is on the
watchlist for a low occupancy rate that has been sustained since
the loss of Staples (formerly 32.0% of the net rentable area) in
2015. The most recent financials showed a Q3 2020 DSCR of 0.72x.
The loan, which has been underwater for several years, has remained
current and to date and no coronavirus-related relief request has
been submitted. The remaining tenant mix includes Petco, Anytime
Fitness, and L'mage Studio Suites, with the gym and salon tenants
either paying rent through the pandemic or the sponsor funding
further shortfalls out of pocket amid the pandemic. Given the
depressed occupancy and DSCR levels, this loan was analyzed with a
POD penalty to increase the expected loss in the analysis for this
review.
DBRS Morningstar is also monitoring a mall loan in the top 10 in
Bellis Fair Mall (Prospectus ID#3, 9.3% of the pool), which is
secured by the 528,000-square-foot (sf) portion of a 776,000-sf
regional mall in Bellingham, Washington, approximately 20 miles
southeast of the Canadian border. The property is anchored by a
collateral Macy's and DICK'S Sporting Goods (which joined with
Ashley Furniture HomeStore to backfill a former Sears space), as
well as noncollateral anchors JCPenney, Target, and Kohl's. The
mall is now owned and operated by affiliates of Brookfield Property
Partners, which acquired the sponsor, General Growth Properties, at
issuance in 2018. Given the proximity to the Canadian border, the
mall has historically benefitted from cross-border travel that has
ceased amid the pandemic. Based on the trailing nine months ended
September 2020 financials, the property was 84.2% occupied with a
DSCR of 1.56x, compared with the YE2019 occupancy rate of 87.7% and
DSCR of 1.88x and YE2018 occupancy rate of 87.7% and DSCR of 2.07x.
Although the occupancy drops and cash flow declines from issuance,
as well as the impacts to traffic amid the pandemic, are indicative
of increased risks for this loan from issuance, the sponsor
continues to keep the loan current, with no coronavirus-related
relief request processed to date.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2013-GC10: DBRS Confirms B(sf) Rating on Class F Certs
------------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of Commercial
Mortgage Pass-Through Certificates, Series 2013-GC10 issued by GS
Mortgage Securities Trust 2013-GC10 as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
The trends on Classes D and E were changed to Negative from Stable,
and the Negative trend for Class F was maintained, as well. All
other trends are Stable. Class F has had a Negative trend since
2018 resulting from ongoing performance declines for the largest
loan in the pool, Empire Hotel & Retail (Prospectus ID #1, 15.8% of
the pool), and the additional Negative trends on the two classes
above Class F in the capital stack are reflective of increased
risks that have emerged for additional loans in the top 15, as
further discussed below.
According to the March 2021 remittance, 53 of the original 61 loans
remain in the trust, representing a collateral reduction of 23.1%
since issuance. In addition to the significant paydown since the
transaction's closing, 18 loans, representing 20.2% of the pool,
are fully defeased. Six loans, representing 21.9% of the pool, are
on the servicer's watchlist and there are currently no loans in
special servicing. The watchlisted loans are being monitored for
tenant rollover, low debt service coverage ratios (DSCRs) and/or
occupancy, trigger events, or Coronavirus Disease
(COVID-19)-related forbearance requests.
The Empire Hotel & Retail pari passu loan is secured by a 423-key,
full-service hotel with ground-level retail in New York City (NYC),
located across the street from Lincoln Center near Central Park.
The loan has been on the servicer's watchlist for several years
because of a low DSCR, which has been depressed since 2017. As of
the trailing 12 months (T-12) ended September 2020, the DSCR was
reported at -0.19 times (x), down from the YE2019 DSCR of 0.78x and
DBRS Morningstar DSCR at issuance of 1.51x. The borrower previously
attributed the revenue declines to renovation work that occurred
between 2014 and 2016, as well as the softening of the NYC hotel
market in recent years. More recently, the coronavirus pandemic
forced the closure of the hotel portion of the property and it
remains closed as of March 2021 with no firm timeline for reopening
provided to date.
The loan remains with the master servicer but did fall 60 days
delinquent in July 2020 before being brought current through the
use of reserve funds allowed by a modification approved by the
master and special servicer as a nontransfer event. As of the March
2021 remittance, the loan showed 30 days delinquent, with the
limited commentary provided by the servicer noting collections were
in process. The reporting for the subject transaction and the
transaction that holds the remaining pari passu debt, CGCMT
2013-GC11 (not rated by DBRS Morningstar), shows a total of $1.8
million in outstanding advances for the whole loan as of March
2021. Given the property's historical performance struggles, which
have been severely compounded by the impact of the coronavirus
pandemic, the loan was analyzed with a probability of default (PoD)
penalty to significantly increase the expected loss in the analysis
for this review.
Another large loan on the servicer's watchlist, 701 Technology
Drive loan (Prospectus ID#15; 2.0% of the pool), is secured by a
flex industrial property in Canonsburg, Pennsylvania. This loan is
being monitored for a low DSCR, which was reported at 0.99x for the
T-9 ended September 2020, with an occupancy rate of 78.6%. The loan
is structured with a cash trap that is to be triggered when the
DSCR falls below the 1.10x threshold, and the servicer has been
contacted for an update on the status of the trigger's enforcement.
The performance decline was primarily driven by a decrease in
occupancy from issuance. In addition, there is substantial tenant
rollover risk within the near term as tenants representing 46.9% of
the NRA have lease expirations in the next year. This includes the
property's largest tenant, Heeter Printing Company (26.6% of NRA),
which has a lease expiration in May 2021. Given the decline in
performance and upcoming tenant rollover risk, the loan was
analyzed with a PoD penalty to increase the expected loss in the
analysis for this review.
Other loans of concern in the top 15 include One Technology Plaza
(Prospectus ID#13; 2.0% of the pool), which is secured by a Class A
office property in downtown Peoria, Illinois. The loan was
previously on the servicer's watchlist when the former
second-largest tenant, Caterpillar Inc. (which represented 18.6% of
NRA at the time), vacated at its lease expiry in June 2017.
Occupancy has been down since, with the December 2020 rent roll
reporting an occupancy rate of 77.3%. In addition, the first and
third-largest remaining tenants, Roosevelt University (20.6% of
NRA) and Illinois State Government Department (13.2% of NRA), have
leases scheduled to expire in December 2021. Based on the YE2020
financials, the loan reported a DSCR of 1.15x, which has remained
unchanged since 2018. According to an online posting, the property
was listed for sale at $17.4 million, which is a 23.3% decline from
the issuance value of $22.7 million but above the current loan
balance of $13.3 million. An update on the borrower's efforts to
sell the property has been requested of the servicer, but the
demand is likely to be tepid given the tertiary location and
challenges for those markets in attracting office users,
particularly amid the coronavirus pandemic. Given the increased
risks from issuance, this loan was also analyzed with a PoD penalty
to increase the expected loss in the analysis for this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2015-GC28: DBRS Confirms B Rating on Class X-D Certs
----------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-GC28 issued by GS Mortgage
Securities Trust 2015-GC28 as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-D at B (sf)
-- Class F at B (low) (sf)
DBRS Morningstar also removed Classes X-D and F from Under Review
with Negative Implications, where they were placed on August 6,
2020. The trends on Classes E, F, X-C, and X-D are Negative, while
all other trends are Stable.
According to the March 2021 remittance, 62 of the original 74 loans
remain in the pool, with scheduled amortization, loan repayments,
and the liquidation of one loan, 7 Becker (Prospectus ID#41),
combining for a collateral reduction of 22.2% since issuance. 12
loans, representing 9.4% of the pool, are fully defeased. The pool
is fairly concentrated by property type, with 39.1% of the pool
secured by office properties and 19.7% of the pool secured by
retail properties. Four loans, representing 4.1% of the pool, are
in special servicing, while 16 loans, representing 37.1% of the
pool, are on the servicer's watchlist. The watchlisted loans are
being monitored for tenant rollover, low debt service coverage
ratios (DSCRs) and/or occupancy, failure to submit financials, or
Coronavirus Disease (COVID-19)-related forbearance requests.
One top-10 loan, MacDade Retail (Prospectus ID#7, 2.9% of the
pool), is on the servicer's watchlist, having been returned to the
master servicer after it was transferred to special servicing in
June 2020 for imminent monetary default. According to the servicer,
the borrower initially submitted a relief request because of the
coronavirus pandemic, but the request was later withdrawn. The loan
collateral is an anchored shopping center in Holmes, Pennsylvania.
At issuance, Kmart occupied 40.3% of the net rentable area (NRA),
but the store was closed in 2019 and no replacement tenants have
been secured to date. Sears' bankruptcy, which preceded the Kmart
closure, triggered a cash flow sweep provision for the loan;
however, in lieu of the sweep, the borrower posted a $500,000
letter of credit that remains on file with the servicer.
As of the September 2020 financials, the servicer reported that the
property's occupancy rate was 50.5%. The largest tenant is Acme
Markets, which represents 17.6% of the NRA. Acme Markets' lease
expired in August 2020, but an Internet search as of March 2021
showed that the store remains open. Other large tenants include TJ
Maxx (10.2% of NRA; lease expires in August 2023) and Ross Dress
for Less (10.1% of NRA; lease expires in January 2025). Although
the loan is now back with the master servicer and showed current as
of the March 2021 reporting, there remain significantly increased
risks from issuance in the extended vacancy of the former Kmart
space. Prospects for backfilling the space are exponentially
slimmer amid the ongoing coronavirus pandemic, which has presented
significant challenges for retailers doing business in
brick-and-mortar locations. As such, DBRS Morningstar applied a
probability of default (PoD) penalty for this loan to increase the
expected loss in the analysis for this review.
The largest loan in special servicing is the Iron Horse Hotel loan
(Prospectus ID#11, 2.4% of the pool), which is secured by a 100-key
full-service boutique hotel in Milwaukee. The loan transferred to
special servicing in March 2020 for imminent monetary default, with
the borrower requesting relief as a result of the coronavirus
pandemic. Although the loan's transfer to special servicing was
said to be the result of the impacts of the coronavirus pandemic,
DBRS Morningstar notes that the loan has reported performance
declines for several years, with the YE2019 DSCR at 0.89 times (x)
compared with the YE2018 DSCR of 0.85x and the DBRS Morningstar
DSCR at issuance of 1.75x. The historical performance declines were
primarily driven by a decrease in food and beverage revenue as the
restaurant within the hotel lost banquet, reception, and event
business. Based on the September 2020 appraisal obtained by the
special servicer, the property was valued at $21.0 million, which
is a decrease from the issuance value of $29.2 million but above
the current loan balance of $17.4 million. Given the increased
risks from issuance in the elevated loan-to-value ratio and
sustained low cash flows prior to the loan's transfer to special
servicing, DBRS Morningstar applied a PoD penalty for this loan to
increase the expected loss in the analysis for this review.
DBRS Morningstar also notes increased risks to the pool from the
second-largest loan in the pool, Discovery Corporate Center
(Prospectus ID#2, 6.9% of the pool), which is secured by three
Class A office buildings in Rancho Bernardo, California, a San
Diego suburb. At issuance, 92.8% of the NRA was leased to Broadcom
Corporation, but the tenant downsized in 2018; as a result,
property occupancy was at 44.0% by YE2018. Some leasing activity
was achieved over the next few years, with the occupancy rate
improving to 76.7% as of June 2020 and the DSCR improving to 1.22x
for the first half of 2020 compared with the YE2019 DSCR of 0.95x
and the YE2018 DSCR of 0.38x. According to Reis, the I-15 Corridor
submarket reported an average vacancy rate of 16.3%, while
properties within a two-mile radius reported a vacancy rate of
17.2%. Given the lower occupancy rate compared with the issuance
figures and the likelihood that leasing activity has stalled amid
the coronavirus pandemic, a PoD penalty was applied to increase the
expected loss for this loan in the analysis for this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2021-RPL1: DBRS Assigns B(sf) Rating on Class B-2 Notes
-------------------------------------------------------------------
DBRS, Inc. assigned ratings to the following Mortgaged-Backed
Securities, Series 2021-RPL1 issued by GS Mortgage-Backed
Securities Trust 2021-RPL1:
-- $225.1 million Class A-1 at AAA (sf)
-- $23.8 million Class A-2 at AA (sf)
-- $248.9 million Class A-3 at AA (sf)
-- $268.6 million Class A-4 at A (sf)
-- $288.5 million Class A-5 at BBB (sf)
-- $19.7 million Class M-1 at A (sf)
-- $19.9 million Class M-2 at BBB (sf)
-- $11.0 million Class B-1 at BB (sf)
-- $11.2 million Class B-2 at B (sf)
The Class A-3, A-4, and A-5 Notes are exchangeable. These classes
can be exchanged for combinations of initial exchangeable notes as
specified in the offering documents.
The AAA (sf) ratings on the Notes reflect 38.45% of credit
enhancement provided by subordinated notes. The AA (sf), A (sf),
BBB (sf), BB (sf), and B (sf) ratings reflect 31.95%, 26.55%,
21.10%, 18.10%, and 15.05% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of seasoned
performing and reperforming, primarily first-lien residential
mortgages funded by the issuance of mortgage-backed notes (the
Notes). The Notes are backed by 2,080 loans with a total principal
balance of $384,955,718 as of the Cut-Off Date (February 28,
2021).
The portfolio is approximately 169 months seasoned and contains
82.9% modified loans. The modifications happened more than two
years ago for 73.1% of the modified loans. Within the pool, 904
mortgages have noninterest-bearing deferred amounts, which equate
to approximately 10.5% of the total principal balance. There are no
HAMP and proprietary principal forgiveness amounts included in the
deferred amounts.
As of the Cut-Off Date, 95.3% of the loans in the pool are current.
Approximately 4.7% is 30 days delinquent under the Mortgage Bankers
Association (MBA) delinquency method and 1.8% is in bankruptcy (all
bankruptcy loans are performing or 30 days delinquent).
Approximately 43.7% of the mortgage loans have been zero times 30
days delinquent (0 x 30) for at least the past 24 months under the
MBA delinquency method.
The majority of the pool (96.7%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated prior to
January 10, 2014, the date on which the rules became applicable .
The loans subject to the ATR rules were treated as Non-QM (3.3%).
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC;
82.9% of the loans) and MTGLQ Investors, L.P. (17.1% of the loans),
acquired the mortgage loans in various transactions prior to the
Closing Date from various mortgage loan sellers or from an
affiliate, GS Mortgage Securities Corp. (the Depositor), which will
contribute the loans to the Trust. These loans were originated and
previously serviced by various entities through purchases in the
secondary market.
As the Retaining Sponsor, GSMC, or a majority-owned affiliate, will
retain an eligible vertical interest in the transaction consisting
of an uncertificated interest (the Retained Interest) in the Trust
representing the right to receive at least 5.0% of the amounts
collected on the mortgage loans, net of the Trust's fees, expenses,
and reimbursements and paid on the Notes (other than the Class R
Notes) and the Retained Interest to satisfy the credit risk
retention requirements under Section 15G of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
The loans will be serviced by Select Portfolio Servicing, Inc.
(SPS; 100%). The initial aggregate servicing fee for the GSMBS
2021-RPL1 portfolio will be 0.25% per annum. Approximately 0.3% of
the pool will be initially serviced by an interim servicer and
transferred to SPS for servicing on March 17, 2021.
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicer or any other party to the
transaction; however, the Servicer is obligated to make advances in
respect to the preservation, inspection, restoration, protection,
and repair of a mortgaged property, which includes delinquent tax
and insurance payments, the enforcement or judicial proceedings
associated with a mortgage loan, and the management and liquidation
of properties (to the extent that the Servicer deems such advances
recoverable).
When the aggregate pool balance of the mortgage loans is reduced to
less than 25% of the Cut-Off Date balance, the Controlling
Noteholder will have the option to purchase all remaining loans and
other property of the Issuer at a specified minimum price. The
Controlling Noteholder will be the beneficial owner of more than
50% the Class B-5 Notes (if no longer outstanding the next most
subordinate Class of Notes, other than Class X).
As a loss mitigation alternative, the Controlling Noteholder may
direct the Servicer to sell mortgage loans that are 90 days or more
delinquent under the MBA delinquency method to unaffiliated
third-party investors in the secondary whole-loan market on
arms-length terms and at fair market value to maximize proceeds on
such loans on a net present value basis.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
M-1 Notes and more subordinate bonds will not be paid from
principal proceeds until the more senior classes are retired.
Excess interest can be used to amortize principal of the notes
after paying transaction parties' fees, Net WAC shortfalls, and
making deposits on to the breach reserve account.
CORONAVIRUS IMPACT – REPERFORMING LOAN (RPL)
The Coronavirus Disease (COVID-19) pandemic and the resulting
isolation measures have caused an economic contraction, leading to
sharp increases in unemployment rates and income reductions for
many consumers. DBRS Morningstar anticipates that delinquencies may
continue to rise in the coming months for many residential
mortgage-backed securities (RMBS) asset classes.
RPL is a traditional RMBS asset class that consists of
securitizations backed by pools of seasoned performing and
reperforming residential home loans. Although borrowers in these
pools may have experienced delinquencies in the past, the loans
have been largely performing for the past six to 24 months since
issuance. Generally, these pools are highly seasoned and contain
sizable concentrations of previously modified loans.
As a result of the coronavirus, DBRS Morningstar has seen increased
delinquencies and loans on forbearance plans and expects a
potential near-term decline in the values of the mortgaged
properties. Such deteriorations may adversely affects borrowers'
ability to make monthly payments, refinance their loans, or sell
properties in an amount sufficient to repay the outstanding balance
of their loans.
In connection with the economic stress assumed under its moderate
scenario (see "Global Macroeconomic Scenarios: March 2021 Update,"
published on March 17, 2021), for the RPL asset class DBRS
Morningstar applies more severe market value decline (MVD)
assumptions across all rating categories than it previously used.
DBRS Morningstar derives such MVD assumptions through a fundamental
home price approach based on the forecasted unemployment rates and
GDP growth outlined in the moderate scenario. In addition, for
pools with loans on forbearance plans, DBRS Morningstar may assume
higher loss expectations above and beyond the coronavirus
assumptions. Such assumptions translate to higher expected losses
on the collateral pool and correspondingly higher credit
enhancement.
In the RPL asset class, while the full effect of the coronavirus
may not occur until a few performance cycles later, DBRS
Morningstar generally believes that loans which were previously
delinquent, recently modified, or have higher updated loan-to-value
ratios (LTVs) may be more sensitive to economic hardships resulting
from higher unemployment rates and lower incomes. Borrowers with
previous delinquencies or recent modifications have exhibited
difficulty in fulfilling payment obligations in the past and may
revert to spotty payment patterns in the near term. Higher LTV
borrowers with lower equity in their properties generally have
fewer refinance opportunities and, therefore, slower prepayments.
In addition, for this transaction, as permitted by the Coronavirus
Aid, Relief, and Economic Security (CARES) Act, signed into law on
March 27, 2020, 237 borrowers (13.7% of the borrowers by balance)
either have completed forbearance plans or are on forbearance plans
because the borrowers reported financial hardship related to the
coronavirus pandemic. These forbearance plans allow temporary
payment holidays, followed by repayment once the forbearance period
ends. The Servicer, in collaboration with the Sponsor, is generally
offering borrowers a three-month payment forbearance plan.
Beginning in month four, the borrower can repay all or some of the
missed mortgage payments at once, deferring the unpaid missed
payments, or opt to go on a repayment plan to catch up on missed
payments for several, typically six, months. During the repayment
period, the borrower needs to make regular payments and additional
amounts to catch up on the missed payments. For the Sponsor's
approach to forbearance loans, the Servicer would attempt to
contact the borrowers before the expiration of the forbearance
period and evaluate the borrowers' capacity to repay the missed
amounts. As a result, the Servicer, in collaboration with the
Sponsor, may offer an extension of the forbearance period,
repayment plan, or other forms of payment relief, such as deferrals
of the unpaid principal and interest (P&I) amounts or a loan
modification, in addition to pursuing other loss mitigation
options.
For this transaction, DBRS Morningstar applied additional
assumptions to evaluate the impact of potential cash flow
disruptions on the rated tranches, stemming from (1) lower P&I
collections and (2) no servicing advances on delinquent P&I. These
assumptions include:
(1) Increased delinquencies for the first 12 months at the AAA (sf)
and AA (sf) rating levels,
(2) Increased delinquencies for the first nine months at the A (sf)
and below rating levels,
(3) No voluntary prepayments for the first 12 months for the AAA
(sf) and AA (sf) rating levels,
(4) No liquidation recovery for the first 12 months for the AAA
(sf) and AA (sf) rating levels.
For more information regarding rating methodologies and the
coronavirus, please see the following DBRS Morningstar press
releases and commentary: "DBRS Morningstar Provides Update on
Rating Methodologies in Light of Measures to Contain Coronavirus
Disease (COVID-19)," dated March 12, 2020; "DBRS Morningstar Global
Structured Finance Rating Methodologies and Coronavirus Disease
(COVID-19)," dated March 20, 2020; and "Global Macroeconomic
Scenarios: March 2021 Update," dated March 17, 2021.
The DBRS Morningstar ratings of AAA (sf) and AA (sf) address the
timely payment of interest and full payment of principal by the
legal final maturity date in accordance with the terms and
conditions of the related Notes. The DBRS Morningstar ratings of A
(sf), BBB (sf), BB (sf), and B (sf) address the ultimate payment of
interest and full payment of principal by the legal final maturity
date in accordance with the terms and conditions of the related
Notes.
Notes: All figures are in U.S. dollars unless otherwise noted.
HARRIMAN PARK: S&P Assigns BB- (sf) Rating on Class E-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R, B-1R,
B-2R, C-R, D-R, and E-R replacement notes and the newly issued
class X-R notes from Harriman Park CLO Ltd./Harriman Park CLO LLC,
a collateralized loan obligation (CLO) originally issued on April
20, 2020, that is managed by Blackstone CLO Management LLC
(formerly Blackstone/GSO CLO Management LLC). At the same time, S&P
withdrew its ratings on the original class A, B-1, B-2, C, D, and E
notes following payment in full on the April 27, 2021, refinancing
date (see list). S&P did not rate the replacement class A-2R
notes.
On the refinancing date, the proceeds from the class A-1R, A-2R,
B-1R, B-2R, C-R, D-R, E-R, and X-R replacement note issuances were
used to redeem the original class A, B-1, B-2, C, D, and E notes as
outlined in the transaction document provisions. Therefore, S&P
withdrew its ratings on the original notes in line with their full
redemption and assigned ratings to select replacement notes.
The replacement notes are being issued via a supplemental
indenture. Based on provisions in the transaction document, S&P
expects the following:
-- The replacement notes will be issued at a lower weighted
average cost of funding than the original notes.
-- The non-call period will be extended by two years to April
2023.
-- The reinvestment period and legal final maturity date will each
be extended by three years to April 2026 and April 2034,
respectively.
-- The required interest coverage and overcollateralization ratios
will be amended.
-- The weighted average life test will be extended to nine years.
-- The class X-R notes will be issued in connection with this
refinancing and paid down using interest proceeds during the first
12 payment dates, in equal installments of $416,667, beginning with
the payment date in July 2021.
Replacement And Original Note Issuances
Replacement notes
Class X-R, $5.00 million: Three-month LIBOR + 0.60%
Class A-1R, $295.75 million: Three-month LIBOR + 1.12%
Class A-2R, $11.75 million: Three-month LIBOR + 1.40%
Class B-1R, $56.00 million: Three-month LIBOR + 1.60%
Class B-2R, $14.00 million: 2.927%
Class C-R, $30.00 million: Three-month LIBOR + 1.95%
Class D-R, $31.25 million: Three-month LIBOR + 3.10%
Class E-R, $18.00 million: Three-month LIBOR + 6.40%
Original notes
Class A, $320.00 million: Three-month LIBOR + 1.20%
Class B-1, $48.00 million: Three-month LIBOR + 1.75%
Class B-2, $12.00 million: 2.448%
Class C, $30.00 million: Three-month LIBOR + 2.50%
Class D, $30.00 million: Three-month LIBOR + 3.64%
Class E, $20.00 million: Three-month LIBOR + 6.91%
Subordinated notes, $41.70 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data 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. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Class X-R, $5.00 million: AAA (sf)
Class A-1R, $295.75 million: AAA (sf)
Class A-2R, $11.75 million: NR
Class B-1R, $56.00 million: AA (sf)
Class B-2R, $14.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $31.25 million: BBB- (sf)
Class E-R (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $41.70 million: NR
Ratings Withdrawn
Harriman Park CLO Ltd./Harriman Park CLO LLC
Class A to NR from 'AAA (sf)'
Class B-1 to NR from 'AA (sf)'
Class B-2 to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
NR--Not rated.
HARRIMAN PARK: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R, B-1R, B-2R, C-R, D-R, and E-R replacement notes, as well as
to the newly issued class X-R notes, from Harriman Park CLO Ltd., a
collateralized loan obligation (CLO) originally issued on April 20,
2020 that is managed by Blackstone CLO Management LLC (formerly
Blackstone/GSO CLO Management LLC). The replacement notes will be
issued via a proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of April 23,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the April 27, 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.
Based on provisions in the aforementioned transaction document:
-- The replacement notes are expected to be issued at a lower
weighted average cost of funding than the original notes.
-- The non-call period will be extended two years to April 2023.
-- The reinvestment period and legal final maturity date will each
be extended by three years to April 2026 and April 2034,
respectively.
-- The required interest coverage ratio and overcollateralization
ratios will be amended.
-- The weighted average life test is expected to be extended to
nine years.
-- The class X-R notes will be issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first 12 payment dates, in equal
installments of $416,667, beginning with the payment date in July
2021.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement Notes
Class Amount Interest
(mil. $) rate (%)
X-R 5.00 Three-month LIBOR + 0.60
A-1R 295.75 Three-month LIBOR + 1.12
A-2R 11.75 Three-month LIBOR + 1.40
B-1R 56.00 Three-month LIBOR + 1.60
B-2R 14.00 2.927
C-R 30.00 Three-month LIBOR + 1.95
D-R 31.25 Three-month LIBOR + 3.10
E-R 18.00 Three-month LIBOR + 6.40
Original Notes
Class Amount Interest
(mil. $) rate (%)
A 320.00 Three-month LIBOR + 1.20
B-1 48.00 Three-month LIBOR + 1.75
B-2 12.00 2.448
C 30.00 Three-month LIBOR + 2.50
D 30.00 Three-month LIBOR + 3.64
E 20.00 Three-month LIBOR + 6.91
Sub Notes 41.70 N/A
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.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
Harriman Park CLO Ltd.
Class X-R, $5.00 million: AAA (sf)
Class A-1R, $295.75 million: AAA (sf)
Class A-2R, $11.75 million: NR (sf)
Class B-1R, $56.00 million: AA (sf)
Class B-2R, $14.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $31.25 million: BBB- (sf)
Class E-R (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $41.70 million: Not rated
HERTZ VEHICLE 2013-A: DBRS Hikes Class C Securities Rating to BB
----------------------------------------------------------------
DBRS, Inc. took rating actions on 43 securities issued by Hertz
Vehicle Financing II LP (HVF II LP):
-- Series 2013-A, Class A, upgraded to AA (low) (sf); changed to
Under Review with Positive Implications
-- Series 2013-A, Class B, upgraded to A (sf)
-- Series 2013-A, Class C, upgraded to BB (sf)
-- Series 2013-A, Class D, changed to Under Review with
Developing Implications
-- Series 2015-3, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2016-2, Class A Notes, upgraded to AA (sf); changed to
Under Review with Positive Implications
-- Series 2016-2, Class B Notes, upgraded to BBB (sf)
-- Series 2016-2, Class C Notes, upgraded to B (sf)
-- Series 2016-2, Class D Notes, changed to Under Review with
Developing Implications
-- Series 2016-4, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2016-4, Class B, upgraded to BBB (sf)
-- Series 2016-4, Class C, upgraded to B (sf)
-- Series 2016-4, Class D, changed to Under Review with
Developing Implications
-- Series 2017-1, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2017-1, Class D, changed to Under Review with
Developing Implications
-- Series 2017-2, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2017-2, Class B, upgraded to BBB (sf)
-- Series 2017-2, Class C, upgraded to B (sf)
-- Series 2017-2, Class D, changed to Under Review with
Developing Implications
-- Series 2018-1, Class A Notes, upgraded to AA (sf); changed to
Under Review with Positive Implications
-- Series 2018-1, Class B Notes, upgraded to BBB (sf)
-- Series 2018-1, Class C Notes, upgraded to B (sf)
-- Series 2018-1, Class D Notes, changed to Under Review with
Developing Implications
-- Series 2018-2, Class A, upgraded to AA (sf); placed Under
Review with Positive Implications
-- Series 2018-2, Class B, upgraded to BBB (sf)
-- Series 2018-2, Class C, upgraded to B (high) (sf)
-- Series 2018-2, Class D, changed to Under Review with
Developing Implications
-- Series 2018-3, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2018-3, Class B, upgraded to BBB (sf)
-- Series 2018-3, Class C, upgraded to B (high) (sf)
-- Series 2018-3, Class D, changed to Under Review with
Developing Implications
-- Series 2019-1, Class A, upgraded to AA (sf); changed to Under
Review with Positive Implications
-- Series 2019-1, Class B, upgraded to BBB (sf)
-- Series 2019-1, Class C, upgraded to B (sf)
-- Series 2019-1, Class D, changed to Under Review with
Developing Implications
-- Series 2019-2, Class A Notes, upgraded to AA (sf); changed to
Under Review with Positive Implications
-- Series 2019-2, Class B Notes, upgraded to BBB (sf)
-- Series 2019-2, Class C Notes, upgraded to B (high) (sf)
-- Series 2019-2, Class D Notes, changed to Under Review with
Developing Implications
-- Series 2019-3, Class A Notes, upgraded to AA (sf); changed to
Under Review with Positive Implications
-- Series 2019-3, Class B Notes, upgraded to BBB (sf)
-- Series 2019-3, Class C Notes, upgraded to B (high) (sf)
-- Series 2019-3, Class D Notes, changed to Under Review with
Developing Implications
In addition, DBRS Morningstar maintained the Under Review with
Developing Implications status on 24 securities issued by HVF II
LP:
-- Series 2013-A, Class B
-- Series 2013-A, Class C
-- Series 2015-3, Class B
-- Series 2015-3, Class C
-- Series 2016-2, Class B Notes
-- Series 2016-2, Class C Notes
-- Series 2016-4, Class B
-- Series 2016-4, Class C
-- Series 2017-1, Class B
-- Series 2017-1, Class C
-- Series 2017-2, Class B
-- Series 2017-2, Class C
-- Series 2018-1, Class B Notes
-- Series 2018-1, Class C Notes
-- Series 2018-2, Class B
-- Series 2018-2, Class C
-- Series 2018-3, Class B
-- Series 2018-3, Class C
-- Series 2019-1, Class B
-- Series 2019-1, Class C
-- Series 2019-2, Class B Notes
-- Series 2019-2, Class C Notes
-- Series 2019-3, Class B Notes
-- Series 2019-3, Class C Notes
DBRS Morningstar initially placed all of the ratings on the notes
issued Under Review with Negative Implications on April 29, 2020.
DBRS Morningstar subsequently downgraded all of the ratings and
maintained the Under Review with Negative Implications status on
May 21, 2020. On August 19, 2020, DBRS Morningstar changed the
ratings for 36 Class A, Class B, and Class C notes to Under Review
with Developing Implications and maintained the Under Review with
Negative Implications status on the Class D notes. On December 2,
2020, DBRS Morningstar maintained the Under Review with Developing
Implications status on 36 securities issued by HVF II LP and also
maintained the Under Review with Negative Implications status on
the ratings of all Class D notes.
The rating actions reflect the following considerations:
(1) Increased credit enhancement levels for the Series 2013-A,
Class A, B, C, and D variable funding notes (VFNs) as proceeds from
fleet dispositions under the Interim Agreement (initially agreed to
on July 24, 2020, and subsequently extended and amended on January
7, 2021) between The Hertz Corporation (Hertz) and the investors of
the Series 2013-A VFNs and medium-term notes have been used to pay
down the principal balance of the notes. The senior Series 2013-A,
Class A notes have been paid down to $1.01 billion at February 28,
2021, from $3.76 billion at May 31, 2020. DBRS Morningstar upgraded
the Series 2013-A, Class A notes to AA (low) (sf) from A (high)
(sf) and changed the status to Under Review with Positive
Implications from Under Review with Developing Implications, as it
is expected that the Series 2013-A, Class A notes will continue to
pay down under the terms of the Interim Agreement. The subordinated
Series 2013-A, Class B, C, and D VFNs have not been paid down under
the terms of the Interim Agreement but have benefited from
increasing credit enhancement as a percentage of the net book value
of the HVF II LP assets allocated to the series. The Series 2013-A,
Class B notes were upgraded to A (sf) from BBB (sf), and the Under
Review with Developing Implications status has been maintained. The
Series 2013-A, Class C notes were upgraded to BB (sf) from B (high)
(sf), and the Under Review with Developing Implications status has
been maintained. The status on the Series 2013-A, Class D notes has
been changed to Under Review with Developing Implications from
Under Review with Negative Implications.
(2) Increased credit enhancement levels for the Class A, B, and C
notes of Series 2016-2, Series 2016-4, Series 2017-2, Series
2018-1, Series 2018-2, Series 2018-3, Series 2019-1, Series 2019-2,
and Series 2019-3 as proceeds from the fleet dispositions under the
Interim Agreement have been used to pay down the principal balance
of the notes.
-- The senior Series 2016-2, Class A Notes have been paid down to
$72.90 million at February 28, 2021, from $388.51 million at May
31, 2020. The Series 2016-2, Class A Notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2016-4, Class A notes have been paid down to
$48.25 million at February 28, 2021, from $240.58 million at May
31, 2020. The Series 2016-4, Class A notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2017-2, Class A notes have been paid down to
$48.75 million at February 28, 2021, from $244.60 million at May
31, 2020. The Series 2017-2, Class A notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2018-1, Class A Notes have been paid down to
$139.05 million at February 28, 2021, from $698.87 million at May
31, 2020. The Series 2018-1, Class A Notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2018-2, Class A notes have been paid down to
$28.10 million at February 28, 2021, from $140.58 million at May
31, 2020. The Series 2018-2, Class A notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2018-3, Class A notes have been paid down to
$28.09 million at February 28, 2021, from $140.74 million at May
31, 2020. The Series 2018-3, Class A notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2019-1, Class A notes have been paid down to
$98.48 million at February 28, 2021, from $492.32 million at May
31, 2020. The Series 2019-1, Class A notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2019-2, Class A Notes have been paid down to
$105.19 million at February 28, 2021, from $576.53 million at May
31, 2020. The Series 2019-2, Class A Notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
-- The senior Series 2019-3, Class A Notes have been paid down to
$102.02 million at February 28, 2021, from $526.97 million at May
31, 2020. The Series 2019-3, Class A Notes were upgraded to AA (sf)
from AA (low) (sf), and the status has been changed to Under Review
with Positive Implications from Under Review with Developing
Implications.
(3) The subordinated Class B, C, and D notes for Series 2016-2,
Series 2016-4, Series 2017-2, Series 2018-1, Series 2018-2, Series
2018-3, Series 2019-1, Series 2019-2, and Series 2019-3 have not
been paid down since May 31, 2020, but have benefited from
increasing credit enhancement as a percentage of the net book value
of the HVF II LP assets allocated to each series.
-- The Series 2016-2, Class B Notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2016-2, Class C Notes were upgraded to B
(sf) from CCC (high) (sf). There is no rating change to the Series
2016-2, Class D Notes, as the increase in credit enhancement is not
to a level commensurate with a higher rating. The Under Review with
Developing Implications status on the Series 2016-2, Class B and C
Notes has been maintained. The status on the Series 2016-2, Class D
Notes has been changed to Under Review with Developing Implications
from Under Review with Negative Implications.
-- The Series 2016-4, Class B notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2016-4, Class C notes were upgraded to B
(sf) from CCC (high) (sf). There is no rating change to the Series
2016-4, Class D notes, as the increase in credit enhancement is not
to a level commensurate with a higher rating. The Under Review with
Developing Implications status on the Series 2016-4, Class B and C
notes has been maintained. The status on the Series 2016-4, Class D
notes has been changed to Under Review with Developing Implications
from Under Review with Negative Implications.
-- The Series 2017-2, Class B notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2017-2, Class C notes were upgraded to B
(sf) from CCC (high) (sf). There is no rating change to the Series
2017-2, Class D notes, as the increase in credit enhancement is not
to a level commensurate with a higher rating. The Under Review with
Developing Implications status on the Series 2017-2, Class B and C
notes has been maintained. The status on the Series 2017-2, Class D
notes has been changed to Under Review with Developing Implications
from Under Review with Negative Implications.
-- The Series 2018-1, Class B Notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2018-1, Class C Notes were upgraded to B
(sf) from CCC (high) (sf). There is no rating change to the Series
2018-1, Class D Notes, as the increase in credit enhancement is not
to a level commensurate with a higher rating. The Under Review with
Developing Implications status on the Series 2018-1, Class B and C
Notes has been maintained. The status on the Series 2018-1, Class D
Notes has been changed to Under Review with Developing Implications
from Under Review with Negative Implications.
-- The Series 2018-2, Class B notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2018-2, Class C notes were upgraded to B
(high) (sf) from B (low) (sf). There is no rating change to the
Series 2018-2, Class D notes, as the increase in credit enhancement
is not to a level commensurate with a higher rating. The Under
Review with Developing Implications status on the Series 2018-2,
Class B and C notes has been maintained. The status on the Series
2018-2, Class D notes has been changed to Under Review with
Developing Implications from Under Review with Negative
Implications.
-- The Series 2018-3, Class B notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2018-3, Class C notes were upgraded to B
(high) (sf) from B (low) (sf). There is no rating change to the
Series 2018-3, Class D notes, as the increase in credit enhancement
is not to a level commensurate with a higher rating. The Under
Review with Developing Implications status on the Series 2018-3,
Class B and C notes has been maintained. The status on the Series
2018-3, Class D notes has been changed to Under Review with
Developing Implications from Under Review with Negative
Implications.
-- The Series 2019-1, Class B notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2019-1, Class C notes were upgraded to B
(sf) from CCC (high) (sf). There is no rating change to the Series
2019-1, Class D notes, as the increase in credit enhancement is not
to a level commensurate with a higher rating. The Under Review with
Developing Implications status on the Series 2019-1, Class B and C
notes has been maintained. The status on the Series 2019-1, Class D
notes has been changed to Under Review with Developing Implications
from Under Review with Negative Implications.
-- The Series 2019-2, Class B Notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2019-2, Class C Notes were upgraded to B
(high) (sf) from B (low) (sf). There is no rating change to the
Series 2019-2, Class D Notes, as the increase in credit enhancement
is not to a level commensurate with a higher rating. The Under
Review with Developing Implications status on the Series 2019-2,
Class B and C Notes has been maintained. The status on the Series
2019-2, Class D Notes has been changed to Under Review with
Developing Implications from Under Review with Negative
Implications.
-- The Series 2019-3, Class B Notes were upgraded to BBB (sf) from
BB (high) (sf). The Series 2019-3, Class C Notes were upgraded to B
(high) (sf) from B (low) (sf). There is no rating change to the
Series 2019-3, Class D Notes, as the increase in credit enhancement
is not to a level commensurate with a higher rating. The Under
Review with Developing Implications status on the Series 2019-3,
Class B and C Notes has been maintained. The status on the Series
2019-3, Class D Notes has been changed to Under Review with
Developing Implications from Under Review with Negative
Implications.
(4) The legal final maturity date for the Series 2015-3, Class A,
B, C, and D notes is September 27, 2021, which is prior to the end
date of the Interim Agreement (September 30, 2021). There is
increased likelihood that the notes may be outstanding at the legal
final maturity date. The Series 2015-3, Class A notes have
benefited from increased credit enhancement and have been paid down
to $44.80 million at February 28, 2021, from $242.33 million at May
31, 2020. The Series 2015-3, Class A notes were upgraded to AA (sf)
from AA (low) (sf), as it is likely that they will be repaid in
full prior to the legal final maturity date. The status on the
Series 2015-3, Class A notes has been changed to Under Review with
Positive Implications from Under Review with Developing
Implications, as the Class A notes continue to pay down under the
terms of the Interim Agreement. The subordinated Series 2015-3,
Class B and C notes have benefited from increasing credit
enhancement but have not paid down during the period of the Interim
Agreement. It is less likely that the Series 2015-3, Class B and C
notes will be repaid in full by the legal final maturity date
pursuant to the Interim Agreement. However, Hertz filed a Plan of
Reorganization on March 2, 2021, that contemplates the full
repayment of the HVF II LP notes with the proceeds from a new
funding facility. The plan is still subject to approval, but if it
is executed in full and prior to the legal maturity date of the
Series 2015-3 notes, then the Class B and C notes will be repaid in
full prior to their legal maturity date. As a result, there is no
rating change for the Series 2015-3, Class B and Class C notes, and
the Under Review with Developing Implications status on the ratings
has been maintained.
(5) The legal final maturity date for the Series 2017-1, Class A,
B, C, and D notes is October 25, 2021, which is less than one month
after the end of the Interim Agreement (September 30, 2021).
Because of the proximity of the legal final maturity date to the
end of the Interim Agreement, there is increased likelihood that
the notes may be outstanding at the legal final maturity date. The
Series 2017-1, Class A notes have benefited from increased credit
enhancement and have been paid down to $59.23 million at February
28, 2021, from $297.19 million at May 31, 2020. The Series 2017-1,
Class A notes were upgraded to AA (sf) from AA (low) (sf), as it is
likely that they will be repaid in full prior to the legal final
maturity date. The status on the Series 2017-1, Class A notes has
been changed to Under Review with Positive Implications from Under
Review with Developing Implications, as the notes continue to pay
down under the terms of the Interim Agreement. The subordinated
Series 2017-1, Class B, C, and D notes have benefited from
increasing credit enhancement but have not paid down during the
period of the Interim Agreement. It is less likely that the Series
2017-1, Class B, C, and D notes will be repaid in full by the legal
final maturity date. However, Hertz filed a Plan of Reorganization
on March 2, 2021, that contemplates the full repayment of the HVF
II LP notes with the proceeds from a new funding facility. The plan
is still subject to approval, but if it is executed in full and
prior to the legal maturity date of the Series 2017-1 notes, then
the Class B, C and D notes will be repaid in full prior to their
legal maturity date. As a result, there is no rating change for the
Series 2017-1, Class B and C notes, and the Under Review with
Developing Implications status on the ratings has been maintained.
However, the status on the Series 2017-1, Class D notes has been
changed to Under Review with Developing Implications from Under
Review with Negative Implications.
(6) The extended and modified Interim Agreement provides for Hertz
to continue paying down the HVF II LP notes through September 30,
2021, at which point the Class A notes for all series would be
repaid in full and the Class B notes for all series would be
partially repaid. Under the current terms of the agreement, the
Class C and D notes for all series would not be repaid or partially
repaid.
(7) On March 2, 2021, Hertz filed a Plan of Reorganization. The
plan contemplates that Hertz's existing equity will be extinguished
and the Plan Sponsors (Knighthead Capital Management and Certares
Opportunities LLC) will purchase at least 51% ownership of
Reorganized Hertz. The unsecured debtholders will be able to
acquire equity of Reorganized Hertz via a rights offering. The
rights offering is fully backstopped by the Plan Sponsors. The Plan
of Reorganization includes $2.283 billion of direct investment from
the Plan Sponsors, $1.970 billion from the rights offering, and $1
billion in exit financing in the form of a secured term loan. In
addition, the plan specifies that Hertz shall cause HVF II LP to
repay in full in cash all of the outstanding HVF II LP notes with
the proceeds of a new asset-backed securitization facility and/or
securities to be issued by a newly formed non-debtor
bankruptcy-remote subsidiary of Hertz (contemplated to be HVF
III).
(8) DBRS Morningstar's set of macroeconomic scenarios for select
economies related to the Coronavirus Disease (COVID-19) pandemic,
available in its commentary "Global Macroeconomic Scenarios: March
2021 Update," published on March 17, 2021. DBRS Morningstar
initially published macroeconomic scenarios on April 16, 2020, and
they were last updated on March 17, 2021; these macroeconomic
scenarios are reflected in DBRS Morningstar's analysis. The rating
actions consider the moderate macroeconomic scenario outlined in
the commentary, with the moderate scenario serving as the primary
anchor for current ratings. The moderate scenario factors in
increasing success in containment during the first half of 2021,
enabling the continued relaxation of restrictions.
(9) The rental car industry continues to encounter challenges
stemming from the coronavirus, as travel and tourism activities
have not yet resumed pre-pandemic volume. While vaccination
coverage rates continue to increase in the U.S., the risk of new
coronavirus variants could pose additional risk in returning back
to normalized business and leisure activity.
(10) Demand for used vehicles continues to be robust, with current
used vehicle inventories at or below normal levels. The potential
impact of the worldwide shortage of semiconductor chips for new
vehicle production may further increase demand for used vehicles,
which could further support the current strong value of used
vehicles.
(11) Vehicle disposition channels are currently operating at normal
capacity, particularly with the migration to digital formats.
Potential localized or widespread coronavirus outbreaks, however,
could result in some level of disruption in the future, which in
turn could affect Hertz's ability to dispose of additional excess
fleet, if required.
(12) Automotive manufacturer liquidity has been generally strong
going into 2021, but the semiconductor chip shortage could pose
production issues. Demand for new vehicles in 2021 will also be a
factor for manufacturers as unemployment rates remain elevated in
the U.S.
DBRS Morningstar's criteria considers certain time horizons, by
rating category, for the liquidation of the rental fleet after an
operating company's bankruptcy. DBRS Morningstar has not modified
its methodology/criteria regarding liquidation time horizons and
associated market value declines during the assumed liquidation
period. It is possible that liquidation horizon and associated
market value decline assumptions may be reconsidered at some point
in the future if there are additional widespread shutdowns of
businesses, including used vehicle auctions.
DBRS Morningstar will seek to complete its assessment and remove
the ratings from Under Review status as soon as appropriate. Upon
the resolution of the Under Review with Developing Implications
status, DBRS Morningstar may upgrade, confirm, or downgrade the
ratings on the affected classes. Upon the resolution of the Under
Review with Negative Implications status, DBRS Morningstar may
confirm or downgrade the ratings on the affected classes.
Notes: All figures are in U.S. dollars unless otherwise noted.
HIN TIMESHARE 2020-A: Fitch Affirms B Rating on Class E Tranche
---------------------------------------------------------------
Fitch Ratings has removed Orange Lake Timeshare Trust 2019-A's
classes C and D from Rating Watch Negative due to stabilizing asset
performance. In addition, Fitch Ratings has affirmed all the
outstanding ratings of Orange Lake Timeshare Trust series 2015-A,
2016-A, 2018-A and 2019-A and HIN Timeshare Trust (HINTT) 2020-A.
Fitch notes that across all the aforementioned transactions, the
seller has exercised the option to repurchase and substitute all
defaults, resulting in zero net losses to date.
The social and market disruption caused by the coronavirus pandemic
and related containment measures have negatively affected the U.S.
economy. To account for the potential impact on the outstanding
transactions, Fitch incorporated conservative assumptions in
deriving a base case cumulative gross default (CGD) proxy for each
trust. The analysis conservatively adjusted proxies to reflect
recent CGD performance. The sensitivity of the ratings to scenarios
more severe than currently expected is provided in the Rating
Sensitivities section.
DEBT RATING PRIOR
---- ------ -----
Orange Lake Timeshare Trust 2015-A
A 68504TAA2 LT Asf Affirmed Asf
B 68504TAB0 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2016-A
A 68504LAA9 LT Asf Affirmed Asf
B 68504LAB7 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2018-A
A 68504WAA5 LT AAAsf Affirmed AAAsf
B 68504WAB3 LT Asf Affirmed Asf
C 68504WAC1 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2019-A
A 68504UAA9 LT AAAsf Affirmed AAAsf
B 68504UAB7 LT Asf Affirmed Asf
C 68504UAC5 LT BBBsf Affirmed BBBsf
D 68504UAD3 LT BBsf Affirmed BBsf
HIN Timeshare Trust 2020-A
A 40439HAA7 LT AAAsf Affirmed AAAsf
B 40439HAB5 LT Asf Affirmed Asf
C 40439HAC3 LT BBBsf Affirmed BBBsf
D 40439HAD1 LT BBsf Affirmed BBsf
E 40439HAE9 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
The affirmation of the notes reflects loss coverage levels
consistent with their current ratings. The Stable Outlook for all
classes of notes reflects Fitch's expectation that loss coverage
levels will remain supportive of these ratings.
To date, each transaction has performed weaker than Fitch's initial
expectations, with high delinquencies and high default rates. As of
the March 2021 collection, adjusted for cumulative gross defaults
(CGD's) for 2015-A, 2016-A, 2018-A, 2019-A, and HINTT 2020-A, are
currently at 18.98%, 21.83%, 19.60% 19.69%, and 3.80%,
respectively. Due to optional repurchases and substitutions by the
seller, none of the transactions have experienced a net loss to
date.
While CGD's in 2019-A continue to remain elevated and above Fitch's
initial base case proxy, default pace has declined or stabilized
across all outstanding transactions. Given the more stable
performance trends and positive signs within the travel and tourism
industries that are highly correlated with timeshare ABS, all
outstanding notes in 2019-A have been affirmed (and Outlooks remain
Stable) for classes A and B. Additionally, the Rating Watch
Negative has been removed and Stable Outlooks assigned.
Due to the uncertainty surrounding the coronavirus pandemic, Fitch
has made assumptions about the spread of coronavirus and the
related containment measures. As a base scenario, Fitch assumes a
global recession in 1H20 and subsequent activity bounce in 2H20 are
followed by a slower recovery in 2021. However, GDP is expected to
reach pre-pandemic levels in 2021. To account for the potential
impact on the outstanding transactions, Fitch incorporated
conservative assumptions in deriving a base case CGD proxy for each
trust. The analysis focused on peak extrapolations as a starting
point and making adjustments based on amortization levels and more
recent CGD performance.
Timeshare ABS in particular have experienced weaker asset
performance in the near term, as the sector is highly correlated to
tourism and travel, which has been affected by the pandemic, as
evidenced by the decline in occupancy rates at timeshare resorts.
This could result in increases in delinquencies and defaults as
owners are unable or unwilling to vacation at timeshare resorts.
However, occupancy rates have improved since spring 2020 when
occupancy rates were down significantly.
The near-term factors that may shield timeshare ABS asset
performance including the following: a number of drives to
destinations; the timeshare product viewed as a long-term
commitment and an owned product; owners having the ability to bank
their points and book vacations at a later date; the overall
monthly payment being smaller relative to other borrower
obligations; and maintenance fees, which are typically the largest
monthly payment, paid annually.
To account for potential increases in delinquencies and defaults,
Fitch maintained the lifetime CGD proxies from the prior review for
2015- A, 2016-A, 2018-A, 2019-A and HINTT 2020-A at 22.00%, 24.50%,
25.00%, 30.00%, and 24.00%. The revised base case proxies represent
an increase from the initial base proxies of 19.70%, 18.00%,
17.60%, 21.50% for 2015-A, 2016-A, 2018-A, and 2019-A
respectively.
For 2019-A, the base case proxy was maintained at 30.00% in the
prior analysis, to reflect the decreasing pace of defaults over the
past six months. The base case default proxies were derived
utilizing extrapolations for each transaction to account for the
defaults, due to negative pandemic-related impacts, and to reflect
Fitch's updated baseline scenarios. The proxies were also
influenced by downside scenario sensitivities (2x the updated CGD
proxies). These include pool factor and timing curve
extrapolations, as well as comparing more recent performance with
2006-2009 recessionary vintages.
In certain cases, several updated extrapolations were higher than
the final revised CGD proxies. However, Fitch's analysis does not
give explicit credit to previously repurchased defaults, resulting
in zero losses on the outstanding transactions. In effect,
considering previously repurchased defaults, the lifetime CGDs are
materially lower than the revised CGD proxies. As such, Fitch
believes the measured increase in the revised CGD proxies is
appropriately conservative and accounts for the weaker performance
trends. The ratings' sensitivity to scenarios more severe than the
currently expected is provided in the Rating Sensitivities section
below.
Under Fitch's stressed cash flow assumptions, loss coverage for the
2015-A class A and B notes falls slightly short of the 2.50x and
1.75x multiples for 'Asf' and 'BBBsf'. The shortfalls are
considered marginal, and are within the multiples range for the
current ratings, given these transaction's significant level of
amortization. Under Fitch's stressed cash flow assumptions, loss
coverage for the 2016-A class A and B notes are above the 2.50x and
1.75x multiples for 'Asf' and 'BBBsf'.
For the 2018-A, 2019-A, 2020-A transactions, Fitch maintained its
rating multiples at 3.00x, 2.25x, 1.50x, and 1.25x for 'AAAsf',
'Asf', 'BBBsf', and 'BBsf', respectively. Under Fitch's stressed
cash flow assumptions, loss coverage for the outstanding classes
for 2018-A, 2019-A, and 2020-A are above the recommended
multiples.
The ratings also reflect the quality of Orange Lake Country Club,
Inc. timeshare receivable originations, the sound financial and
legal structure of the transactions, and the strength of the
servicing provided by Orange Lake Country Club, Inc. Fitch will
continue to monitor economic conditions and their impact as they
relate to timeshare asset backed securities and the trust level
performance variables and update the ratings accordingly.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch applied an up sensitivity by reducing the base case
proxy by 20%. The impact of reducing the proxies by 20% from
the recommended proxies could result in one category upgrade
or affirmations of ratings with stronger multiples.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Conversely, unanticipated increases in the frequency of
defaults could produce default levels higher than the
projected base case default proxy and impact available loss
coverage and multiples levels for the transactions.
-- Fitch ran a down sensitivity for each transaction that would
raise the CGD proxy by 2x the current proxy. This is extremely
stressful to the transactions and could result in downgrades
of up to one or two 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.
INSTITUTIONAL MORTGAGE 2012-2: DBRS Confirms B(low) on G Certs
--------------------------------------------------------------
DBRS, Inc. confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates issued by Institutional Mortgage
Securities Canada Inc., Series 2012-2 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (sf)
-- Class XC at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
The Negative trends on Classes F and G reflect the ongoing
uncertainty surrounding the resolution of the Center 1000 loan,
which represents 9.0% of the pool and is in special servicing.
transferred to special servicing at the time, shortly after the
borrower's bankruptcy protection filing. In March 2020, DBRS
Morningstar placed Class XC Under Review with Negative Implications
as well. DBRS Morningstar maintained the Under Review with Negative
Implications status for those
All other trends are Stable. Classes D, E, F, and G were initially
placed Under Review with Negative Implications in December 2019 due
to concerns surrounding the same loan, which had just five classes
through the following 15 months as the special servicer obtained
new information and court proceedings progressed. An updated
appraisal as well as the relatively recent sale of a similarly
located property in Calgary suggest the increased stress on Classes
F and G remains, justifying the Negative trends. The Under Review
with Negative Implications status for the five classes has been
removed with this review.
The Centre 1000 loan is secured by a Class B office building in
suburban Calgary. According to the servicer, the court has granted
approval for the receiver to list and sell the property, with a
resolution targeted by the end of 2021. The property was appraised
at $9.2 million as of August 2020, slightly below the current
outstanding loan balance of $9.5 million. While the sponsor
provides partial recourse of $3.1 million, the enforceability of
that guarantee is unknown given the likelihood the sponsor's
financial situation has significantly deteriorated since issuance
and again amid the ongoing Coronavirus Disease (COVID-19) pandemic.
As a result of declining market conditions and overall lack of
demand for suburban Calgary offices, DBRS Morningstar has assumed a
stressed property valuation in its analysis and is projecting a
realized loss to the trust upon resolution.
As of the March 2021 remittance, there has been collateral
reduction of 56.2%, as 12 of the original 31 loans remain in the
trust. Two loans, representing 28.5% of the pool, are defeased.
There are currently four loans on the servicer's watchlist,
representing 41.7% of the pool balance, including the largest and
fourth-largest loans in the transaction, both of which are secured
by multifamily properties in Alberta.
The Cedars Apartments loan (Prospectus ID#1; 17.4% of the pool) is
secured by a property in the Acadia neighborhood of Calgary and has
recently struggled with minor declines in occupancy and rental
revenue, while the Lakewood Apartments loan (Prospectus ID#3; 10.0%
of the pool) is secured by a property in Fort McMurray, which has
suffered from significant declines in occupancy and rental revenue
for several years as the loan has been modified and the borrower
has received a forbearance. While the borrower is complying with
all terms of the forbearance, the loan has increased credit risk
given the borrower's weakened financial condition and the lack of
demand for rental housing in the Wood Buffalo region.
Notes: All figures are in Canadian dollars unless otherwise noted.
INSTITUTIONAL MORTGAGE 2013-3: DBRS Confirms B Rating on F Certs
----------------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates Series 2013-3 issued
by Institutional Mortgage Securities Canada Inc., Series 2013-3:
-- Class A-3 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class X at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)
Classes X, D, E, F, and G were removed from Under Review with
Negative Implications where they were most recently affirmed on
September 18, 2020. With these rating actions, Classes X, E, F, and
G now carry Negative trends because of the concerns and uncertainty
surrounding the two loans now in special servicing as a result of
the Strategic Group's bankruptcy filing in 2019. In addition, the
Negative trends are reflective of the increased risks for the three
loans backed by apartment properties in Fort McMurray, Alberta. All
other trends are Stable.
The rating confirmations and Stable trends on the ratings higher in
the capital stack reflect the overall stable performance of those
loans not currently in special servicing or backed by properties in
Fort McMurray as well as the substantial paydown of the transaction
since issuance, which has increased credit support for those bonds.
At issuance, the trust was secured by 38 loans at the original
trust balance of $250.0 million. Per the February 2021 remittance,
22 loans remain in the trust at the current balance of $91.5
million, representing a collateral reduction of 63.5% since
issuance as a result of loan repayment and scheduled loan
amortization. Two loans, representing 15.0% of the pool, are in
special servicing and five loans, representing 26.4% of the pool,
are on the servicer's watchlist.
The largest loan in special servicing, Deerfoot Court (Prospectus
ID#5; 9.0% of the pool), is secured by a 76,000-square-foot (sf)
Class B mid-rise office property in Northeast Calgary,
approximately nine kilometers from the Calgary central business
district (CBD). The loan transferred to special servicing in
January 2020 following the borrower's bankruptcy filing. The
borrower is an affiliate of the Strategic Group. The receiver is
working to lease vacant space at the property as part of a plan to
work toward an eventual sale. The February 2021 rent roll showed a
leased rate of approximately 62.0%, down significantly from the
occupancy rate of 97.5% at January 2020. The risk of increased
vacancy is noteworthy as tenants representing 11.0% of the net
rental area (NRA) have leases expiring within the next year. The
servicer obtained an updated appraisal dated August 2020 that
showed an as-is value of $7.5 million, down from the first
appraisal obtained by the special servicer that showed a $9.5
million value as of February 2020 and well below the issuance value
of $15.8 million. The value decline is reflective of the
challenging market in Calgary, where sustained low oil prices have
contributed to significant increases in vacancy rates throughout
the city. In its Q4 2020 market outlook, CBRE noted the suburban
Calgary office vacancy rate at 22.0%.
The second loan in special servicing, Airways Business Plaza
(Prospectus ID#12; 6.0% of the pool), is included in the same
bankruptcy filing from the Strategic Group as the Deerfoot Court
loan. This loan's collateral is a 65,000-sf suburban office
building, located approximately 13 kilometers south of Calgary
International Airport. A receiver is in place at this property and
the servicer is pursuing a lease up and eventual sale for this
asset as well. As of the February 2021 rent roll, the subject is
70.0% occupied with a minimal 6.0% of NRA rollover risk in the next
12 months. The servicer has obtained two updated appraisals for the
property since the transfer to special servicing, with the most
recent in August 2020 when the property's as-is value was estimated
at $8.9 million, down from the $10 million valuation in February
2020 and the issuance value of $12.0 million. Based on the most
recent appraisal, the loan has an as-is loan-to-value ratio of
62.1%.
The most worrisome loans on the servicer's watchlist are the three
secured by multifamily properties located in Fort McMurray,
including Lunar and Whimbrel Apartments (Prospectus ID#10; 5.2% of
the pool), Snowbird and Skyview Apartments (Prospectus ID#11; 4.9%
of the pool), and Parkland and Gannet Apartments (Prospectus ID#17;
4.2% of the pool). All three properties are located within the Fort
McMurray CBD and are of older construction, but all had
historically maintained high occupancy rates and rents prior to the
ongoing downturn in the oil and gas industry that began in late
2014. The sponsor for all three loans, an affiliate of Lanesborough
REIT, has worked with the servicer several times to paper loan
modifications that allowed for various forms of payment relief and
extensions to the maturity date and, as of the February 2021
remittance, the loan is reported current. Two of the three
complexes were affected by area flooding and are currently under
repair. The third property, Parkland and Gannet, has remained open
and has absorbed some of the tenancy from the other two buildings,
ending the year with an occupancy rate of 94.5% as of December
2020. Although the sponsor remains current on its obligations for
these loans, the increased risk to the trust from the lower rental
and occupancy rates maintained for the last five years is
indicative of significantly increased risks from issuance.
Notes: All figures are in Canadian dollars unless otherwise noted.
IVY HILL XVIII: S&P Assigns BB- (sf) Rating on $30MM Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Ivy Hill Middle Market
Credit Fund XVIII Ltd./Ivy Hill Middle Market Credit Fund XVIII
LLC's floating- and fixed-rate notes.
The note issuance is a CLO transaction backed primarily by middle
market speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Ivy Hill Middle Market Credit Fund XVIII Ltd./Ivy Hill Middle
Market Credit Fund XVIII LLC
Class A, $282.5 million: AAA (sf)
Class B-1, $45.0 million: AA (sf)
Class B-2, $20.0 million: AA (sf)
Class C, $37.5 million: A- (sf)
Class D, $22.5 million: BBB- (sf)
Class E, $30.0 million: BB- (sf)
Subordinated notes, $60.0 million: Not rated
JP MORGAN 2010-C2: S&P Lowers Class H Certs Rating to 'D (sf)'
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class C, D, E, F, G,
and H commercial mortgage pass-through certificates from J.P.
Morgan Chase Commercial Mortgage Securities Trust 2010-C2, a U.S.
CMBS transaction. At the same time, S&P affirmed its ratings on
classes A-3, B, and X-A from the same transaction.
The downgrades on classes C through H reflect their susceptibility
to reduced liquidity support or liquidity interruption from the
four specially serviced loans in the pool totaling $151.9 million
(51.2% of the pool balance): Greece Ridge Center ($62.2 million,
21.0%), Bryan Tower ($58.4 million, 19.7%), Valley View Mall ($26.6
million, 9.0%), and Park Place One ($4.7 million, 1.5%) (see
details below).
S&P said, "While the model-indicated ratings on classes C, D, and E
were higher than their current rating levels, we lowered our
ratings on these classes because we considered the possibility for
reduced liquidity support from the specially serviced loans. This
includes the potential for the master servicer to deem some or all
of the remaining specially serviced loans nonrecoverable.
Specifically, for class E, we lowered our rating to 'CCC (sf)'
because we believe that with reported appraisal reduction amounts
(ARAs) totaling $33.5 million on three ($93.5 million, 31.5%) of
the four specially serviced loans, the class is more susceptible to
liquidity interruption and the risk of default and losses have
increased. Classes C, D, and E are currently dependent on the
servicer's advances for their interest payments and the resolution
of the specially serviced loans for their principal repayments."
Further, the downgrades on classes F, G, and H to 'D (sf)' reflect
accumulated interest shortfalls that we expect to remain
outstanding in the foreseeable future. These classes had
accumulated interest shortfalls outstanding for three consecutive
months. According to the April 16, 2021, trustee remittance report,
the trust incurred $59,797 in monthly interest shortfalls due
primarily to appraisal subordinate entitlement reduction amounts of
$16,131 and special servicing and workout fees of $42,983.
S&P said, "The affirmations on classes A-3 and B reflect our view
that the current ratings are generally in line with the
model-indicated ratings.
"We affirmed our 'AAA (sf)' rating on the class X-A interest-only
(IO) certificates based on our criteria for rating IO securities,
in which the rating on the IO security would not be higher than
that of the lowest-rated reference class. The notional amount on
class X-A references classes A-1, A-2, and A-3."
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."
Transaction Summary
As of the April 2021 trustee remittance report, the collateral pool
balance was $296.5 million, which is 26.9% of the pool balance at
issuance. The pool currently includes five loans down from 30 loans
at issuance. Four of these loans are with the special servicer,
Greystone Servicing Co. LLC (Greystone), and one (Arizona Mills;
$144.6 million, 48.8%) is on the master servicer's watchlist.
The Arizona Mills loan, the largest loan in the pool, is secured by
a 1.2 million-sq.-ft. regional mall in Tempe, Ariz. The loan
transferred to the special servicer in May 2020 due to imminent
default because the borrower was unable to refinance the loan upon
its original July 1, 2020, maturity date. The loan was subsequently
modified, which included extending the loan's maturity date to July
1, 2021. The loan is on the master servicer's watchlist due to the
upcoming maturity date. The loan has a reported debt service
coverage (DSC) of 2.00x for the nine months ended Sept. 30, 2020.
S&P calculated a 1.51x S&P Global Ratings weighted average DSC and
84.4% S&P Global Ratings weighted average loan-to-value (LTV) ratio
using a 10.05% S&P Global Ratings weighted average capitalization
rate for the Arizona Mills and Greece Ridge Center loans.
To date, the transaction has not experienced any principal losses.
S&P said, "We expect losses to reach approximately 2.1% of the
original pool trust balance in the near term based on losses we
expect upon the eventual resolution of three ($89.7 million, 30.2%)
of the four specially serviced loans."
Credit Considerations
As of the April 2021 trustee remittance report, four loans in the
pool were with the special servicer, Greystone.
The Greece Ridge Center loan is the second-largest loan in the pool
and the largest loan with the special servicer. It has a total
reported exposure of $62.7 million and is secured by 1.0 million
sq. ft. of a 1.6 million-sq.-ft. regional mall in Greece, N.Y. The
loan has a nonperforming matured balloon payment status and was
transferred to the special servicer on Nov. 15, 2019, at the
borrower's request. The borrower requested for noteholders' consent
to pay off the loan early with certain terms waived. However, due
to the COVID-19 pandemic, the borrower has been delinquent on its
debt service payments since May 2020 and was not able to refinance
the loan upon its Oct. 1, 2020, maturity date. An $18.9 million ARA
is in effect against the loan. There is currently $4.0 million in
reserves. According to the special servicer, it is exploring
various resolution strategies with the borrower, including a loan
modification and extension. S&P said, Our analysis considered the
potential for the loan to return to the master servicer as a
corrected mortgage loan. Given the challenges that the retail mall
has faced and its volatile cash flow, we increased our
capitalization rate to 12.50% from 9.75% in the August 2020 full
review. Using the S&P Global Ratings' net cash flow (NCF) of $5.9
million, unchanged from last review, our analysis yielded an S&P
Global Ratings' LTV ratio exceeding 100%."
The Bryan Tower loan is secured by a 40-story, 1.1 million-sq.-ft.
office property located in Dallas. The loan, which has a
foreclosure-in-progress payment status, has a reported exposure of
$58.8 million and was transferred to the special servicer on July
30, 2020, due to imminent maturity default. The loan matured on
Oct. 1, 2020. According to the October 2020 rent roll, the property
was 45.5% occupied. There is currently about $7.0 million in
reserves, including $5.0 million deposited in a rollover reserve
account upon former tenant, Baylor Healthcare (25.4% of the net
rentable area [NRA]), vacating in June 2020. Greystone indicated
that it is exploring various resolution strategies, including
foreclosure. S&P expects a minimal loss (less than 25%) upon the
eventual resolution of the loan.
The Valley View Mall loan is secured by 343,617 sq. ft. of a
598,213-sq.-ft. regional mall in La Crosse, Wis. The loan, which
has a reported foreclosure-in-progress payment status, has a
reported exposure of $27.0 million and was transferred to the
special servicer on April 16, 2020, due to imminent default. The
loan matured on July 1, 2020. According to the special servicer, a
receiver is in place at the property and is working on leasing up
the vacant space. The reported occupancy rate was 84.0% as of Jan.
31, 2021. In addition, HyVee Supermarket is expected to backfill
the former Sears space in late 2021. Greystone stated that it is
pursuing foreclosure. A $13.3 million ARA has been calculated by
the servicer for this loan. S&P expects a moderate loss (26%-59%)
upon the loan's eventual resolution.
The Park Place One loan is secured by a 95,073-sq.-ft. suburban
office building in Springfield, Ill. The loan, which has a
nonperforming matured balloon payment status, has a reported
exposure of $5.0 million and was transferred to the special
servicer on June 26, 2020, due to imminent default. The loan
matured on Aug. 1, 2020. The property was 50.0% occupied according
to the March 2020 rent roll. Leases expiring in 2022 include Sikich
(23,527 sq. ft.; 24.7% of NRA) and Morgan Stanley (5,012 sq. ft.;
5.3%). Greystone noted that it is exploring various resolution
strategies, including a potential purchase of the loan by an
unaffiliated party of one of the loan guarantors. A $1.3 million
ARA is in effect against the loan. S&P expects a significant loss
(60% or greater) upon the loan's eventual resolution.
S&P estimated losses for three of the four specially serviced
loans, arriving at a weighted-average loss severity of 26.2%.
Environmental, social, and governance (ESG) factors relevant to the
rating action:
-- Health and safety.
Ratings Lowered
J.P. Morgan Chase Commercial Mortgage Securities Trust 2010-C2
Class C to 'BB (sf)' from 'A+ (sf)'
Class D to 'B (sf)' from 'BBB- (sf)'
Class E to 'CCC (sf)' from 'B+ (sf)'
Class F to 'D (sf)' from 'CCC (sf)'
Class G to 'D (sf)' from 'CCC- (sf)'
Class H to 'D (sf)' from 'CCC- (sf)'
Ratings Affirmed
J.P. Morgan Chase Commercial Mortgage Securities Trust 2010-C2
Class A-3: AAA (sf)
Class B: AA+ (sf)
Class X-A: AAA (sf)
JP MORGAN 2012-C8: DBRS Confirms BB(sf) Rating on Class F Certs
---------------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2012-C8
issued by J.P. Morgan Chase Commercial Mortgage Securities Trust
2012-C8:
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class EC at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-B at B (high) (sf)
-- Class G at B (sf)
DBRS Morningstar removed Classes X-B and G from Under Review with
Negative Implications, where they were placed on August 6, 2020.
All trends are Stable, with the exception of Classes X-B and G,
which carry Negative trends.
The Negative trends are reflective of DBRS Morningstar's concerns
surrounding the larger watchlisted loans in the pool. As of the
February 2021 remittance, the initial trust balance of $1.1 billion
had been reduced by 39.7% to $685.5 million, with 29 of the
original 43 loans remaining in the pool. The transaction is
concentrated by property type, as 12 loans, representing 32.5% of
the pool, are secured by retail collateral. To date, there have
been no losses incurred to the trust, and, as of the February 2021
remittance, no loans were delinquent or in special servicing. The
pool benefits from a relatively large amount of defeasance, as four
loans, representing 18.6% of the pool, are fully defeased.
There are nine loans, representing 39.1% of the pool, being
monitored on the servicer's watchlist. These loans are generally
being monitored for low debt service coverage ratios (DSCRs) and
low occupancy. The Gallery at Harborplace loan (Prospectus ID#4,
10.2% of the pool) is the largest loan on the watchlist and is
secured by a mixed-use property consisting of office and retail
space in downtown Baltimore. The loan was added to the servicer's
watchlist in December 2020 after the loan reported an annualized Q3
2020 DSCR of 0.74 times (x) and an occupancy rate of 69.5%, a
decrease from the YE2019 DSCR of 1.29x and occupancy of 79%. The
property has been negatively affected by the Coronavirus Disease
(COVID-19) pandemic and the loss of several smaller retail tenants,
which has resulted in a 10% drop in occupancy in 2020. This has led
to a 13% decline in base rent and a 45% decline in other income in
comparison with YE2019 figures. The property's retail space is
highly dependent on foot traffic generated by other Inner Harbor
attractions like the National Aquarium, and a rebound in net cash
flow will be somewhat dependent on a rebound in tourism.
Hotel Sorella CityCentre (Prospectus ID#7, 6.3% of the pool) is the
largest hotel loan in the pool and was added to the servicer's
watchlist in July 2020 for low occupancy and a low DSCR as a result
of the coronavirus pandemic. The loan is secured by a boutique
luxury full-service hotel in Houston's Energy Corridor and has
historically relied on clientele from the oil and gas industry.
Despite the downturn in the oil industry, the loan had continued to
report a healthy DSCR before the pandemic, most recently with a
YE2019 DSCR of 1.45x (although net cash flow slightly lagged
issuance levels). The hotel has been severely affected by the
pandemic, reporting a Q2 2020 annualized DSCR of -0.15x. The loan
remains current as of the February 2021 remittance.
DBRS Morningstar remains concerned about the Ashford Office Complex
(Prospectus ID#5, 7.6% of the pool) and The Crossings (Prospectus
ID#9, 4.6% of the pool) loans. Both loans have been monitored on
the servicer's watchlist since 2018 for low occupancy and low
DSCRs. Ashford Office Complex is secured by three office buildings
in Houston's Energy Corridor and most recently reported a Q3 2020
annualized DSCR of 0.78x with an occupancy rate of 56%. The
Crossings is secured by an office property in Dallas. This loan
most recently reported a Q3 2020 annualized DSCR of 0.57x with an
occupancy rate of 58%. Both properties are in submarkets with
vacancy rates exceeding 20%. DBRS Morningstar analyzed all
previously mentioned loans with elevated probabilities of default
to reflect their current risk profiles.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2021-6: Fitch Assigns B(EXP) Rating on Class B-5 Debt
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings to JP Morgan Mortgage
Trust 2021-6 (JPMMT 2021-6).
DEBT RATING
---- ------
JPMMT 2021-6
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-3-A LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-A LT AAA(EXP)sf Expected Rating
A-4-X LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-A LT AAA(EXP)sf Expected Rating
A-5-X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-6-A LT AAA(EXP)sf Expected Rating
A-6-X LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-A LT AAA(EXP)sf Expected Rating
A-7-X LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-8-A LT AAA(EXP)sf Expected Rating
A-8-X LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-9-A LT AAA(EXP)sf Expected Rating
A-9-X LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-10-A LT AAA(EXP)sf Expected Rating
A-10-X LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-11-A LT AAA(EXP)sf Expected Rating
A-11-AI LT AAA(EXP)sf Expected Rating
A-11-B LT AAA(EXP)sf Expected Rating
A-11-BI 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-X-1 LT AAA(EXP)sf Expected Rating
A-X-2 LT AA(EXP)sf Expected Rating
A-X-3 LT AAA(EXP)sf Expected Rating
A-X-4 LT AAA(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-1-A LT AA-(EXP)sf Expected Rating
B-1-X LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-2-A LT A-(EXP)sf Expected Rating
B-2-X 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 1,673 loans with a total balance
of approximately $1.564 billion as of the cutoff date. The pool
consists of prime quality fixed-rate mortgages (FRMs) from various
mortgage originators. The servicers in the transactions consist of
JP Morgan Chase Bank and various other servicers. Nationstar
Mortgage LLC (Nationstar) will be the master servicer.
All of the loans qualify as either Safe Harbor Qualified Mortgages
(SHQM) or Agency Safe Harbor QM loans.
There is no exposure to LIBOR in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are fixed
rate based off of the net WAC, or floating/inverse floating rate
based off of the SOFR index, and capped at the net WAC. This is the
fifth Fitch-rated JPMMT transaction to use SOFR as the index rate
for floating/inverse floating-rate certificates.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The pool consists of very
high-quality 30-year, 25-year and 20-year fixed-rate fully
amortizing loans. All of the loans qualify as SHQM or Agency Safe
Harbor QM loans. The loans were made to borrowers with strong
credit profiles, relatively low leverage and large liquid reserves.
The loans are seasoned at an average of four months according to
Fitch (two months per the transaction documents). The pool has a
weighted average (WA) original FICO score of 779 (as determined by
Fitch), which is indicative of very high credit quality borrowers.
Approximately 87.3% of the loans have a borrower with an original
FICO score above 750. In addition, the original WA combined
loan-to-value ratio (CLTV) of 68.3%, translating to a sustainable
loan-to-value ratio (sLTV) of 73.7%, represents substantial
borrower equity in the property and reduced default risk.
Non-conforming loans comprise 98.2% of the pool, while the
remaining 1.8% represents conforming loans. 100% of the loans are
designated as QM loans, with roughly 86.7% of the pool originated
by a retail channel.
Loans where the borrower maintains a primary residence comprise
90.8% of the pool, while 6.6% comprises second homes and 2.6%
represents non-permanent residences that were treated as investor
properties. Single-family homes comprise 91.9% of the pool, and
condominiums make up 7.0%. Cash-out refinances comprise 9.9% of the
pool, purchases comprise 33.4% and rate-term refinances comprise
56.7%.
A total of 519 loans in the pool are over $1 million, and the
largest loan is $2.74 million.
Fitch determined that 2.6% of the loans were made to foreign
nationals/non-permanent residents. These loans were treated as
investor-occupied to reflect the additional risk they may pose.
Geographic Concentration (Neutral): Approximately 41.0% of the pool
is concentrated in California. The largest MSA concentration is in
the San Francisco-Oakland-Fremont, CA MSA (13.9), followed by Los
Angeles-Long Beach-Santa Ana, CA MSA (10.6%), and the
Chicago-Naperville-Joliet, IL MSA (7.4%). The top three MSAs
account for 31.9% of the pool. As a result, there was no
probability of default (PD) penalty for geographic concentration.
Shifting Interest Structure (Mixed): 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 to 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.
CE Floor (Positive): A CE or senior subordination floor of 0.40%
has been considered to mitigate potential tail end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.300006% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
Updated Economic Risk Factor (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 coronavirus 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."
JPMMT 2021-6 has an ESG Relevance Score of '4' for Transaction
Parties and Operational Risk. Operational risk is well controlled
for in JPMMT 2021-6, including strong transaction due diligence as
well as an aggregator assessed as 'Above Average' by Fitch and an
'RPS1-' Fitch-rated servicer, which resulted in a reduction in
expected losses and is relevant to the rating.
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. 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 39.9% at 'AAA'. 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 positive home price growth of
10% with no assumed overvaluation. 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.
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 SitusAMC, Clayton, Digital Risk, and Opus Capital
Markets. The third-party due diligence described in Form 15E
focused on four areas: compliance review, credit review, valuation
review, and data integrity. Fitch considered this information in
its analysis and, as a result, Fitch did not make any adjustment(s)
to its analysis.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, Digital Risk, and Opus Capital Markets were
engaged to perform the review. Loans reviewed under this engagement
were given compliance, credit and valuation grades and assigned
initial grades for each subcategory. Minimal exceptions and waivers
were noted in the due diligence reports. Refer to the Third-Party
Due Diligence section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan-level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
JPMMT 2021-6 has an ESG Relevance Score of '4' for Transaction
Parties and Operational Risk. Operational risk is well controlled
for in JPMMT 2021-6, including strong transaction due diligence as
well as an aggregator assessed as 'Above Average' by Fitch and an
'RPS1-' Fitch-rated servicer, which resulted in a reduction in
expected losses and is relevant to the rating.
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 2021-6: Moody's Assigns (P)B3 Rating to Cl. B-5 Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 51
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust (JPMMT) 2021-6. The ratings range from
(P)Aaa (sf) to (P)B3 (sf).
JPMMT 2021-6 is the sixth prime jumbo transaction in 2021 issued by
J.P. Morgan Mortgage Acquisition Corporation (JPMMAC). Overall, the
credit quality of the mortgage loans backing this transaction is
similar to that of transactions issued by other prime issuers. The
pool has strong credit quality and consists of borrowers with high
FICO scores, low loan-to-value (LTV) ratios, high income, and
liquid cash reserves.
Similar to recent JPMMT transactions rated by us, Moody's consider
the overall servicing arrangement for this pool to be adequate
given the strong servicing arrangement of the servicers, as well as
the presence of a strong master servicer to oversee the servicers.
JPMMT 2021-6 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool. In
coding the cash flow, Moody's took into account the step-up
incentive servicing fee structure.
In this transaction, the Class A-11 notes' coupon is indexed to
SOFR. However, based on the transaction's structure, the particular
choice of benchmark has no credit impact. First, interest payments
to the notes, including the floating rate notes, are subject to the
net WAC cap, which prevents the floating rate notes from incurring
interest shortfalls as a result of increases in the benchmark index
above the fixed rates at which the assets bear interest. Second,
the shifting-interest structure pays all interest generated on the
assets to the bonds and does not provide for any excess spread.
Moody's base its provisional ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, Moody's assessments of the origination quality and
servicing arrangement, the strength of the third-party review (TPR)
and the representations and warranties (R&W) framework of the
transaction.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2021-6
Cl. A-1, Rating Assigned (P)Aaa (sf)
Cl. A-2, Rating Assigned (P)Aaa (sf)
Cl. A-3, Rating Assigned (P)Aaa (sf)
Cl. A-3-A, Rating Assigned (P)Aaa (sf)
Cl. A-3-X*, Rating Assigned (P)Aaa (sf)
Cl. A-4, Rating Assigned (P)Aaa (sf)
Cl. A-4-A, Rating Assigned (P)Aaa (sf)
Cl. A-4-X*, Rating Assigned (P)Aaa (sf)
Cl. A-5, Rating Assigned (P)Aaa (sf)
Cl. A-5-A, Rating Assigned (P)Aaa (sf)
Cl. A-5-X*, Rating Assigned (P)Aaa (sf)
Cl. A-6, Rating Assigned (P)Aaa (sf)
Cl. A-6-A, Rating Assigned (P)Aaa (sf)
Cl. A-6-X*, Rating Assigned (P)Aaa (sf)
Cl. A-7, Rating Assigned (P)Aaa (sf)
Cl. A-7-A, Rating Assigned (P)Aaa (sf)
Cl. A-7-X*, Rating Assigned (P)Aaa (sf)
Cl. A-8, Rating Assigned (P)Aaa (sf)
Cl. A-8-A, Rating Assigned (P)Aaa (sf)
Cl. A-8-X*, Rating Assigned (P)Aaa (sf)
Cl. A-9, Rating Assigned (P)Aaa (sf)
Cl. A-9-A, Rating Assigned (P)Aaa (sf)
Cl. A-9-X*, Rating Assigned (P)Aaa (sf)
Cl. A-10, Rating Assigned (P)Aaa (sf)
Cl. A-10-A, Rating Assigned (P)Aaa (sf)
Cl. A-10-X*, Rating Assigned (P)Aaa (sf)
Cl. A-11, Rating Assigned (P)Aaa (sf)
Cl. A-11-X*, Rating Assigned (P)Aaa (sf)
Cl. A-11-A, Rating Assigned (P)Aaa (sf)
Cl. A-11-AI*, Rating Assigned (P)Aaa (sf)
Cl. A-11-B, Rating Assigned (P)Aaa (sf)
Cl. A-11-BI*, Rating Assigned (P)Aaa (sf)
Cl. A-12, Rating Assigned (P)Aaa (sf)
Cl. A-13, Rating Assigned (P)Aaa (sf)
Cl. A-14, Rating Assigned (P)Aaa (sf)
Cl. A-15, Rating Assigned (P)Aaa (sf)
Cl. A-16, Rating Assigned (P)Aaa (sf)
Cl. A-17, Rating Assigned (P)Aaa (sf)
Cl. A-X-1*, Rating Assigned (P)Aaa (sf)
Cl. A-X-2*, Rating Assigned (P)Aaa (sf)
Cl. A-X-3*, Rating Assigned (P)Aaa (sf)
Cl. A-X-4*, Rating Assigned (P)Aaa (sf)
Cl. B-1, Rating Assigned (P)Aa3 (sf)
Cl. B-1-A, Rating Assigned (P)Aa3 (sf)
Cl. B-1-X*, Rating Assigned (P)Aa3 (sf)
Cl. B-2, Rating Assigned (P)A3 (sf)
Cl. B-2-A, Rating Assigned (P)A3 (sf)
Cl. B-2-X*, Rating Assigned (P)A3 (sf)
Cl. B-3, Rating Assigned (P)Baa3 (sf)
Cl. B-4, Rating Assigned (P)Ba3 (sf)
Cl. B-5, Rating Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Moody's expected loss for this pool in a baseline scenario-mean is
0.28%, in a baseline scenario-median is 0.14%, and reaches 2.70% at
a stress level consistent with Moody's Aaa ratings.
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 consumer assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's increased its model-derived median expected losses by
10.00% (6.27% for the mean) and Moody's Aaa loss by 2.50% to
reflect the likely performance deterioration resulting from the
slowdown in US economic activity due to the coronavirus outbreak.
These adjustments are lower than the 15% median expected loss and
5% Aaa loss adjustments Moody's made on pools from deals issued
after the onset of the pandemic until February 2021. Moody's
reduced adjustments reflect the fact that the loan pool in this
deal does not contain any loans to borrowers who are not currently
making payments. For newly originated loans, post-COVID
underwriting takes into account the impact of the pandemic on a
borrower's ability to repay the mortgage. For seasoned loans, as
time passes, the likelihood that borrowers who have continued to
make payments throughout the pandemic will now become non-cash
flowing due to COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Collateral Description
Moody's assessed the collateral pool as of April 1, 2021, the
cut-off date. The deal will be backed by 1,673 fully-amortizing
fixed-rate mortgage loans with an aggregate unpaid principal
balance (UPB) of $1,564,278,923 and an original term to maturity of
up to 30 years. The pool consists predominantly of prime jumbo
non-conforming (98.2%) and GSE-eligible conforming (1.8% by UPB)
mortgage loans. The borrowers have high monthly income (about
$30,874 on a WA basis), and significant liquid cash reserve (about
$422,143 on a WA basis), all of which have been verified as part of
the underwriting process and reviewed by the third-party review
firms. The GSE-eligible loans, which make up about 1.8% of the
JPMMT 2021-6 pool by loan balance, were underwritten pursuant to
GSE guidelines and were approved by DU/LP.
About 41.0% of the mortgage loans (by balance) were originated in
California which includes metropolitan statistical areas (MSAs) San
Francisco (13.9%) and Los Angeles (10.6%). The high geographic
concentration in high-cost MSAs is reflected in the high average
balance of the pool ($935,014). All the mortgage loans are
designated as safe harbor Qualified Mortgages (QM) and meet
Appendix Q to the QM rules.
Overall, the characteristics of the mortgage loans underlying the
pool are generally comparable to those of other JPMMT transactions
backed by prime mortgage loans that Moody's have rated.
As of the cut-off date, none of the borrowers of the mortgage loans
are currently subject to a forbearance plan or are in the process
of being subject to a forbearance plan, including as a result of
COVID-19. In the event a borrower enters into a forbearance plan,
including as a result of COVID-19, after the cut-off date, such
mortgage loan will remain in the pool.
Aggregation/Origination Quality
Moody's consider JPMMAC's aggregation platform to be adequate and
Moody's did not apply a separate loss-level adjustment for
aggregation quality. In addition to reviewing JPMMAC as an
aggregator, Moody's have also reviewed the originator(s)
contributing a significant percentage of the collateral pool (above
10%) and MAXEX Clearing LLC (an aggregator).
Guaranteed Rate (Guaranteed Rate Inc, Guaranteed Rate Affinity and
Proper Rate) and loanDepot.com, LLC originated approximately 23.1%
and 14.4% of the mortgage loans (by UPB) in the pool, respectively.
The remaining originators each account for less than 10.0% (by UPB)
of the loans in the pool. Approximately 33.7% and 1.0% (by UPB) of
the mortgage loans were acquired by JPMMAC from MAXEX and Verus
Mortgage Trust 1A (collectively, aggregators), respectively, which
purchased such mortgage loans from the related originators or from
an unaffiliated third party which directly or indirectly purchased
such mortgage loans from the related originators.
Moody's did not make an adjustment for GSE-eligible loans, since
those loans were underwritten in accordance with GSE guidelines.
Moody's increased Moody's base case and Aaa loss expectations for
certain originators of non-conforming loans where Moody's do not
have clear insight into the underwriting practices, quality control
and credit risk management.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate given the strong servicing arrangement of the
servicers, as well as the presence of a strong master servicer to
oversee the servicers. NewRez LLC f/k/a New Penn Financial, LLC
d/b/a Shellpoint Mortgage Servicing (Shellpoint) will interim
service approximately about 85.0%, loanDepot.com, LLC (loanDepot)
will service about 14.4% (subserviced by Cenlar, FSB) and United
Wholesale Mortgage, LLC (UWM) will service about 0.6% (also
subserviced by Cenlar, FSB). Nationstar Mortgage LLC (Nationstar
Mortgage Holdings Inc. corporate family rating B2) will act as the
master servicer.
The servicers are required to advance P&I on the mortgage loans. To
the extent that the servicers are unable to do so, the master
servicer will be obligated to make such advances. In the event that
the master servicer, Nationstar, is unable to make such advances,
the securities administrator, Citibank, N.A. (rated Aa3) will be
obligated to do so to the extent such advance is determined by the
securities administrator to be recoverable. The servicing fee for
loans in this transaction will be based on a step-up incentive fee
structure with a monthly base fee of $40 per loan and additional
fees for delinquent or defaulted loans.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The TPR
results confirm compliance with the originator's underwriting
guidelines for the vast majority of loans, no material regulatory
compliance issues, and no material property valuation issues. The
loans that had exceptions to the originator's underwriting
guidelines had significant compensating factors that were
documented.
There are 19 loans (1.2% by UPB) that have an exterior-only
appraisal due to COVID-19, instead of full appraisal. Since the
exterior-only appraisal only covers the outside of the property
there is a risk that the property condition cannot be verified to
the same extent had the appraiser been provided access to the
interior of the home. Also, four (4) loans representing 0.1% (by
UPB) are appraisal waiver loans. These loans do not have a
traditional appraisal but instead an estimate of value or sales
price is provided, typically, by the seller. . All of the exterior-
only appraisal loans have a collateral desk appraisal (CDA) within
an acceptable tolerance limit. All of the appraisal waiver loans
were supported within acceptable tolerance limits using both an
automatic valuation model (AVM) and a 2055 exterior only product.
Moody's took this into consideration in Moody's analysis to account
for the risk associated with such mortgage loans.
R&W Framework
Moody's review of the R&W framework takes into account the
financial strength of the R&W providers, scope of R&Ws (including
qualifiers and sunsets) and enforcement mechanisms. JPMMT 2021-6's
R&W framework is in line with that of other JPMMT transactions
Moody's have rated where an independent reviewer is named at
closing, and costs and manner of review are clearly outlined at
issuance. The loan-level R&Ws meet or exceed the baseline set of
credit-neutral R&Ws Moody's have identified for US RMBS. The R&W
framework is "prescriptive", whereby the transaction documents set
forth detailed tests for each R&W. The originators and the
aggregators each makes a comprehensive set of R&Ws for their loans.
The creditworthiness of the R&W provider determines the probability
that the R&W provider will be available and have the financial
strength to repurchase defective loans upon identifying a breach.
JPMMAC does not backstop the originator R&Ws, except for certain
"gap" R&Ws covering the period from the date as of which such R&W
is made by an originator or an aggregator, respectively, to the
cut-off date or closing date. Moody's made adjustments to Moody's
losses for such R&W providers that are unrated and/or financially
weaker entities.
Transaction Structure
The transaction has a shifting interest structure in which the
senior bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the senior
bonds. Next, available distribution amounts are used to reimburse
realized losses and certificate write-down amounts for the senior
bonds (after subordinate bonds have been reduced to zero i.e. the
credit support depletion date). Finally, interest and then
principal payments are paid to the subordinate bonds in sequential
order. Realized losses are allocated in a reverse sequential order,
first to the lowest subordinate bond. After the balance of the
subordinate bonds is written off, losses from the pool begin to
write off the principal balance of the senior support bond, and
finally losses are allocated to the super senior bonds.
The Class A-11 Certificates will have a pass-through rate that will
vary directly with the SOFR rate and the Class A-11-X Certificates
will have a pass-through rate that will vary inversely with the
SOFR rate.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinate bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinate bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 0.40% of the cut-off date pool
balance, and as subordination lock-out amount of 0.30% of the
cut-off date pool balance. Moody's calculate the credit neutral
floors for a given target rating as shown in Moody's principal
methodology. The senior subordination floor is equal to an amount
which is the sum of the balance of the six largest loans at closing
multiplied by the higher of their corresponding MILAN Aaa severity
or a 35% severity.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
JP MORGAN 2021-MHC: Moody's Assigns B3 Rating to Class F Certs
--------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to seven
of CMBS securities, issued by J.P. Morgan Chase Commercial Mortgage
Securities Trust 2021-MHC, Commercial Mortgage Pass-Through
Certificates, Series 2021-MHC:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B3 (sf)
Cl. X-CP*, Definitive Rating Assigned A3 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by a single, floating-rate loan
secured by the borrower's fee simple interest in a portfolio of 93
manufactured housing community ("MHC") properties, one self-storage
property, and the indirect equity interests in the entities that
own 1,504 community owned homes located across 13 states. Moody's
ratings are based on the credit quality of the loans and the
strength of the securitization structure.
The portfolio contains a total of 11,129 pads, which is comprised
of 10,897 manufactured housing ("MH") pads, 194 recreational
vehicle ("RV") pads, and 38 site built homes. The self-storage
property contains 136 units. There are 1,504 community owned homes,
which represent approximately 14% of the pads. Construction dates
for the communities range from 1920 to 2000, with a weighted
average year built of 1976.
The portfolio is diversified by region and property count. The
portfolio's largest property accounts for only 5.3% of allocated
loan amount ("ALA") and the top 10 properties account for 34.4% of
the ALA and 35.6% of NCF. In terms of regional diversity, the
portfolio is spread across 13 states and 29 markets. The top five
markets (Champaign, Dallas / Fort Worth, St. Louis, Austin, and
Omaha) account for 50.3% of NCF and 49.8% of ALA. Collectively,
these markets contain 5,488 pads (49.3% of the total portfolio
pads) across 41 properties.
Moody's approach to rating this transaction involved the
application of both Moody's Large Loan and Single Asset/Single
Borrower CMBS methodology and Moody's IO Rating methodology. The
rating approach for securities backed by a single loan compares the
credit risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The securitization consists of a single floating-rate,
interest-only, first lien mortgage loan with an outstanding cut-off
date principal balance of $488,620,000 (the "loan" or "mortgage
loan"). The mortgage loan has an initial two-year term, with three,
one-year extension options.
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.
The Moody's first-mortgage DSCR is 2.03x and Moody's first-mortgage
stressed DSCR (at a 9.25% constant) is 0.67x. Moody's DSCR is based
on Moody's assessment of the property's stabilized NCF.
The Moody's LTV ratio for the first-mortgage balance is 145.6%.
Taking into consideration the mezzanine loan of $40,000,000, the
total debt Moody's LTV would increase to 157.3%. Moody's analysis
did not underwrite any direct value associated to the community
owned homes. The Moody's LTV ratio is based on Moody's value.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The pool's weighted
average property quality grade is 2.47.
Notable strengths of the transaction include: granular portfolio,
acquisition by experienced MHC sponsor, recent capital
expenditures, and strong MHC fundamentals.
Notable concerns of the transaction include: the effects of the
coronavirus, high Moody's LTV, overall age of the portfolio,
Sponsor's first acquisition of properties located in certain
markets, certain credit negative loan structure and legal
features.
The principal methodology used in rating all classes except the
interest-only class was "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in September 2020.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
The coronavirus 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 the United States of America economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
JPMBB COMMERCIAL 2015-C31: DBRS Cuts Class F Certs Rating to CCC
----------------------------------------------------------------
DBRS Limited downgraded its ratings on four classes of Commercial
Mortgage Pass-Through Certificates, Series 2015-C31 issued by JPMBB
Commercial Mortgage Securities Trust 2015-C31 as follows:
-- Class D to BB (low) (sf) from BBB (low) (sf)
-- Class E to B (sf) from BB (low) (sf)
-- Class F to CCC (sf) from B (low) (sf)
-- Class X-D to BB (sf) from BBB (sf)
Classes D, E, F, and X-D were also removed from Under Review with
Negative Implications, where they were placed on August 6, 2020.
In addition, DBRS Morningstar confirmed the remaining classes as
follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)
Classes A-S, B, C, D, E, X-A, X-B, X-C, X-D, and EC have Negative
trends. The trends for all other classes are Stable, with the
exception of Class F, which has a rating that does not carry a
trend.
The rating downgrades and Negative trends are largely reflective of
increased risk of loss for the largest loan in the pool, Civic
Opera Building (Prospectus ID#1, 9.4% of the pool), as well as the
other loans currently in special servicing, which collectively
represent 13.7% of the pool.
As of the March 2021 remittance, 55 of the original 58 loans
remained in the pool, with scheduled amortization resulting in
collateral reduction of 11.6% since issuance. Seven loans are in
special servicing, and there are 16 loans representing 35.9% of the
pool balance on the servicer's watchlist, including three of the
largest five loans in the pool. Between the servicer's watchlist
and the loans in special servicing, seven of the 10 largest loans
in the pool are represented.
The Civic Opera Building loan is secured by an office building in
Chicago's West Loop District. The loan was transferred to special
servicing in June 2020 for imminent monetary default and, as of the
March 2021 remittance, was most recently paid in October 2020. The
trust loan is a pari passu portion of a $164.0 million whole loan
that was originated in 2015 and split between this transaction and
the JPMBB Commercial Mortgage Securities Trust 2015-C32
transaction, which is also rated by DBRS Morningstar. Although the
loan's transfer to special servicing has been attributed to the
effects of the Coronavirus Disease (COVID-19) pandemic, the
property has reported cash flow declines from issuance for most
years since the loan closed, with the most recent year-end figures
showing a debt service coverage ratio (DSCR) of 0.76 times (x),
with an occupancy rate of 80.0%. By Q2 2020, the annualized DSCR
had fallen to 0.69x and the occupancy rate was at 75.0%. At
issuance, the property was 92.0% occupied and the DBRS Morningstar
DSCR was 1.06x.
Although the tenancy is quite granular, with the largest tenant
representing only 6.9% of the net rentable area since issuance,
precipitous tenancy losses have resulted in a sustained low
occupancy rate for several years; the building's age (constructed
in 1929) and style bring some inherent challenges for leasing,
particularly in this area of Chicago, where a significant amount of
new supply has been delivered. Vacancy rates for most submarkets in
Chicago were ticking up prior to the coronavirus pandemic, and
those trends have recently been exacerbated with a glut of sublease
space that has been put on the market in the last year. Given the
sustained low coverage ratios and the challenges in leasing up the
vacant space and securing renewals for existing tenants, the risk
of loss to the trust for this loan has significantly increased from
issuance. In the analysis for this review, DBRS Morningstar assumed
a liquidation scenario based on a significant haircut to the
issuance value, resulting in a loss severity in excess of 40.0%.
The special servicer has not provided an updated appraisal, but
DBRS Morningstar anticipates that figure will come in well below
the issuance valuation of $220.0 million and could suggest an even
higher loss severity at resolution, supporting the Negative trends
through the Class E principal bond.
The largest loan on the servicer's watchlist, The Roosevelt New
Orleans Waldorf Astoria (Prospectus ID#2, 8.3% of the pool), is
secured by a 504-key full-service hotel in New Orleans and was
previously with the special servicer after a transfer in March 2020
as a result of the sponsor's coronavirus relief request. The
borrower ultimately received approval to obtain a Paycheck
Protection Program loan, and the relief request was withdrawn. The
loan has remained current through the stint in special servicing
and as of the March 2021 remittance. The servicer continues to
monitor the loan on the watchlist because of the low DSCR (0.66x)
reported for the trailing 12 months (T-12) ended December 31, 2020,
well below the 1.66x reported for the T-12 period ended December
31, 2019. Historically, the property has performed in line with to
slightly above issuance expectations, and, although the impact of
the coronavirus pandemic has introduced increased risk for this
loan, mitigating factors include the loan's current status and
location within New Orleans, which is well positioned to benefit
from a precipitous increase in leisure travel, as it is a drive or
short flight away for many parts of the country.
The third-largest loan in the pool, Sunbelt Portfolio (Prospectus
ID#3, 7.6% of the pool), is secured by a portfolio of three
cross-collateralized and cross-defaulted office buildings in
Birmingham, Alabama, and Columbia, South Carolina. This loan is
also a pari passu loan that has pieces in two DBRS
Morningstar-rated transactions, including the subject and the JPMBB
Commercial Mortgage Securities Trust 2015-C30 transaction. The loan
was placed on the servicer's watchlist in April 2020 because of
performance declines resulting from the loss of the portfolio's
former second-largest tenant, Wells Fargo, which vacated the Wells
Fargo Tower property in Birmingham at lease expiration in December
2019. A new tenant, Shipt Inc., took a portion of the Wells Fargo
space, and, as of the trailing nine months ended September 30,
2020, the portfolio reported an occupancy of 67.0% and the loan
reported a DSCR of 1.17x, compared with the YE2019 occupancy of
80.6% and DSCR of 1.28x. Given the sustained occupancy declines and
the headwinds amid the coronavirus pandemic for backfilling the
vacant space across the buildings, a probability of default penalty
was applied to increase the expected loss in the analysis for this
review.
DBRS Morningstar materially deviated from its North American CMBS
Insight Model when determining the ratings for Classes A-S, B, C,
and D, as the quantitative results suggested a lower rating. The
classes were assigned a Negative trend as a result of the general
direction of the quantitative results, which incorporated certain
elevated expected loss adjustments to loans in special servicing or
on the servicer's watchlist. The material deviations are based on
the uncertain loan-level event risk associated with the loans
currently in special servicing and on the servicer's watchlist.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMBB COMMERCIAL 2015-C32: DBRS Cuts Rating of 4 Certs Classes to C
-------------------------------------------------------------------
DBRS, Inc. downgraded its ratings on eight classes of Commercial
Mortgage Pass-Through Certificates, Series 2015-C32 issued by JPMBB
Commercial Mortgage Securities Trust 2015-C32 as follows:
-- Class X-B to AA (low) (sf) from AA (sf)
-- Class B to A (high) (sf) from AA (low) (sf)
-- Class C to CCC (sf) from A (low) (sf)
-- Class EC to CCC (sf) from A (low) (sf)
-- Class D to C (sf) from BBB (low) (sf)
-- Class E to C (sf) from BB (low) (sf)
-- Class F to C (sf) from B (sf)
-- Class G to C (sf) from B (low) (sf)
DBRS Morningstar also confirmed its ratings on the following
classes:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
DBRS Morningstar removed Classes C, D, E, F, G, and EC from Under
Review with Negative Implications, where they were placed on August
6, 2020. In addition, DBRS Morningstar discontinued its ratings on
Classes X-C and X-D as they reference classes with a CCC (sf) or
lower rating. All trends are Stable with the exception of Classes B
and X-B, which have Negative trends, and Classes C, D, E, F, G, and
EC, which have ratings that do not carry a trend. DBRS Morningstar
also designated Classes E, F, and G as having Interest in Arrears
because of ongoing shortfalls.
The downgrades and Negative trends are reflective of a loss
incurred by the trust since the last review, as well as anticipated
losses upon resolution of the transaction's specially serviced
loans, including the three largest loans in the pool.
As of the March 2021 remittance, the pool's balance had been
reduced to $874.5 million from $1.1 billion at issuance, resulting
from the payoff of 11 loans and scheduled amortization.
Additionally, the trust recorded its first loss in January 2021,
when the $25.0 million Hyatt Place Texas Portfolio loan, formerly
the 12th-largest loan in the pool, liquidated with a $4.0 million
loss.
Ten loans, representing 32.0% of the pool, are with the special
servicer and include the three largest loans in the pool: the $70.4
million Hilton Suites Chicago Miracle Mile loan; the $72.0 million
Civic Opera Building loan; and the $59.8 million Palmer House
Retail Shops loan. These loans account for more than 23% of the
current pool balance, and, as part of this analysis, DBRS
Morningstar assumed a liquidation scenario for all three loans from
the trust and expects significant losses upon their resolutions.
The Hilton Suites Chicago Miracle Mile loan (Prospectus ID#1, 8.1%
of the pool) is secured by a 345-room full-service hotel in
Chicago's Magnificent Mile district. The loan fell delinquent ahead
of its October 2020 maturity and was transferred to the special
servicer. The hotel's performance had been on a downward trend for
the past few years, with the most recent 12-month financials from
March 2020 reporting a debt service coverage ratio (DSCR) of 0.79
times (x) and $3.9 million in net cash flow, which represents a
48.5% decline from the issuer's underwritten level of $7.5 million.
Modification discussions have not been successful, and the special
servicer is pursuing its legal remedies. While an updated appraisal
has not been reported, DBRS Morningstar expects a significant loss
to the trust upon resolution.
The Civic Opera Building loan (Prospectus ID#2, 8.2% of the pool)
is secured by an office building in Chicago's West Loop District.
The loan was transferred to special servicing in June 2020 for
imminent monetary default and, as of the March 2021 remittance, was
most recently paid in October 2020. The trust loan is a pari passu
portion of a $164.0 million whole loan that was originated in 2015
and split between this transaction and the JPMBB Commercial
Mortgage Securities Trust 2015-C31 transaction, which is also rated
by DBRS Morningstar. Although the loan's transfer to special
servicing has been attributed to the effects of the Coronavirus
Disease (COVID-19) pandemic, the property has reported cash flow
declines from issuance for most years since the loan closed, with
the most recent year-end figures showing a DSCR of 0.76x, with an
occupancy rate of 80.0%. By Q2 2020, the annualized DSCR had fallen
to 0.69x and the occupancy rate was at 75.0%. At issuance, the
property was 92.0% occupied and the DBRS Morningstar DSCR was
1.06x.
Although the tenancy is quite granular, with the largest tenant
representing only 6.9% of the net rentable area since issuance,
precipitous tenancy losses have resulted in a sustained low
occupancy rate for several years; the building's age (constructed
in 1929) and style bring some inherent challenges for leasing,
particularly in this area of Chicago, where a significant amount of
new supply has been delivered. Vacancy rates for most submarkets in
Chicago were ticking up prior to the coronavirus pandemic, and
those trends have recently been exacerbated with a glut of sublease
space that has been put on the market in the last year. Given the
sustained low coverage ratios and the challenges in leasing up the
vacant space and securing renewals for existing tenants, the risk
of loss to the trust for this loan has significantly increased from
issuance. In the analysis for this review, DBRS Morningstar assumed
a liquidation scenario based on a significant haircut to the
issuance value, resulting in a loss severity in excess of 40.0%.
The special servicer has not provided an updated appraisal, but
DBRS Morningstar anticipates that figure will come in well below
the issuance valuation of $220.0 million and could suggest an even
higher loss severity at resolution.
The third-largest loan, the Palmer House Retail Shops loan, is
secured by a 134,536-square-foot mixed-use retail and office
property in downtown Chicago. The collateral comprises retail
shops, a 166-space parking garage, and a portion of office space
within the Palmer House Hilton Hotel. The hotel is not part of the
collateral but is owned by an affiliate of the borrower of the
subject loan and is also experiencing severe operational
difficulties and facing foreclosure. The hotel has been closed
since March 2020 because of the coronavirus pandemic and is not
accepting reservations before May 20, 2021, according to the
hotel's website. Furthermore, the largest collateral tenant, Ampco
System Parking Inc., which operated the parking garage, exercised
its early lease termination option in July 2020. The loan fell
delinquent and transferred to the special servicer in July 2020.
With a receiver now assigned to the property, DBRS Morningstar
liquidated the loan from the trust and expects a loss upon
resolution.
The Hilton Atlanta Perimeter loan (Prospectus ID#12, 3.1% of the
pool) is secured by a 224-room select-service hotel in the Central
Perimeter submarket of Atlanta. Cash flow has been trending
downward for the past few years and fell to $1.1 million as of June
2020, which is 64% below the issuer's underwritten figure of $3.1
million. The loan fell delinquent amid the pandemic and could not
pay off at the October 2020 scheduled maturity date. The property
was reappraised in 2020 and reported a value of $26.6 million, a
38.3% decrease from the appraised value at issuance. The servicer
had classified the loan as real estate owned as of the March 2021
remittance, and a loss is anticipated upon resolution.
There are 11 additional loans, representing 16.6% of the pool, on
the servicer's watchlist. These loans are being monitored for
various reasons, including low DSCRs or occupancy, tenant rollover
risk, and/or pandemic-related forbearance requests.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMBB COMMERCIAL 2015-C33: DBRS Confirms BB Rating on Class E Certs
-------------------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-C33 issued by JPMBB
Commercial Mortgage Securities Trust 2015-C33 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class D-1 at BBB (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class D-2 at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
Class G has been removed from Under Review with Negative
Implications, where it was placed on August 6, 2020. All trends are
Stable.
The rating confirmations reflect the overall stable performance of
the transaction, which has had a collateral reduction of 10.4%
since issuance with 62 of the original 64 loans remaining in the
pool as of the February 2021 remittance. The transaction benefits
from a high concentration of multifamily properties, which make up
35.4% of the pool balance. Additionally, five loans, representing
5.4% of the pool, are fully defeased.
The February 2021 remittance report also noted that nine loans,
representing 12.2% of the pool, were on the servicer's watchlist,
and three loans, representing 5.0% of the pool, were in special
servicing. The largest loan in special servicing, DoubleTree
Anaheim—Orange County (Prospectus ID#4, 4.0% of the pool), which
is secured by a 461-room full-service hotel in Orange, California,
transferred to special servicing in July 2020 for payment default.
The subject is in close proximity to several major demand drivers,
primarily Disneyland and the Anaheim Convention Center, both of
which have been effectively closed because of the Coronavirus
Disease (COVID-19) pandemic and are currently functioning as
vaccination sites. The borrower has presented the special servicer
with resolution options to bring the loan current, which are being
evaluated by the lender. An updated appraisal as of August 2020
valued the property as-is at $61.1 million, a 23.5% decline from
the issuance value of $83.8 million but still well in excess of the
whole loan amount. The appraisal also lists a stabilized value of
$90.4 million, which incorporates occupancy and average daily rate
increases over a three-year period. The other two specially
serviced loans total less than 1.0% of the pool balance; both are
secured by hotel properties in North Carolina with related
borrowers and were transferred after coronavirus-related relief
requests.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMCC 2012-CIBX: DBRS Cuts Rating on 2 Certs Classes to C(sf)
-------------------------------------------------------------
DBRS, Inc. downgraded its ratings on six classes of Commercial
Mortgage Pass-Through Certificates, Series 2012-CIBX, issued by
JPMCC 2012-CIBX Mortgage Trust as follows:
-- Class B to AA (low) (sf) from AA (high) (sf)
-- Class C to A (low) (sf) from AA (low) (sf)
-- Class D to BBB (low) (sf) from A (low) (sf)
-- Class E to CCC (sf) from BBB (low) (sf)
-- Class F to C (sf) from BB (sf)
-- Class G to C (sf) B (sf)
DBRS Morningstar also confirmed its ratings on the remaining
classes in the transaction as follows:
-- Class A-4 at AAA (sf)
-- Class A-4FL at AAA (sf)
-- Class A-4FX at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
Additionally, DBRS Morningstar has discontinued its rating on Class
X-B as the lowest-rated reference obligation tranche, Class G, has
been downgraded to C (sf).
The trends on Classes A-4, A-4FL, A-4FX, A-S, and X-A are Stable,
while the trends on Classes B, C, and D have been changed to
Negative from Stable. The remaining classes have ratings that do
not carry a trend. With this rating action, Class G has been
removed from Under Review with Negative Implications from where it
was placed in August 2020.
The rating downgrades and Negative trends reflect the significant
increased credit risk to the transaction driven by the five loans
in special servicing, which collectively represent 27.8% of the
pool balance and are all secured by retail properties. The two
largest loans in special servicing are secured by regional malls,
representing 16.1% of the pool. Additionally, eight nondefeased
loans have scheduled maturity dates in 2021. While these loans are
currently performing, select loans secured by retail or hotel
properties may face challenges in securing refinance capital.
As of March 2021, the transaction consists of 36 of the original 49
loans, with collateral reduction of 43.3% since issuance. The
transaction is concentrated by property type as 16 loans,
representing 40.1% of the pool, are secured by retail properties
and six loans, representing 20.1% of the pool, are secured by hotel
properties. Both asset types have been disproportionately affected
by the ongoing Coronavirus Disease (COVID-19) pandemic. The
transaction does benefit from defeasance as 10 loans, representing
22.7% of the pool balance, are defeased. In addition to the five
loans in special servicing, there are 10 loans on the servicer's
watchlist, representing 27.9% of the pool.
The largest loan in special servicing, Jefferson Mall (Prospectus
ID#4; 8.3% of the pool), is secured by a regional mall in
Louisville, Kentucky, owned by CBL & Associates (CBL), which filed
for Chapter 11 bankruptcy protection in November 2020. The
collateral includes the inline space at the mall and the junior
anchors, which include H&M, Ross Dress for Less, Old Navy, and
Jo-Ann Fabrics. The loan has been on the DBRS Morningstar Hotlist
since February 2019 after the loss of two non-collateral anchors
(Macy's in 2017 and Sears in 2018). The loan initially transferred
to special servicing in February 2020 for imminent default risk and
was modified in August 2020 with terms including a maturity
extension to 2026 and a cash trap. The two remaining traditional
anchors, Dillard's and JCPenney, remain open as of March 2021 and
to date, no closure for the subject JC Penney location has been
announced. The loan was reported current for March 2021 but
transferred back to special servicing in January 2021 for imminent
nonmonetary default, with no material updates provided by the
special servicer to date.
According to the December 2020 rent roll, the collateral remains
well occupied at 92.6%. The loan reported a YE2020 net cash flow
(NCF) of $6.0 million, a -8.3% variance from the issuance NCF and
-24.1% variance from the YE2017 NCF. The YE2020 debt service
coverage ratio (DSCR) was 1.34x. At issuance, the collateral was
valued at $101.7 million; however, the decline in cash flow, as
well as the large remaining anchor vacancies, suggests the
desirability and value of the collateral has decreased
significantly from issuance. A hypothetical valuation derived by
DBRS Morningstar, using the YE2020 NCF and a stressed cap rate
suggest a value significantly below the outstanding loan balance of
$60.8 million. Given the second transfer to special servicing, the
performance declines for the mall from issuance and the sponsor's
recent bankruptcy filing, as well as the scenario suggested by the
hypothetical valuation, DBRS Morningstar believes a loss at
resolution is likely for this loan, one of the primary drivers for
the rating downgrades and trend changes.
The second-largest loan in special servicing, Southpark Mall
(Prospectus ID#5; 7.8% of the pool), is secured by a regional mall
in Colonial Heights, Virginia, also owned by CBL. The collateral
includes the inline space, a Regal Cinemas anchor space and the
former Sears anchor pad. There was a Dillard's anchor in place at
issuance that also served as collateral for the loan; that space
was vacated and ultimately re-leased to Dick's Sporting Goods. The
loan has been on the DBRS Morningstar Hotlist since March 2020 as a
result of increased credit risk. The remaining traditional anchors
are Macy's and JCPenney, which remain open and neither chain has
announced plans to close the respective locations at the subject
property to date. The loan initially transferred to special
servicing in March 2020 for imminent default risk and the borrower
was granted a 90-day forbearance allowing for the use of all
existing reserves to keep the loan current. The loan returned to
the master servicer in October 2020 but transferred back to special
servicing in January 2021 and was reported current as of the March
2021 remittance. Like the Jefferson Mall loan, updates from the
special servicer have been limited but these two transfers may be
tied to the CBL bankruptcy filing late last year, which remains
ongoing as of March 2021.
According to the December 2020 rent roll, the collateral was 68.8%
occupied with the majority of the vacancy concentrated in the
former Sears space (28.6% of the NRA). The loan reported a YE2020
NCF of $6.4 million, a -3.3% variance from issuance and -9.5%
variance from YE2018. The YE2020 DSCR was 1.52x. At issuance, the
collateral was valued at $103.0 million; however, the decline in
(NCF) and occupancy suggest the desirability and value of the
collateral has decreased. A hypothetical valuation derived by DBRS
Morningstar, using the YE2020 NCF and a stressed cap rate, suggests
a value significantly below the outstanding loan balance of $56.7
million. Given that scenario, as well as the performance declines
from issuance, albeit slightly less pronounced as compared with the
Jefferson Mall property, the financial struggles for the loan
sponsor and the general challenges for the collateral property in
its status as a regional mall located in a secondary market, DBRS
Morningstar believes a loss at resolution is likely. This was
another primary contributing factor for the rating downgrades and
trend changes with this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMCC TRUST 2011-C5: Fitch Lowers Class G Tranche to 'Csf'
----------------------------------------------------------
Fitch Ratings has downgraded four and affirmed five classes of
JPMCC Commercial Mortgage Securities Trust 2011-C5.
DEBT RATING PRIOR
---- ------ -----
JPMCC 2011-C5
A-3 46636VAC0 LT AAAsf Affirmed AAAsf
A-S 46636VAK2 LT AAAsf Affirmed AAAsf
A-SB 46636VAD8 LT PIFsf Paid In Full AAAsf
B 46636VAM8 LT AAsf Affirmed AAsf
C 46636VAP1 LT Asf Affirmed Asf
D 46636VAR7 LT CCCsf Downgrade Bsf
E 46636VAT3 LT CCsf Downgrade CCCsf
F 46636VAV8 LT CCsf Downgrade CCCsf
G 46636VAX4 LT Csf Downgrade CCsf
X-A 46636VAE6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades reflect a greater
certainty of loss due to increased loss expectations on the two
specially serviced loans/assets (25.5% of pool), Asheville Mall and
La Salle Select Portfolio.
Concentrated Pool: The pool is highly concentrated with 12
loans/assets remaining. Due to the concentrated nature of the pool,
Fitch performed a sensitivity analysis that grouped the remaining
loans based on the likelihood of repayment and expected losses from
the specially serviced loans/assets; the ratings reflect this
analysis. Classes A-3 and A-S are reliant on low leveraged loans,
the majority of which are secured by grocery-anchored retail and
portfolios of bank branches, to repay.
Specially Serviced Loans/FLOCs: The Asheville Mall loan (17.3%),
which is secured by a 323,380-sf portion of a 973,367- sf enclosed
regional mall located in Asheville, NC, transferred to special
servicing in June 2020 at the request of the borrower, CBL &
Associates, to negotiate potential coronavirus-related debt relief.
The mall had been experiencing downward trending occupancy, in-line
and anchor tenant sales even prior to the onset of the coronavirus
pandemic.
Non-collateral anchors include Belk, JC Penney and Dillard's. A
former non-collateral Sears closed in July 2018. Major tenants
include Barnes & Noble (11.1% of NRA; January 2024 lease expiry),
H&M (6.8%; January 2025) and Old Navy (5.4%; January 2022). As of
the December 2020 rent roll, 4.7% of the collateral NRA was
scheduled to expire by YE 2020 (across six tenants), 16.2% in 2021
(25 tenants), 18.1% in 2022 (11 tenants) and 10.1% in 2023 (11
tenants). Comparable in-line sales for tenants occupying less than
10,000sf were $384 psf as of TTM June 2020. Collateral occupancy
was 87.1% as of December 2020, compared to 87.9% as of September
2019, 88.7% as of June 2018 and 97% at YE 2017.
A receiver was appointed in December 2020. The borrower has turned
over cashflow from property operations to the receiver to make debt
service payments through December 2020, which were applied
retroactively. Per the servicer, the borrower is no longer seeking
a modification and the property is expected to be sold out of
receivership. Fitch's base case loss of approximately 60% equates
to an implied cap rate of 32% on the YE 2019 NOI.
The REO LaSalle Select Portfolio asset (7.4%) consists of three
class B suburban office properties located in Norcross, GA. The
original portfolio consisted of four office properties, one of
which was sold in August 2019. Sales proceeds were applied to
outstanding advances, pay down a portion of the loan's balance and
$6 million was held back for TI/LCs and capital expenditures for
new leasing and roof replacement of the remaining three properties.
As of November 2020, the outstanding reserve balance was
approximately $3.13 million. The remaining properties have had
limited positive leasing momentum. Fitch's base case loss of
approximately 85% factors in a discount to the most recent
appraisal valuation.
Coronavirus Exposure: The largest loan in the pool,
InterContinental Hotel Chicago (36.4%), which is secured by a
792-room full service hotel located in Chicago, IL, had already
been experiencing declining performance prior to the coronavirus
pandemic due to superior competition, new market supply and
increased real estate taxes. The sponsor initially requested relief
in May 2020 but cancelled its request in August 2020. As of TTM
September 2020, occupancy, ADR and RevPAR declined to 27%, $145 and
$19 respectively, from 65%, $219 and $141 in 2019. The loan has
remained current. The Negative Rating Outlooks on classes B and C
reflect these classes' reliance on the Intercontinental Hotel
Chicago loan for repayment and upcoming refinance and coronavirus
performance concerns. The loan matures in August 2021.
Increased Credit Enhancement: As of the April 2021 remittance
reporting, the pool's aggregate balance has been reduced by 65.7%
to $352.8 million from $1.03 billion at issuance. Realized losses
total $6.5 million (0.6% of original pool balance) and are fully
absorbed by the non-rated class G. Since Fitch's prior rating
action, the Prattville Town Center and Franklin Centre loans
(combined 2.4% of original pool balance) prepaid in full during
their open periods in February and April 2021, respectively. One
loan (0.9% of pool) is fully defeased.
All loans in the pool mature or have anticipated repayment dates
between June and September 2021.
RATING SENSITIVITIES
The Negative Outlooks on classes B and C reflect the potential for
downgrade given refinance and coronavirus performance concerns
associated with the InterContinental Hotel Chicago loan. The Stable
Outlooks on classes A-3 and A-S reflect increased CE and expected
continued amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the
FLOCs, coupled with additional paydown and/or defeasance.
Upgrades to classes B and C would occur with significant
improvement in CE and/or defeasance and with the stabilization
of performance on the InterContinental Hotel Chicago loan;
however, adverse selection and increased concentrations could
cause this trend to reverse. Classes would not be upgraded
above 'Asf' if interest shortfalls are likely.
-- Upgrades to the distressed classes D through G are not likely
given these classes' reliance on specially serviced loan
recoveries, but may be possible if recoveries significantly
exceed Fitch's expectations.
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. Downgrades to classes A-3 and
A-S are not likely due to the position in the capital
structure and reliance on stable performing, low leveraged
loans, but may occur should interest shortfalls affect these
classes.
-- Downgrades to classes B and C are possible should expected
losses for the pool increase significantly and losses on the
InterContinental Hotel Chicago loan exceed Fitch's
expectation. Further downgrades to the distressed classes D
through G are possible with a greater certainty of loss on the
specially serviced loans, or as losses are realized.
In addition to its baseline scenario related to the coronavirus,
Fitch also envisions a downside scenario where the health crisis is
prolonged beyond 2021; should this scenario play out, Fitch expects
additional negative rating actions, including downgrades and/or
additional 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.
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
---------------------------------------------------------------
Fitch Ratings has affirmed 17 classes of JPMDB Commercial Mortgage
Securities Trust 2018-C8 commercial mortgage pass-through
certificates.
DEBT RATING PRIOR
---- ------ -----
JPMDB 2018-C8
A-1 46591AAW5 LT AAAsf Affirmed AAAsf
A-2 46591AAX3 LT AAAsf Affirmed AAAsf
A-3 46591AAZ8 LT AAAsf Affirmed AAAsf
A-4 46591ABA2 LT AAAsf Affirmed AAAsf
A-S 46591ABE4 LT AAAsf Affirmed AAAsf
A-SB 46591ABB0 LT AAAsf Affirmed AAAsf
B 46591ABF1 LT AA-sf Affirmed AA-sf
C 46591ABG9 LT A-sf Affirmed A-sf
D 46591AAG0 LT BBB-sf Affirmed BBB-sf
E 46591AAJ4 LT BB+sf Affirmed BB+sf
F 46591AAL9 LT BB-sf Affirmed BB-sf
G 46591AAN5 LT B-sf Affirmed B-sf
X-A 46591ABC8 LT AAAsf Affirmed AAAsf
X-B 46591ABD6 LT AA-sf Affirmed AA-sf
X-D 46591AAA3 LT BBB-sf Affirmed BBB-sf
X-EF 46591AAC9 LT BB-sf Affirmed BB-sf
X-G 46591AAE5 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Relatively Stable Performance; Slight Increase in Loss
Expectations: While the majority of the pool continues to exhibit
relatively stable performance, loss expectations have increased
slightly since Fitch's prior rating action, primarily driven by
higher losses on the specially serviced loans, both of which
transferred due to the slowdown in economic activity related to the
pandemic. Fitch's current ratings incorporate a base case loss of
4.90%. The Negative Rating Outlooks reflect losses that could reach
6.50% when factoring in additional pandemic-related stresses.
Fitch Loans of Concern/Specially Serviced Loans: There are eight
Fitch Loans of Concern (24% of pool), including two loans in
special servicing (6.7%).
The largest change in loss since the prior rating action is the
specially serviced Atlantic Times Square loan (5.7% of pool), which
is secured by a mixed-use property comprised of 212,800-sf of
retail space and 100 apartment units in Monterey Park, CA. The
loan, which transferred to special servicing in November 2020 due
to payment default, was 90+ days delinquent as of March 2021. Per
the servicer, workout negotiations remain ongoing, including
discussions on a possible partial interest deferral for six to nine
months in conjunction with a proposed guaranty.
As of the December 2020 rent roll, the retail space was 96.5%
leased, with major tenants including AMC Theaters (19.8% of total
collateral NRA; August 2030 lease expiry), 24-Hour Fitness (8.1%;
August 2025) and Atlantic Seafood and Dim Sum Restaurant (3.2%;
March 2022). The servicer-reported occupancy for the multifamily
component was 94% at YE19; an updated rent roll has been
requested.
The next largest increase in loss since the prior rating action is
the specially serviced Holiday Inn Express Albany loan (1%), which
is secured by a 135-room limited service hotel in Albany, NY. The
loan transferred to special servicing in June 2020 due to
pandemic-related performance impact. As of March 2021, the lender
is in the process of setting up cash management and is
dual-tracking foreclosure proceedings alongside discussions with
the borrower on workout alternatives and a potential loan
modification. Occupancy declined to 61% at YE19 from 64.5% at YE18;
RevPAR declined to $66 from $69 and ADR remained flat at $108
compared to $107 over this same period.
The next largest increase in loss since the prior rating action is
the Lehigh Valley Mall (2.0%), which is secured by a 545,233-sf
portion of a 1.2 million sf regional mall located in Whitehall, PA
(approximately 2 miles north of downtown Allentown). The loan is
sponsored by Simon Property Group and Pennsylvania Real Estate
Investment Trust. Anchors include Macy's (ground lessee), Boscov's
(non-collateral) and JC Penney (non-collateral); all three anchors
have been at the property since 1957.
As of TTM September 2020, inline sales for tenants under 10,000 sf
(excluding Apple) were $435 psf, compared with $461 psf at YE19 and
$451 psf at issuance. Fitch's base case loss of 4.0% reflects a cap
rate of 12% and a 10% haircut to the YE19 NOI to address the recent
occupancy declines and near-term lease rollover concerns. Fitch
also applied an additional coronavirus stress, which considered an
outsized loss of 17.3% based on a 15% cap rate and 20% haircut to
the YE19 NOI.
The next largest increase in loss since the prior rating action is
the Lakewood Forest Plaza loan (2.4%), which is secured by a
108,016-sf retail property in Houston, TX. Occupancy declined to
42.8% as of February 2021 from 74.8% in March 2020. The former
anchor tenant, Stein Mart (28.4% of NRA), closed its store at the
property in August 2020, prior to its scheduled March 2024 lease
expiry, as a result of its parent company filing for Chapter 11
bankruptcy. Another smaller tenant, Pita Pit (1.9%), also vacated
prior to its September 2021 lease expiry. Major tenants include El
Palenque (5.2% of NRA; December 2021 lease expiry), First Watch
Restaurants (3.5%; May 2022) and Dragon's Lair Comics and Fantasy
(3.5%; March 2022). As of the February 2021 rent roll, 6.7% of the
NRA is scheduled to expire in 2021 (two tenants), 9.1% in 2022
(four tenants) and 12.2% in 2023 (six tenants).
Minimal Changes in Credit Enhancement: As of the March 2021
remittance reporting, the pool's aggregate balance has paid down by
1.4% to $702.8 million from $713.1 million at issuance. Ten loans
(37.9% of pool) are full-term, interest-only, 14 loans (25.5%)
remain in their partial interest-only period and 17 loans (36.6%)
are amortizing. Based on the scheduled balance at maturity, the
pool will pay down by 8.5%. Scheduled loan maturities include one
loan (4.3%) in 2022, three loans (14.3%) in 2023, one loan (2.0%)
in 2027 and 36 loans in 2028 (79.4%).
Additional Stresses Applied due to Coronavirus Exposure: Five loans
(16.3% of pool) are secured by hotel properties and 10 loans
(22.2%) are secured by retail properties. The hotel loans have a
weighted average (WA) NOI DSCR of 2.25x and can withstand an
average 45.7% decline to NOI before DSCR falls below 1.00x. The
retail loans have a WA NOI DSCR of 2.07x and can withstand an
average 49.7% decline to NOI before DSCR falls below 1.00x. Fitch
applied additional coronavirus-related stresses to all five hotel
loans (16.3%) and four retail loans (7.3%); these additional
stresses contributed to the Negative Rating Outlooks.
RATING SENSITIVITIES
The Negative Rating Outlooks on classes D, E, F, G, X-D, X-EF and
X-G reflect the potential for downgrade given the concerns
associated with the performance of the FLOCs and ultimate impact of
the coronavirus pandemic. The Stable Outlooks on classes A-1, A-2,
A-3, A-4, A-SB, A-S, B, C, X-A and X-B reflect increased (credit
enhancement) CE and expected continued amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- 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 classes D and X-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 and G 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. If the specially
serviced loans revert to their pre-pandemic performance and/or
actual losses are better than Fitch's expectations, the
Negative Rating Outlooks on classes E, F, G, X-EF and X-G may
be revised back to Stable.
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. Downgrades to classes A-1, A
2, A-3, A-4, A-SB, A-S, B, C, X-A and X-B are not likely due
to the position in the capital structure, but may occur should
interest shortfalls affect these classes.
-- Downgrades to classes D and X-D are possible should expected
losses for the pool increase significantly and all the loans
susceptible to the coronavirus pandemic suffer losses, which
would erode CE. Downgrades to classes E, F, G, X-EF and X-G
are possible if performance of the FLOCs, including the two
specially serviced loans, or loans susceptible to the
coronavirus pandemic, do 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 downgrades and/or
additional Negative Rating 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.
KAYNE CLO 11: S&P Assigns BB- (sf) Rating on $14MM Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Kayne CLO 11 Ltd./Kayne
CLO 11 LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Kayne CLO 11 Ltd./Kayne CLO 11 LLC
Class A, $252.0 million: AAA (sf)
Class B, $52.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $24.0 million: BBB- (sf)
Class E (deferrable), $14.0 million: BB- (sf)
Subordinated notes, $44.7 million: Not rated
LB-UBS COMMERCIAL 2007-C6: S&P Cuts Class D Certs Rating to 'D(sf)'
-------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from LB-UBS
Commercial Mortgage Trust 2007-C6, a U.S. commercial
mortgage-backed securities (CMBS) 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."
S&P said, "The downgrades on classes A-J, B, C, and D reflect
credit support erosion that we anticipate will occur upon the
eventual resolution of the 48 assets ($275.7 million, 95.4%) with
the special servicer (discussed below), as well as a reduction in
the liquidity support available to these classes due to ongoing
interest shortfalls. Classes C and D are currently experiencing
interest shortfalls, while classes A-J and B are highly susceptible
to reduced liquidity support or interest shortfalls in the event
appraisal reduction amounts (ARAs) are increased for the specially
serviced assets. We lowered our ratings on classes C and D to 'D
(sf)' because we expect the accumulated interest shortfalls to
remain outstanding for the foreseeable future."
According to the April 2021, trustee remittance report, the current
monthly interest shortfalls totaled $1.03 million and resulted
primarily from:
-- Interest not advanced totaling $733,411;
-- Special servicing fees totaling $49,730; and
-- Appraisal Subordinate Entitlement Reduction (ASER) amount
totaling $218,460.
Transaction Summary
As of the April 2021 trustee remittance report, the collateral pool
balance was $289.0 million, which is 9.7% of the pool balance at
issuance. The pool currently includes four loans (reflecting
Islandia Shopping Center A and B notes as one) and 45 real
estate-owned (REO) assets (reflecting the PECO Portfolio as 39
assets), down from 182 loans at issuance. Forty-eight of these
assets ($275.7 million, 95.4%) are with the special servicer, and
one ($13.3 million, 4.6%) is on the master servicer's watchlist.
S&P said, "For the sole performing loan, we calculated an S&P
Global Ratings' weighted average debt service coverage (DSC) of
0.94x and an S&P Global Ratings' weighted average loan-to-value
(LTV) ratio of 96.0% using S&P Global Ratings' weighted average
capitalization rate of 8.00%. The sole performing loan, Tower
Square Retail, is secured by a retail property totaling 70,579
sq.-ft. located in Eden Prairie. The loan appears on the servicer
watchlist due to a reported low DSC of 0.93x as of year-end 2020.
The loan matures in July 2022.
"To date, the transaction has experienced $181.5 million in
principal losses, or 6.1% of the original pool trust balance. We
expect losses to reach approximately 12.8% of the original pool
trust balance in the near term, based on loss incurred to date and
additional losses we expect upon the eventual resolution of the 48
specially serviced assets."
Credit Considerations
As of the April 2021 trustee remittance report, 48 assets in the
pool were with the special servicer, LNR Partners LLC. Details of
the three largest specially serviced assets are as follows:
-- The majority of the specially serviced assets comprised of the
PECO Portfolio, which had an original loan balance of $323.9
million and was originally secured by 39 properties at issuance.
Thirty-eight of the properties have been sold, resulting in a
paydown of the outstanding balance to $132.4 million, and a total
exposure of $145.2 million. The sole remaining property, Eastwood
Shopping Center, is a 155,104-sq.-ft.-retail property located in
Frankfort, Ky. S&P expects a significant loss (60% or greater) upon
the eventual resolution of these assets.
-- The Islandia Shopping Center – (A and B note) loan ($67.6
million, 23.4%) is the second-largest loan in the pool and has a
combined total reported exposure of $69.7 million. The loan is
secured by an anchored retail property that was built in 1991,
covers a 376,774-sq.-ft. area, and is located in Islandia, N.Y. The
loan transferred to the special servicer on Jan. 6, 2021, for
imminent default. The loan was previously transferred to the
special servicer in Dec. 2013 and was subsequently returned to the
master servicer in March 2015 after modifications, whereby the
original loan was bifurcated into a $63.5 million A note and a
$10.1 million B note, the interest rate was changed, and the
maturity date was extended to July 9, 2021. The reported DSC and
occupancy as of Sept. 30, 2020, were 1.20x and 95.0%, respectively.
No ARA are currently in effect on this loan. According to special
servicer comments, a note sale is scheduled for May 2021 that may
result in a possible resolution to the trust. S&P expects a
moderate loss (26%-59%) upon this loan's eventual resolution.
-- The Lakeland Town Center REO asset ($25.1 million, 8.7%) is the
third-largest asset in the pool and has a total reported exposure
of $27.9 million. The property is a 304,375-sq.-ft. retail property
that was built in 1964 and is located in Lakeland, Fla. The loan
was transferred to the special servicer on Oct. 12, 2016, for
imminent default, and became REO on Jan. 14, 2020. A $23.3 million
ARA is in effect against the asset. The reported DSC and occupancy
as of Sept. 30, 2020, were 0.46x and 56.0%, respectively. According
to special servicer comments, an auction of the property is
scheduled for May 2021 that may result in a possible resolution to
the trust. We expect a significant loss (60% or greater) upon this
loan's eventual resolution.
-- The remaining assets with the special servicer each have
individual balances that represent less than 6.4% of the total pool
trust balance. We estimated losses for the 48 specially serviced
assets, arriving at a weighted-average loss severity of 72.1%.
Ratings Lowered
LB-UBS Commercial Mortgage Trust 2007-C6
Class A-J: to 'BB (sf)' from 'BBB- (sf)'
Class B: to 'CCC (sf)' from 'BB+ (sf)'
Class C: to 'D (sf)' from 'CCC- (sf)'
Class D: to 'D (sf)' from 'CCC- (sf)'
LIFE 2021-BMR: DBRS Gives Provisional B(low) Rating on G Certs
--------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-BMR to
be issued by LIFE 2021-BMR Mortgage Trust:
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable. Class HRR is not rated by DBRS Morningstar
The transaction consists of a portfolio of 17 properties with 43
individual tenants totaling approximately 2.4 million sf of Class A
office and laboratory space in the life-sciences hubs of Cambridge,
Massachusetts; San Diego; and San Francisco. The portfolio includes
15 assets that were securitized in the CGDBB 2017-BIOC transaction,
500 Kendall, which was securitized in the GSMS 2017-500K
transaction, and 65 Grove, which the sponsor acquired with a term
loan in 2018.
The portfolio benefits greatly from its granular rent roll,
institutional quality tenancy, and locations in the top-three
life-sciences hubs in the country. These leading clusters exhibit
low availability rates and high barriers to entry. DBRS Morningstar
is optimistic that rents in the these markets will continue to rise
as laboratory space in the life-sciences and biotechnology
industries becomes more expensive and companies continue to
congregate around established universities, research centers, and
hospitals, most often in dense urban areas.
The transaction benefits from strong cash flow stability
attributable to a significant proportion of credit tenant leases
across the portfolio. Approximately 67.8% of the in-place base rent
is attributable to investment-grade (IG) tenants. Additionally, the
portfolio serves as the global or domestic headquarters for 15
tenants comprising 44.0% of base rent, including five of the top 15
tenants, comprising 35.7% of base rent. In addition to a large
percentage of investment-grade tenancy, there is limited lease
rollover during the five-year fully extended loan term. Leases
comprising only 4.9% of the DBRS Morningstar gross potential rent
expire within the two-year initial term of the loan and only 28.6%
during the five-year fully extended term. The lease rollover during
the fully extended term is evenly distributed with no more than
10.8% of rents expiring in any calendar year.
The sponsor for the transaction, BioMed Realty, is a fully
integrated REIT that is focused on acquiring, developing, leasing,
owning and managing laboratory and office space for the life
science and technology industry. BioMed Realty was founded in 2004
and merged with The Blackstone Group in 2016. BioMed is a
full-service life science and technology office operating platform
with 16 million SF (including in-process developments and announced
acquisitions pending close). In November 2020, Blackstone
recapitalized BioMed Realty for $14.6 billion as part of a new
long-term, perpetual capital, core+ strategy.
The DBRS Morningstar LTV on the trust loan is significant at 105%.
The high leverage point, combined with the lack of amortization,
could potentially result in elevated refinance risk and/or loss
severities in an event of default (EOD). However, the sponsor has
approximately $1.06 billion of market equity in the portfolio which
substantially mitigates this risk.
Nine of the portfolio's 17 assets are single-tenant buildings.
Together, the nine properties represent 50.5% of the portfolio's
total NCF. Single-tenant properties generally present higher risk
than multiple-tenant properties because their sole source of income
is generated by one lessee rather than a diversified roster of
tenants. However, five of the assets, totaling 48.2% of NCF, are
approximately 100% leased to investment-grade tenants, three of
which, totaling 45.6% of NCF, have lease expirations beyond the
loan's fully extended maturity in March 2026.
The loan allows for pro rata paydowns associated with property
releases for the first 30% of the unpaid principal balance. The
loan has been structured with a partial pro rata/sequential-pay
structure. DBRS Morningstar considers this structure credit
negative, particularly at the top of the capital stack. Under a
partial pro rata structure, deleveraging of the senior notes
through the release of individual properties occurs at a slower
pace as compared with a sequential-pay structure. DBRS Morningstar
applied a penalty to the transaction's capital structure to account
for the pro rata nature of certain prepayments.
The borrower can also release individual properties subject to
customary requirements. However, the prepayment premium for the
release of individual assets is 105.0% for the first 30.0% of the
loan balance and 110.0% of the loan balance thereafter. DBRS
Morningstar considers the release premium to be weaker than those
of other previously rated single-borrower, multi-property deals
and, as a result, applied a penalty to the transaction's capital
structure to account for the weak deleveraging premium.
Notes: All figures are in U.S. dollars unless otherwise noted.
LSTAR COMMERCIAL 2015-3: DBRS Confirms BB Rating on Class E Certs
-----------------------------------------------------------------
DBRS, Inc. upgraded its ratings on four classes of the Commercial
Mortgage Pass-Through Certificates, Series 2015-3 issued by LSTAR
Commercial Mortgage Trust 2015-3 as follows:
-- Class B to AAA (sf) from AA (low) (sf)
-- Class C to AA (sf) from A (low) (sf)
-- Class X-C to A (high) (sf) from BBB (sf)
-- Class D to A (sf) from BBB (low) (sf)
DBRS Morningstar confirmed its ratings on the remaining classes as
follows:
-- Class A-S at AAA (sf)
-- Class E at BB (sf)
-- Class X-A at B (high) (sf)
-- Class X-B at B (high) (sf)
-- Class F at B (sf)
Classes E and F were removed from Under Review with Negative
Implications, where they were placed on August 6, 2020. Classes E
and F have Stable trends. DBRS Morningstar changed the trends on
Classes X-A and X-B to Stable from Negative. The remaining classes
have Stable trends.
The upgrades reflect the stable performance of the transaction,
which has remained in line with DBRS Morningstar's expectations, as
well as the significant paydown since issuance. At issuance, the
transaction consisted of 62 loans with an original trust balance of
$281.4 million. As of the February 2021 remittance report, 14 loans
remained in the transaction with a trust balance of $130.9 million,
representing a collateral reduction of approximately 53.5% since
issuance that resulted from amortization, the payoff of 42 loans,
and the liquidation of six loans. These six liquidated loans
resulted in a cumulative loss to the non-rated Class G of less than
$65,000.
Dawson Village (Prospectus ID#9; 7.8% of pool) is the only loan in
special servicing. This loan is secured by a grocery-anchored
shopping center in Dawsonville, Georgia, approximately 50 miles
northeast of the Atlanta central business district. The loan
transferred to special servicing in December 2019 and became real
estate owned in July 2020. The property's physical occupancy
decreased to 17% in 2017 after its largest tenant, Kroger (formerly
76.8% of the net rentable area), vacated prior to its December 2026
lease expiration. Kroger subsequently bought the remainder of its
lease out for $3.7 million in 2020, which is held in reserve.
Occupancy increased to its current level of 70% after the borrower
was able to partially backfill the former Kroger space with Planet
Fitness and Launch Trampoline Park. The property was reappraised in
June 2020 at $9.75 million, which implies a loan-to-value ratio of
105%.
The largest loan on the servicer's watchlist is the
InterContinental Hotel Monterey (Prospectus ID#2; 27.4% of pool),
which is secured by a full-service hotel along the Monterey Bay
coast in California. The loan is being monitored on the servicer's
watchlist because of performance concerns related to the
Coronavirus Disease (COVID-19) pandemic. Occupancy declined to 58%,
and effective gross income dropped by 28% compared with 2019
because of the pandemic-related travel restrictions. The property
had shown stable performance prior to the coronavirus pandemic as
the YE2019 net cash flow was in line with issuance levels while
posting a debt service coverage ratio of 2.98 times. The loan
remains current and sponsors have not requested pandemic-related
relief.
DBRS Morningstar materially deviated from its North American CMBS
Insight Model when determining the ratings assigned to Classes E
and F as the quantitative results suggested higher ratings on the
classes. The material deviations are warranted given the uncertain
loan-level event risk with the loan in special servicing and on the
servicer's watchlist, in addition to the increased concentration of
the pool in terms of the number of loans remaining.
Notes: All figures are in U.S. dollars unless otherwise noted.
MADISON PARK XXXIV: S&P Assigns BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Madison Park Funding XXXIV
Ltd., a CLO originally issued in 2019 that is managed by Credit
Suisse Asset Management LLC. S&P withdrew its ratings on the
original class A-1, B, C, and D notes following payment in full on
the April 26, 2021, refinancing date. The class A-2 and E notes
were unrated.
On the April 26, 2021, refinancing date, the proceeds from the
class A-R, B-R, C-R, D-R, and E-R replacement note issuances were
used to redeem the original class A-1, A-2, B, C, D, and E notes as
outlined in the transaction document provisions. Therefore, S&P
withdrew their ratings on the original A-1, B, C, and D notes in
line with their full redemption, and we assigned ratings to the
replacement notes.
The replacement notes are being issued via a supplemental
indenture. The following are based on provisions in the transaction
documents:
-- The stated maturity date will be extended by one year to April
25, 2032.
-- The unrated class A-2 notes will be combined with the rated
class B notes to form the new class B-R notes.
-- The unrated class E notes will be issued as a new class E-R
notes.
-- The revised transaction document includes a construct to
account for the replacement of LIBOR.
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 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, 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 Assigned
Madison Park Funding XXXIV Ltd.
Class A-R, $294.50 million: AAA (sf)
Class B-R, $77.90 million: AA (sf)
Class C-R, $28.80 million: A (sf)
Class D-R, $31.30 million: BBB-(sf)
Class E-R, $21.30 million: BB- (sf)
Ratings Withdrawn
Madison Park Funding XXXIV Ltd.
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
NR--Not rated.
MAGNETITE XXII: S&P Assigns Prelim BB-(sf) Rating on E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-R, C-R, D-R, and E-R replacement notes from Magnetite XXII
Ltd./Magnetite XXII LLC, a CLO originally issued in May 2019 that
is managed by BlackRock Financial Management Inc.
The preliminary ratings are based on information as of April 29,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the May 7, 2021 refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
Based on provisions in the transaction documents and portfolio
characteristics:
-- The replacement class A-R, C-R, D-R, and E-R notes are expected
to be issued at a lower spread than the original notes.
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes are
expected to be issued at a floating spread, replacing the current
floating spread capital structure.
-- The original reinvestment period end date is unaffected.
-- The original stated maturity date of the secured notes is
unaffected.
-- A one-year non-call period has been added.
-- Of the identified underlying collateral obligations, 100.00%
have credit ratings assigned by S&P Global Ratings.
-- Of the identified underlying collateral obligations, 97.74$
have recovery ratings assigned by S&P Global Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data 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. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Magnetite XXII Ltd./Magnetite XXII LLC
Class A-R, $415.000 million: AAA (sf)
Class B-R, $78.000 million: AA (sf)
Class C-R (deferrable), $39.500 million: A (sf)
Class D-R (deferrable), $39.000 million: BBB- (sf)
Class E-R (deferrable), $26.000 million: BB- (sf)
Subordinated notes, $64.385 million: Not rated
MELLO MORTGAGE 2021-MTG1: DBRS Finalizes B Rating on Class B5 Certs
-------------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage Pass-Through Certificates, Series 2021-MTG1 issued by
Mello Mortgage Capital Acceptance 2021-MTG1:
-- $325.6 million Class A1 at AAA (sf)
-- $325.6 million Class A2 at AAA (sf)
-- $325.6 million Class A3 at AAA (sf)
-- $244.2 million Class A4 at AAA (sf)
-- $244.2 million Class A5 at AAA (sf)
-- $244.2 million Class A6 at AAA (sf)
-- $81.4 million Class A7 at AAA (sf)
-- $81.4 million Class A8 at AAA (sf)
-- $81.4 million Class A9 at AAA (sf)
-- $260.4 million Class A10 at AAA (sf)
-- $260.4 million Class A11 at AAA (sf)
-- $260.4 million Class A12 at AAA (sf)
-- $65.1 million Class A13 at AAA (sf)
-- $65.1 million Class A14 at AAA (sf)
-- $65.1 million Class A15 at AAA (sf)
-- $16.3 million Class A16 at AAA (sf)
-- $16.3 million Class A17 at AAA (sf)
-- $16.3 million Class A18 at AAA (sf)
-- $37.9 million Class A19 at AAA (sf)
-- $37.9 million Class A20 at AAA (sf)
-- $37.9 million Class A21 at AAA (sf)
-- $363.5 million Class A22 at AAA (sf)
-- $363.5 million Class A23 at AAA (sf)
-- $363.5 million Class A24 at AAA (sf)
-- $363.5 million Class AX1 at AAA (sf)
-- $325.6 million Class AX2 at AAA (sf)
-- $325.6 million Class AX3 at AAA (sf)
-- $325.6 million Class AX4 at AAA (sf)
-- $244.2 million Class AX5 at AAA (sf)
-- $244.2 million Class AX6 at AAA (sf)
-- $244.2 million Class AX7 at AAA (sf)
-- $81.4 million Class AX8 at AAA (sf)
-- $81.4 million Class AX9 at AAA (sf)
-- $81.4 million Class AX10 at AAA (sf)
-- $260.4 million Class AX11 at AAA (sf)
-- $260.4 million Class AX12 at AAA (sf)
-- $260.4 million Class AX13 at AAA (sf)
-- $65.1 million Class AX14 at AAA (sf)
-- $65.1 million Class AX15 at AAA (sf)
-- $65.1 million Class AX16 at AAA (sf)
-- $16.3 million Class AX17 at AAA (sf)
-- $16.3 million Class AX18 at AAA (sf)
-- $16.3 million Class AX19 at AAA (sf)
-- $37.9 million Class AX20 at AAA (sf)
-- $37.9 million Class AX21 at AAA (sf)
-- $37.9 million Class AX22 at AAA (sf)
-- $363.5 million Class AX23 at AAA (sf)
-- $363.5 million Class AX24 at AAA (sf)
-- $363.5 million Class AX25 at AAA (sf)
-- $5.4 million Class B1 at AA (sf)
-- $5.4 million Class B1A at AA (sf)
-- $5.4 million Class BX1 at AA (sf)
-- $7.5 million Class B2 at A (low) (sf)
-- $7.5 million Class B2A at A (low) (sf)
-- $7.5 million Class BX2 at A (low) (sf)
-- $3.4 million Class B3 at BBB (low) (sf)
-- $1.1 million Class B4 at BB (low) (sf)
-- $574.0 thousand Class B5 at B (sf)
Classes AX1, AX2, AX3, AX4, AX5, AX6, AX7, AX8, AX9, AX10, AX11,
AX12, AX13, AX14, AX15, AX16, AX17, AX18, AX19, AX20, AX21, AX22,
AX23, AX24, AX25, BX1, and BX2 are interest-only certificates. The
class balances represent notional amounts.
Classes A1, A2, A3, A4, A5, A7, A8, A9, A10, A11, A12, A13, A14,
A16, A17, A19, A20, A22, A23, A24, AX2, AX3, AX4, AX5, AX8, AX9,
AX10, AX11, AX12, AX13, AX14, AX17, AX20, AX23, AX24, AX25, B1, and
B2 are exchangeable certificates. These classes can be exchanged
for combinations of exchange certificates as specified in the
offering documents.
Classes A1, A2, A3, A4, A5, A6, A7, A8, A9, A10, A11, A12, A13,
A14, A15, A16, A17, and A18 are super-senior certificates. These
classes benefit from additional protection from the senior support
certificates (Classes A19, A20, and A21) with respect to loss
allocation.
The AAA (sf) ratings on the Certificates reflect 5.10% of credit
enhancement provided by subordinated certificates. The AA (sf), A
(low) (sf), BBB (low) (sf), BB (low) (sf), and B (sf) ratings
reflect 3.70%, 1.75%, 0.85%, 0.55%, and 0.40% of credit
enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This securitization is a portfolio of first-lien fixed-rate prime
conventional residential mortgages funded by the issuance of the
Certificates. The Certificates are backed by 576 loans with a total
principal balance of $383,005,628 as of the Cut-Off Date (March 1,
2021).
MELLO 2021-MTG1 is the third prime securitization issued from the
MELLO shelf MTG series and comprises fully amortizing fixed-rate
mortgages with original terms to maturity of primarily 30 years.
The first two MELLO deals were issued in 2018 and consisted of a
combination of non-agency and agency-eligible prime collateral.
Unlike those first two securitizations, all loans in the MELLO
2021-MTG1 pool are conforming, high-balance mortgage loans which
were underwritten by loanDepot.com, LLC (loanDepot) using an
automated underwriting system designated by Fannie Mae or Freddie
Mac and were eligible for purchase by such agencies. In addition,
the pool contains a large concentration of loans (50.0%) that were
granted appraisal waivers by the agencies. In its analysis, DBRS
Morningstar applied property value haircuts to such loans, which
increased the expected losses on the collateral.
loanDepot is the Originator, Seller, and Servicing Administrator of
the mortgage loans, and Artemis Management LLC is the Sponsor of
the transaction. LD Holdings Group LLC, the parent company of the
Sponsor and Seller, will serve as Guarantor with respect to the
remedy obligations of the Seller. LDPMF LLC, a subsidiary of the
Sponsor and an affiliate of the Seller, will act as Depositor of
the transaction.
Cenlar FSB will act as the Servicer. Wells Fargo Bank, N.A. (Wells
Fargo; rated AA with a Negative trend by DBRS Morningstar) will act
as the Master Servicer and Securities Administrator. Wilmington
Savings Fund Society, FSB will serve as Trustee, and Deutsche Bank
National Trust Company will serve as Custodian.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a pre-crisis structure.
As of the Cut-Off Date, no borrower within the pool has entered
into a Coronavirus Disease (COVID-19)-related forbearance plan with
a servicer. In the event a borrower requests or enters into a
forbearance plan after the Closing Date, such loan will remain in
the pool.
Coronavirus Pandemic Impact
The coronavirus pandemic and the resulting isolation measures have
caused an economic contraction, leading to sharp increases in
unemployment rates and income reductions for many consumers. DBRS
Morningstar anticipates that delinquencies may continue to rise in
the coming months for many residential mortgage-backed securities
(RMBS) asset classes, some meaningfully.
The prime mortgage sector is a traditional RMBS asset class that
consists of securitizations backed by pools of residential home
loans originated to borrowers with prime credit. Generally, these
borrowers have decent FICO scores, reasonable equity, and robust
income and liquid reserves.
As a result of the coronavirus, DBRS Morningstar has seen increased
delinquencies and loans on forbearance plans, and expects a
potential near-term decline in the values of the mortgaged
properties. Such deteriorations may adversely affect borrowers'
ability to make monthly payments, refinance their loans, or sell
properties in an amount sufficient to repay the outstanding balance
of their loans.
In connection with the economic stress assumed under its moderate
scenario (see "Global Macroeconomic Scenarios: January 2021
Update," published on January 28, 2021), for the prime asset class,
DBRS Morningstar applies more severe market value decline (MVD)
assumptions across all rating categories than it previously used.
DBRS Morningstar derives such MVD assumptions through a fundamental
home price approach based on the forecast unemployment rates and
GDP growth outlined in the moderate scenario. In addition, for
pools with loans on forbearance plans, DBRS Morningstar may assume
higher loss expectations above and beyond the coronavirus
assumptions. Such assumptions translate to higher expected losses
on the collateral pool and correspondingly higher credit
enhancement.
In the prime asset class, while the full effect of the coronavirus
may not occur until a few performance cycles later, DBRS
Morningstar generally believes that this sector should have low
intrinsic credit risk. Within the prime asset class, loans
originated to (1) self-employed borrowers or (2) higher
loan-to-value ratio (LTV) borrowers may be more sensitive to
economic hardships resulting from higher unemployment rates and
lower incomes. Self-employed borrowers are potentially exposed to
more volatile income sources, which could lead to reduced cash
flows generated from their businesses. Higher LTV borrowers, with
lower equity in their properties, generally have fewer refinance
opportunities and therefore slower prepayments. In addition,
certain pools with elevated geographic concentrations in densely
populated urban metropolitan statistical areas may experience
additional stress from extended lockdown periods and the slowdown
of the economy.
The ratings reflect transactional strengths that include
high-quality credit attributes, well-qualified borrowers,
structural enhancements, satisfactory third-party due-diligence
review, and 100% current loans.
The ratings reflect transactional weaknesses that include loans
with agency appraisal waivers, certain aspects of the
representations and warranties framework, an issuer with limited
securitization history, and the servicing administrator's financial
capabilities.
Notes: All figures are in U.S. dollars unless otherwise noted.
MELLO WAREHOUSE 2021-2: Moody's Assigns B2 Rating to 2 Tranches
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to six
classes of notes issued by Mello Warehouse Securitization Trust
2021-2 (the transaction). The ratings range from Aaa (sf) to B2
(sf). The securities in this transaction are backed by a revolving
pool of newly originated first-lien, fixed rate and adjustable
rate, residential mortgage loans which are eligible for purchase by
Fannie Mae, Freddie Mac or in accordance with the criteria of
Ginnie Mae for the guarantee of securities backed by mortgage loans
to be pooled in connection with the issuance of Ginnie Mae
securities. The pool may also include FHA Streamline mortgage loans
or VA-IRRR mortgage Loans, which may have limited valuation and
documentation. The revolving pool has a total size of
$500,000,000.
Issuer: Mello Warehouse Securitization Trust 2021-2
Cl. A, Assigned Aaa (sf)
Cl. B, Assigned Aa2 (sf)
Cl. C, Assigned A2 (sf)
Cl. D, Assigned Baa2 (sf)
Cl. E, Assigned B2 (sf)
Cl. F, Assigned B2 (sf)
RATINGS RATIONALE
The transaction is based on a repurchase agreement between
loanDepot.com LLC ("loanDepot"), as repo seller, and Mello
Warehouse Securitization Trust 2021-2 as buyer. LD Holdings Group
LLC ("LD Holdings", senior unsecured rating B2) guarantees
loanDepot's payment obligations under the securitization's
repurchase agreement.
Moody's base its Aaa expected losses of 31.28% and expected losses
of 5.35% on the mean, and 4.42% on the median, on a scenario in
which loanDepot and the guarantor LD Holdings does not pay the
aggregate repurchase price to pay off the notes at the end of the
facility's three-year revolving term, and the repayment of the
notes will depend on the credit performance of the remaining static
pool of mortgage loans. To assess the credit quality of the static
pool, Moody's created a hypothetical adverse pool based on the
facility's eligibility criteria, which includes no more than 25%
(by unpaid balance) adjustable-rate mortgage (ARM) loans. Loans
which are subject to payment forbearance, a trial modification, or
delinquency are ineligible to enter the facility. Moody's analyzed
the pool using Moody's US MILAN model and made additional pool
level adjustments to account for risks related to (i) a weak
representation and warranty enforcement framework (ii) existence of
compliance findings related to the TILA-RESPA Integrated Disclosure
(TRID) Rule in third-party diligence reports from prior Mello
Warehouse Securitization Trust transactions, which have raised
concerns about potential losses owing to TRID for the loans in this
transaction. The final rating levels are based on Moody's
evaluation of the credit quality of the collateral as well as the
transaction's structural and legal framework.
The ratings on the notes are the higher of (i) the repo guarantor's
(LD Holdings Group LLC) rating and (ii) the rating of the notes
based on the credit quality of the mortgage loans backing the notes
(i.e., absent consideration of the repo guarantor). If the repo
guarantor does not satisfy its obligations under the guaranty, then
the ratings on the notes will only reflect the credit quality of
the mortgage loans backing the notes.
Collateral Description:
The mortgage loans will be newly originated, first-lien, fixed-rate
and adjustable rate mortgage loans that also comply with the
eligibility criteria set forth in the master repurchase agreement.
The aggregate principal balance of the purchased loans at closing
will be $500,000,000. Per the transaction documents, the mortgage
pool will have a minimum weighted average FICO of 725 and a maximum
weighted average LTV of 80%.
The ultimate composition of the pool of mortgage loans remaining in
the facility at the end of the three-year term upon default of
loanDepot is unknown. Moody's modeled this risk through evaluating
the credit risk of an adverse pool constructed using the
eligibility criteria. In generating the adverse pool: 1) Moody's
assumed the worst numerical value from the criteria range for each
loan characteristic. For example, the credit score of the loans is
not less than 640 and the weighted average credit score of the
purchased mortgage loans is not less than 725; the maximum
debt-to-income ratio is 50% in the adverse pool (per eligibility
criteria); 2) Moody's assumed risk layering for the loans in the
pool within the eligibility criteria. For example, loans with the
highest LTV also had the lowest FICO to the extent permitted by the
eligibility criteria; 3) Moody's took into account the specified
restrictions in the eligibility criteria such as the weighted
average LTV and FICO; 4) Since these loans are eligible for
purchase by the agencies, Moody's also took into account the
specified restrictions in the underwriting criteria. For example,
no more than 97% LTV for fixed rate purchased loans and 95% for
adjustable rate purchase loans.
The transaction allows the warehouse facility to include up to 50%
(consistent with the prior deal) of mortgage loans (by outstanding
principal balance) whose collateral documents have not yet been
delivered to the custodian (wet loans). This transaction is more
vulnerable to the risk of losses owing to fraud from wet loans
during the time it does not hold the collateral documents. There
are risks that a settlement agent will fail to deliver the mortgage
loan files after receipt of funds, or the sponsor of the
securitization, either by committing fraud or by mistake, will
pledge the same mortgage loan to multiple warehouse lenders.
However, Moody's analysis has considered several operational
mitigants to reduce such risks, including (i) collateral documents
must be delivered to the custodian within 10 business days
following a wet loan's funding or it becomes ineligible, (ii) the
transaction will only fund a wet loan if the closing of the
mortgage loan is handled by a settlement agent (covered by errors
and omissions insurance policy) who will provide a closing
protection letter to the repo seller (except for attorney closings
in the State of New York), (iii) the repo seller maintains a
fidelity bond in place, naming the issuer as an additional insured
party, in the event of fraud in connection with the closing of the
wet loans, (iv) the repo seller has acquired services of an
independent third party fraud detection and verification vendor,
PitchPoint Solutions Inc. (settlement agent vendor), to verify
credentials of settlement agents and the bank accounts for wires in
connection with the funding of such wet loans, and (v) Deutsche
Bank National Trust Company (Baa1), a highly rated independent
counterparty, act as the mortgage loan custodian. Moody's view
these mitigants as adequate measures to prevent the likelihood of
fraud by the settlement agent or the sponsor.
The loans will be originated and serviced by loanDepot.com, LLC
(loanDepot). U.S. Bank National Association will be the standby
servicer. Moody's consider the overall servicing arrangement for
this pool to be adequate. At the transaction closing date, the
servicer acknowledges that it is servicing the purchased loans for
the joint benefit of the issuer and the indenture trustee.
Transaction Structure:
Moody's analysis of the securitization structure includes reviewing
bankruptcy remoteness, assessing the ability of the indenture
trustee to take possession of the collateral in an event of
default, conformity of the collateral with the eligibility criteria
as well as allocation of funds to the notes.
The transaction is structured as a master repurchase agreement
between loanDepot (the repo seller) and the Mello Warehouse
Securitization Trust 2021-2 (the trust or issuer). The U.S.
Bankruptcy Code provides repurchase agreements, security contracts
and master netting agreements a "safe harbor" from the Bankruptcy
Code automatic stay. Due to this safe harbor, in the event of a
bankruptcy of loanDepot or the guarantor, the issuer will be exempt
from the automatic stay and thus, the issuer will be able to
exercise remedies under the master repurchase agreement, which
includes seizing the collateral.
During the revolving period, the repo seller's obligations will
include making timely payments of interest accrued on the notes as
well as the aggregate monthly fees. Failure to make such payments
will constitute a repo trigger event whereby the indenture trustee
will seize the collateral and terminate the repo agreement. It is
expected that the notes will not receive payments of principal
until the expected maturity date or after the occurrence and
continuance of an event of default under the indenture unless the
repo seller makes an optional prepayment. In an event of default,
principal will be distributed sequentially amongst the classes.
Realized losses will be allocated in a reverse sequential order.
In addition, since the pool may consist of both fixed rate and
adjustable rate mortgages, the transaction may be exposed to
potential risk from interest rate mismatch. To account for the
mismatch, Moody's assumed a stressed LIBOR curve by increasing the
one-month LIBOR rate incrementally for a certain period until it
reaches the maximum allowable interest rate as described in the
transaction documents.
Ongoing Due Diligence
During the revolving period, Clayton Services LLC (or a qualified
successor diligence provider appointed by the repo seller) will
conduct ongoing due diligence every 180 days on 100 randomly
selected loans (other than wet loans). The first review will be
performed 30 days following the closing date. The scope of the
review will include credit underwriting, regulatory compliance,
valuation and data integrity.
Because Moody's analysis is based on a scenario in which the
facility terms out, due diligence reviews provide some control on
the credit quality of the collateral. The due diligence framework
in this transaction combined with the collateral eligibility
controls help mitigate the risks of adverse selection in this
transaction.
While the due diligence review will provide some validation on the
quality of the loans, it may not be fully representative of the
collateral quality of the facility at all times. This is mainly due
to the frequency of the due diligence review, the revolving nature
of the collateral pool, and that the review will be conducted on a
sample basis. Also, by the time the due diligence review is
completed, some of the sampled loans may no longer be in the pool.
Representation and Warranties
For a mortgage loan to qualify as an eligible mortgage loan, the
loan must meet representations and warranties described in the
repurchase agreement. The substance of the representations and
warranties are consistent with those in Moody's published criteria
for representations and warranties for U.S. RMBS transactions.
After a repo event of default, which includes the repo seller or
buyer's failure to purchase or repurchase mortgage loans from the
facility, the repo seller or buyer's failure to perform its
obligations or comply with stipulations in the master repurchase
agreement, bankruptcy or insolvency of the buyer or the repo
seller, any breach of covenant or agreement that is not cured
within the required period of time, as well as the repo seller's
failure to pay price differential when due and payable pursuant to
the master repurchase agreement, a delinquent loan reviewer will
conduct a review of loans that are more than 120 days delinquent to
identify any breaches of the representations and warranties
provided by the underlying sellers. Loans that breach the
representations and warranties will be put back to the repo seller
for repurchase.
While the transaction has the above described representation and
warranties enforcement mechanism, in the amortization period, after
an event of default where the repo seller did not pay the notes in
full, it is unlikely that the repo seller will repurchase the
loans. In addition, the noteholders (holding 100% of the aggregate
principal amount of all notes) may waive the requirement to appoint
such delinquent loan reviewer.
Elevated social risks associated with the coronavirus
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 consumer assets from a gradual and unbalanced
recovery in US economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's have not made any adjustments related to coronavirus for
this transaction because (i) loans that are subject to payment
forbearance or a trial modification are ineligible to enter the
facility, and the repo seller must repurchase loans in the facility
that become subject to forbearance, (ii) delinquent loans are
ineligible to enter the facility, and (iii) loans are unlikely to
be modified while in the facility due to the seasoning constraint
specified in the eligibility criteria. The repo seller will be
required to repurchase any loans that do not meet the "eligible
loan" criteria.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from 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 the state of the housing
market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a weaker collateral composition than that in the
adverse pool, financial distress of any of the counterparties.
Transaction performance also depends greatly on the US macro
economy and housing market.
Methodology
The methodologies used in these ratings were "Moody's Approach to
Rating US RMBS Using the MILAN Framework" published in April 2020.
MF1 2021-FL5: DBRS Finalizes B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by MF1 2021-FL5, Ltd.:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All classes are Stable.
The initial collateral consists of 35 floating-rate mortgage loans
secured by 49 transitional multifamily and five senior housing
properties totaling $1.177 billion (56.7% of the total fully funded
balance), excluding $298.0 million of remaining future funding
commitments and $599.1 million of pari passu debt. Three loans (LA
Multifamily Portfolio II, SF Multifamily Portfolio II, and LA
Multifamily Portfolio III), representing 7.2% of the trust balance,
are associated with the same sponsorship group. These loans allow
the borrower to acquire and bring properties into the trust
post-closing through future funding up to a maximum whole-loan
balance of $100.0 million for each individual loan, which is
accounted for in figures and metrics throughout the report. Two
loans in the pool, 56 West 125th Street and Vitagraph, representing
4.9% of the initial pool balance, are contributing both senior and
mezzanine loan components that will both be held in the trust. Of
the 35 loans, there is one unclosed, delayed-close loan as of March
9, 2021: Pinnacle (Prospectus ID#9), representing 3.8% of the
initial pool balance. Additionally, one loan, LA Multifamily
Portfolio III (Prospectus ID#35), has delayed-close mortgage
assets, which are identified in the data tape and included in the
DBRS Morningstar analysis. If a delayed-close loan or asset is not
expected to close or fund prior to the purchase termination date,
then any amounts remaining in the unused proceeds account up to
$5.0 million will be deposited into the replenishment account. Any
funds in excess of $5.0 million will be transferred to the payment
account and applied as principal proceeds in accordance with the
priority of payments. Additionally, during a 90-day period
following the closing date, the Issuer can bring an estimated $13.4
million of future funding participations into the pool, resulting
in a target deal balance of $1.190 billion.
The loans are mostly secured by currently cash flowing assets, many
of which are in a period of transition with plans to stabilize and
improve the asset value. In total, 21 loans, representing 56.6% of
the pool, have remaining future funding participations totaling
$298.0 million, which the Issuer may acquire in the future.
Given the floating-rate nature of the loans, the index DBRS
Morningstar used (one-month Libor) was the lower of (1) DBRS
Morningstar's stressed rate that corresponded with the remaining
fully extended term of the loans and (2) the strike price of the
interest rate cap with the respective contractual loan spread added
to determine a stressed interest rate of the loan term. When
measuring the cut-off date balances against the DBRS Morningstar
As-Is Net Cash Flow, 32 loans, representing 91.7% of the cut-off
date pool balance, had a DBRS Morningstar As-Is Debt Service
Coverage Ratio (DSCR) of 1.00 times (x) or below, a threshold
indicative of default risk. Additionally, the DBRS Morningstar
Stabilized DSCR for 19 loans, representing 43.0% of the initial
pool balance, of 1.00x or below indicates elevated refinance risk.
The properties are often transitioning with potential upside in
cash flow; however, DBRS Morningstar does not give full credit to
the stabilization if there are no holdbacks or if the other loan
structural features are insufficient to support such treatment.
Furthermore, even if the structure is acceptable, DBRS Morningstar
generally does not assume the assets will stabilize above market
levels. The transaction will have a sequential-pay structure.
With regard to the Coronavirus Disease (COVID-19) pandemic, the
magnitude and extent of performance stress posed to global
structured finance transactions remains highly uncertain. This
considers the fiscal and monetary policy measures and statutory law
changes that have already been implemented or will be implemented
to soften the impact of the crisis on global economies. Some
regions, jurisdictions, and asset classes are, however, affected
more immediately. Accordingly, DBRS Morningstar may apply
additional short-term stresses to its rating analysis, for example
by front-loading default expectations and/or assessing the
liquidity position of a structured finance transaction with more
stressful operational risk and/or cash flow timing considerations.
The loans were all sourced by an affiliate of the Issuer, which has
strong origination practices and substantial experience in the
multifamily industry. Classes F and G and the Preferred Shares
(collectively, the Retained Securities; representing 14.8% of the
initial pool balance) will be purchased by a wholly owned
subsidiary of MF1 REIT II LLC.
Seven loans, representing 18.9% of the pool, are in areas
identified as DBRS Morningstar Market Ranks of 7 or 8, which are
generally characterized as highly dense urbanized areas that
benefit from increased liquidity driven by consistently strong
investor demand, even during times of economic stress. Markets
ranked 7 and 8 benefit from lower default frequencies than less
dense suburban, tertiary, and rural markets. Urban markets
represented in the deal include Los Angeles, New York, San
Francisco, and Denver. Fifteen loans, representing 44.4% of the
pool balance, have collateral in MSA Group 3, which is the
best-performing group in terms of historical CMBS default rates
among the top 25 MSAs. MSA Group 3 has a historical default rate of
17.2%, which is nearly 10.8 percentage points lower than the
overall CMBS historical default rate of 28.0%.
The pool exhibits a Herfindahl score of 26.9, which is favorable
for a commercial real estate (CRE) collateralized loan obligation
and notably higher than previous transactions rated by DBRS
Morningstar, including MF1 2020-FL4 with a Herfindahl score of
13.9, and MF1 2021-FL3 with a Herfindahl score of 23.1.
The loan collateral was generally in very good physical condition
as evidenced by five loans, representing 19.2% of the initial pool
balance, secured by properties that DBRS Morningstar deemed to be
Above Average in quality. An additional three loans, representing
10.7% of the initial pool balance, are secured by properties with
Average + quality. Furthermore, only two loans, representing 8.0%
of the initial pool balance, are backed by a property that DBRS
Morningstar considered to be Average – quality.
Twenty-three loans, comprising 60.3% of the initial trust balance,
represent acquisition financing wherein sponsors contributed
significant cash equity as a source of funding in conjunction with
the mortgage loan, resulting in a moderately high sponsor cost
basis in the underlying collateral.
DBRS Morningstar has analyzed the loans to a stabilized cash flow
that is, in some instances, above the in-place cash flow. It is
possible that the sponsors will not successfully execute their
business plans and that the higher stabilized cash flow will not
materialize during the loan term, particularly with the ongoing
coronavirus pandemic and its impact on the overall economy. A
sponsor's failure to execute the business plan could result in a
term default or the inability to refinance the fully funded loan
balance. DBRS Morningstar made relatively conservative
stabilization assumptions and, in each instance, considered the
business plan to be rational and the future funding amounts to be
sufficient to execute such plans. In addition, DBRS Morningstar
analyzes loss severity given default (LGD) based on the as-is
loan-to-value ratio (LTV), assuming the loan is fully funded.
The ongoing coronavirus pandemic continues to pose challenges and
risks to the CRE sector and, while DBRS Morningstar expects
multifamily properties to fare better than most other property
types, the long-term effects on the general economy and consumer
sentiment are still unclear. Furthermore, the pandemic has nearly
halted leasing activity for assisted-living properties in the short
term, which will continue to hamper this sector. Thirty-four loans,
representing 96.8% of the initial pool balance (including the
delayed-close loans), were originated after the beginning of the
pandemic in March 2020. Loans originated after the pandemic include
timely property performance reports and recently completed
third-party reports, including appraisals. Seventeen loans,
representing 46.5% of the initial pool balance, are secured by
newly built or recently renovated properties with relatively simple
business plans, which primarily involve the completion of an
initial lease-up phase. The sponsors behind these assets are using
the loans as traditional bridge financing, enabling them to secure
more permanent financing once the properties reach stabilized
operations. Given the uncertainty and elevated execution risk
stemming from the coronavirus pandemic, 22 loans, representing
67.8% of the initial pool balance, are structured with upfront
interest reserves, some of which are expected to cover one year or
more of interest shortfalls. The three assisted-living properties,
representing 8.5% of the initial pool balance, were modeled with
increased probability of default (PD) and LGD.
The loan agreements for LA Multifamily Portfolio II (Prospectus
ID#5), SF Multifamily Portfolio II (Prospectus ID#20), and LA
Multifamily Portfolio III (Prospectus ID#35) allow the related
borrower to acquire additional properties as collateral for the
mortgage loan subject to maximum whole loan proceeds of $100.0
million each. This exposes the pool to an increase in borrower
concentration, and there is no non-consolidation opinion required
for the loans. However, the sponsor is a well-capitalized real
estate investment company with significant experience managing
multifamily properties and operating in West Coast markets,
particularly San Francisco. Furthermore, the sponsor has
successfully executed a similar business plan on other portfolios.
Additionally, the portfolio properties are in very desirable
markets in San Francisco and Los Angeles, with many in areas with a
DBRS Morningstar Market Rank of 7 or 8, which is indicative of a
liquid and urban market. DBRS Morningstar modeled the maximum
whole-loan amounts of $100.0 million by adding additional
properties to the portfolios based on the eligibility criteria
provided by the Issuer. For modeling purposes, DBRS Morningstar
increased the maximum Stabilized LTVs by 250 basis points to allow
some conservatism on the future appraisals, which DBRS Morningstar
will not be able to review.
Four loans, representing 12.8% of the initial cut-off date pool
balance, have a sponsor with negative credit history and/or limited
financial wherewithal, including Dunbar (Prospectus ID#2), Glendale
Portfolio (Prospectus ID#11), 56 West 125th Street (Prospectus
ID#19), and Memory Center of Atlanta (Prospectus ID#30). DBRS
Morningstar deemed these loans to have Weak sponsor strength,
effectively increasing the PD for each loan.
All loans have floating interest rates and are interest-only during
the initial loan term, which ranges from 24 months to 36 months,
creating interest rate risk. The borrowers of all 35 loans have
purchased Libor rate caps, ranging between 0.75% and 3.00%, to
protect against rising interest rates over the term of the loan.
All loans are short term and, even with extension options, have a
fully extended loan term of five years maximum. Additionally, 34
loans, representing 98.9% of the initial pool balance, have
extension options and, in order to qualify for these options, the
loans must meet minimum DSCR and LTV requirements. Nineteen loans,
representing 51.6% of the initial pool balance, amortize on 30-year
schedules during all or a portion of their extension options.
The transaction will likely be subject to a benchmark rate
replacement, which will depend on the availability of various
alternative benchmarks. The current selected benchmark is the
Secured Overnight Financing Rate (SOFR). Term SOFR, which is
expected to be a similar forward-looking term rate comparable with
Libor, is the first alternative benchmark replacement rate but is
currently being developed. There is no assurance that Term SOFR
development will be completed or that it will be widely endorsed
and adopted. This could lead to volatility in the interest rate on
the mortgage assets and floating-rate notes. The transaction could
be exposed to a timing mismatch between the notes and the
underlying mortgage assets as a result of the mortgage benchmark
rates adjusting on different dates from the benchmark on the notes,
or a mismatch between the benchmark and/or the benchmark
replacement adjustment on the notes and the benchmark and/or the
benchmark replacement adjustment (if any) applicable to the
mortgage loans. In order to compensate for differences between the
successor benchmark rate and the then-current benchmark rate, a
benchmark replacement adjustment has been contemplated in the
indenture as a way to compensate for the rate change. Currently
Wells Fargo, National Association in its capacity as Designated
Transaction Representative will generally be responsible for
handling any benchmark rate change, and will be held to a gross
negligence standard only with regard to any liability for its
actions.
Notes: All figures are in U.S. dollars unless otherwise noted.
MIDOCEAN CREDIT II: S&P Affirms CCC+ (sf) Rating on Class F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-RR and B-R
replacement notes from MidOcean Credit CLO II/MidOcean Credit CLO
II LLC, a CLO originally issued in 2014 that is managed by MidOcean
Credit Fund Management L.P. At the same time, S&P withdrew its
ratings on the class A-R and B notes following payment in full on
the April 29, 2021, refinancing date. In addition, S&P affirmed its
ratings on the class C, D-R, E-R, and F notes, which were not
refinanced and not affected by the amendment.
S&P said, "The class F notes do not pass our cash flow stresses at
its current rating. The affirmation reflects the notes'
subordination levels and the transaction's stable performance since
the downgrade in September 2020.
"Our review of this transaction included a cash flow analysis,
based on the portfolio and transaction data 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. Our analysis
also considered the transaction's ability to pay timely interest
and/or ultimate principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Affirmed
MidOcean Credit CLO II/MidOcean Credit CLO II LLC
Class C: A- (sf)
Class D-R: BB+ (sf)
Class E-R: B- (sf)
Class F: CCC+ (sf)
Ratings Withdrawn
MidOcean Credit CLO II/MidOcean Credit CLO II LLC
Class A-R to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Other Outstanding Notes
MidOcean Credit CLO II/MidOcean Credit CLO II LLC
Income notes: Not rated
NR--Not rated.
MORGAN STANLEY 2013-C7: DBRS Cuts Rating on 3 Classes to C(sf)
--------------------------------------------------------------
DBRS, Inc. downgraded seven classes of Commercial Mortgage
Pass-Through Certificates, Series 2013-C7 issued by Morgan Stanley
Bank of America Merrill Lynch Trust 2013-C7 as follows:
-- Class X-B to AA (low) (sf) from AA (sf)
-- Class C to A (high) (sf) from AA (low) (sf)
-- Class PST to A (high) (sf) from AA (low) (sf)
-- Class D to CCC (sf) from BBB (sf)
-- Class E to C (sf) from BB (high) (sf)
-- Class F to C (sf) from BB (sf)
-- Class G to C (sf) from B (sf)
With this rating action, DBRS Morningstar removed Class G from
Under Review with Negative Implications, where it placed the class
in August 2020.
DBRS Morningstar also confirmed the remaining classes in the
transaction as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
The trends on Classes A-3, A-4, A-AB, A-S, X-A, X-B, B, C, and PST
are Stable, while the remaining classes have ratings that do not
carry trends.
The rating downgrades reflect the significant increased credit risk
to the transaction, which is primarily driven by the three loans in
special servicing, collectively representing 15.2% of the pool
balance. Two of the loans are secured by regional malls,
representing 13.3% of the pool, while the remaining loan is secured
by a mixed-use retail and office property. As of the March 2021
remittance, the transaction consists of 57 of the original 64
loans, with collateral reduction of 27.6% since issuance. Seven
loans, representing 12.5% of the pool balance are defeased.
The transaction is concentrated by property type as 29 loans,
representing 46.4% of the pool, are secured by retail properties,
which have been disproportionately affected by the ongoing
Coronavirus Disease (COVID-19) pandemic; however, many individual
properties in the transaction are anchored by a grocer, which has
historically provided higher occupancy and cash flow stability.
Additionally, the largest loan in the transaction, Chrysler East
Building (Prospectus ID#1; 16.3% of the pool), is secured by a
trophy-quality office property in Midtown Manhattan. In addition to
the three loans in special servicing, there are 12 loans on the
servicer's watchlist, representing 12.3% of the pool.
The largest loan in special servicing, Solomon Pond Mall
(Prospectus ID#2; 9.1% of the pool), is secured by a regional mall
in Marlborough, Massachusetts, owned by a joint venture among Simon
Property Group, Canada Pension Plan, and Teachers Insurance and
Annuity Association of America. The collateral includes the in-line
space as well as the Regal Cinemas anchor, with non-collateral
anchor tenants including Macy's, JCPenney, and Sears. The loan
transferred to special servicing in May 2020, and according to the
servicer, discussions regarding a potential loan modification
remain ongoing. In February 2021, Sears announced this location
will close, but a firm closing date has not yet been provided. All
of the Regal Cinemas locations throughout the country temporarily
closed in October 2020 and remain closed as of March 2021,
including the subject's theater. The chain has previously advised
of plans to reopen by the spring of 2021, but no firm announcement
has been made to date with regard to those plans.
According to the February 2021 rent roll, in-line occupancy had
declined to 61.6%. Mall performance was declining in advance of the
pandemic as the year-end debt service coverage ratio (DSCR) figures
for YE2018 and YE2019 were 1.87x and 1.76x, respectively, with the
servicer most recently reporting a YE2020 DSCR of 1.68x. These
figures are down from the issuer's DSCR of 2.10x and the DBRS
Morningstar DSCR at issuance of 2.00x. At issuance, the property
was valued at $200.0 million; however, the declines in occupancy
and cash flow as well as the pending Sears vacancy suggest the
value has likely decreased significantly. According to the
servicer, an updated appraisal is still being finalized. In the
hypothetical liquidation scenario for this loan, DBRS Morningstar
applied a stressed capitalization rate to the YE2020 net cash flow
of $11.0 million, with the resulting value significantly below the
outstanding loan balance of $91.8 million. Given this scenario,
DBRS Morningstar believes the trust will ultimately experience a
loss at loan resolution.
The second-largest loan in special servicing, Valley West Mall
(Prospectus ID#7, 4.2% of the pool), is secured by a regional mall
in West Des Moines, Iowa, owned by Minneapolis-based Watson
Investments (Watson), which originally developed the mall in 1975.
The collateral includes the in-line space and all three anchor
pads. The loan transferred to special servicing in August 2019. The
property's cash flow declines began in 2017 and accelerated after
the loss of anchor tenant Younkers in 2018, leaving two anchors in
Von Maur and JCPenney. Since the loss of Younkers, the servicer has
confirmed that Von Maur will also be vacating the property, a
likelihood that DBRS Morningstar has noted since 2018 when Von Maur
announced plans to open a brand new location at Jordan Creek Town
Center, a competing mall in Des Moines. Most recently, the loan
reported a DSCR of 0.36x at YE2020, down from 0.84x at issuance and
the DBRS Morningstar DSCR of 2.11x at issuance. No plans have been
announced for JCPenney to date, but it is noteworthy that the
tenant's lease expires in 2022.
According to a February 2021 news article in the Des Moines
Register, the property is likely to be redeveloped with a $278
million plan proposed that would include an equity contribution of
$262 million from Watson and a $30 million grant from the state
through the Iowa Reinvestment Act. The redevelopment would take
five to 10 years and would include the near-total demolition of the
current property to add new retail, entertainment, office, hotel,
and multifamily components. While the potential for redevelopment
is noteworthy, the outlook for the loan remains quite grim as the
current value of the collateral is likely significantly below the
appraised value of $95.0 million at issuance. While an updated
appraisal has yet to be completed, the land value at issuance of
$20.1 million is significantly below the outstanding loan balance
of $41.9 million and suggests the loan will experience a
significant loss at resolution.
The remaining loan in special servicing, 494 Broadway (Prospectus
ID#19; 1.9% of the pool), is secured by a mixed-use building
(retail and office) in the SoHo neighborhood of Lower Manhattan.
The loan has been in special servicing since July 2019, and
according to the servicer, a modification proposal could not be
finalized with the borrower and the servicer now expects the
property will be foreclosed. The property was 77.2% occupied at
YE2020; however, two tenants (54.5% of the net rentable area) are
on month-to-month leases. The property was last valued at $16.3
million in November 2019, down from the issuance value of $31.3
million and below the current outstanding loan exposure of $21.7
million. The loan is sponsored by Thor Equities, an institutional
New York City commercial real estate owner; however, the value
decline that has likely been significantly exacerbated amid the
effects of the coronavirus pandemic suggests significantly
increased risks for this loan. DBRS Morningstar assumed a loss
severity exceeding 70.0% in the analysis for this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2015-C20: DBRS Cuts Class F Certs Rating to C(sf)
----------------------------------------------------------------
DBRS Limited downgraded the ratings of the Commercial Mortgage
Pass-Through Certificates, Series 2015-C20 issued by Morgan Stanley
Bank of America Merrill Lynch Trust 2015-C20 as follows:
-- Class X-E to B (sf) from BB (sf)
-- Class E to B (low) (sf) from BB (low) (sf)
-- Class F to C (sf) from B (low) (sf)
With this review, DBRS Morningstar removed Classes E, X-E, and X-F
from Under Review with Negative Implications, where they were
placed on August 6, 2020.
In addition, DBRS Morningstar confirmed the remaining classes as
follows:
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PST at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
DBRS Morningstar also discontinued its rating on Class X-F as the
applicable reference obligation now has a C (sf) rating.
Classes D, E, and X-E have been assigned Negative trends. Class F
has a rating that does not carry a trend. All other trends remain
Stable.
The rating downgrades and Negative trend assignments reflect the
increased risk of loss to the trust for some of the loans in the
pool, including two loans in special servicing, Ashford Portfolio
– Palm Desert, CA (Prospectus ID #10, 2.2% of the pool) and
Ashford Portfolio – Charlotte/Durham, NC (Prospectus ID #11, 1.9%
of the pool), which share the same sponsor in Ashford Hospitality
Limited Partnership (Ashford). Both loans were liquidated in the
analysis for this review as the servicer has indicated Ashford's
commitment to the loans may be in question. Collectively, there are
11 loans, representing 13.3% of the pool, in special servicing.
DBRS Morningstar notes significantly increased risks for some of
the loans in special servicing that were showing performance
declines even before the Coronavirus Disease (COVID-19) global
pandemic.
Holiday Inn Express – Syracuse (Prospectus ID #53, formerly 0.8%
of the pool) was disposed in February 2021, resulting in a loss to
the unrated Class G certificates. The loan was secured by a 95-key
Holiday Inn Express located near the Syracuse Airport in Syracuse,
New York, and had been in special servicing since 2017. The
realized loss was generally in line with DBRS Morningstar's
projections.
As of the March 2021 remittance, 82 of the original 88 loans remain
in the pool, with a collateral reduction of 15.3% since issuance.
Nine loans, representing 5.1% of the current pool balance, are
fully defeased. In addition to the specially serviced loans, there
are 18 loans, representing 20.3% of the current trust balance, on
the servicer's watchlist as of the March 2021 remittance. The
servicer is monitoring these loans for a variety of reasons,
including low debt service coverage ratio (DSCR) and occupancy
issues; however, the primary reason for the increase of loans on
the watchlist is the coronavirus-driven stress for retail and
hospitality properties, with watchlisted loans backed by those
property types generally reporting a low DSCR.
The Ashford Portfolio – Palm Desert, CA loan is secured by a
portfolio consisting of one extended-stay hotel (Residence Inn Palm
Desert) and one limited-service hotel (Courtyard Inn Palm Desert)
totaling 281 keys located in Palm Desert, California. Prior to the
onset of the coronavirus pandemic, performance had been stable,
with a YE2019 DSCR of 1.86x, compared with the YE2018 DSCR of 2.09x
and 1.60x at issuance. The loan transferred to special servicing in
May 2020 at the sponsor's request and, since January 2021, the
servicer has reported that Ashford has not been responsive to
servicer communication and has yet to execute the forbearance
agreement approved by the special servicer. The loan has not been
paid since March 2020. Given the uncertainty with regard to the
sponsor's commitment to the loan and the likelihood the trust would
be faced with selling the properties at a discount to the issuance
values if a foreclosure were executed, a liquidation scenario was
assumed for this loan.
The Ashford Portfolio – Charlotte/Durham, NC is secured by two
limited-service SpringHill Suites hotels located in Charlotte and
Durham, North Carolina. Like the Palm Springs portfolio previously
discussed, the performance for these hotels was generally stable as
compared with issuance figures prior to the onset of the
coronavirus pandemic. This loan was also transferred to special
servicing in May 2020 at Ashford's request and also remains
outstanding for all payments due after March 2020. According to
servicer commentary since January 2021, a non-judicial foreclosure
is being pursued, with foreclosure sales for both properties
expected to be final by the end of March 2021. The loan was
liquidated based on a significant haircut to the issuance
valuation, with the projected losses for this and the other Ashford
loan supporting the rating downgrades for the lowest-rated
classes.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2015-C23: DBRS Confirms B Rating on Class X-FG Certs
-------------------------------------------------------------------
DBRS Limited confirmed the ratings on all the classes of Commercial
Pass-Through Certificates, Series 2015-C23 issued by Morgan Stanley
Bank of America Merrill Lynch Trust 2015-C23 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PST at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)
With this review, DBRS Morningstar changed the trends on Classes F,
G, and X-FG to Negative from Stable. All other trends remain
Stable.
According to the March 2021 remittance, 67 of the original 75 loans
remain in the trust, with loan repayments and amortization
contributing to a collateral reduction of 17.2% since issuance.
Five loans, representing 2.8% of the current pool balance, are
fully defeased. There have been no losses incurred to date and the
increased credit support and generally stable performance of the
underlying loans supports the rating confirmations with this
review.
There are challenges for the pool, some of which are driven by
events in motion prior to the Coronavirus Disease (COVID-19)
pandemic, but the impact of the pandemic on retail and hotel
properties in particular have introduced noteworthy increased risks
considered for this review. Three loans, representing 5.4% of the
current pool balance, are in special servicing. Both of those loans
are backed by hotel properties and both were post-coronavirus
transfers. There are an additional 15 loans, representing 32.8% of
the current pool balance, on the servicer's watchlist. The
watchlisted loans are being monitored for a variety of issues
including tenant rollover, low debt service coverage ratios (DSCRs)
and/or occupancy issues, property damage, or coronavirus-related
forbearance requests.
The Negative trends assigned to three classes reflect the increased
risk of loss to the trust for the largest specially serviced loan,
Hilton Garden Inn W 54th Street (Prospectus ID#7, 4.4% of the
pool). The pari passu loan is secured by a 401-key, select-service
hotel located in Midtown Manhattan, with pari passu debt held
across three CMBS transactions, including the DBRS
Morningstar-rated Morgan Stanley Capital I Trust 2015-MS1
transaction and another transaction not rated by DBRS Morningstar.
The loan was transferred to special servicing in June 2020 for
imminent monetary default. Although the loan reported DSCR figures
that were generally healthy over the last five years, cash flows
have consistently lagged the issuance expectations due to a
combination of lower revenues and higher expenses. Most recently,
the property has been hard hit amid the coronavirus pandemic, which
has ground travel to New York to a near halt as both business and
leisure travel has declined significantly.
After an excess cash reserve used to pay debt service shortfalls
was depleted in October 2020, a loan modification proposal was
submitted by the borrower, which remains under review by the
servicer as of March 2021. The loan was reported 30 days delinquent
as of the March 2021 reporting. Although the property's performance
prior to the coronavirus pandemic was relatively strong (a factor
that should incentivize the borrower to continue working with the
special servicer to resolve the outstanding defaults), there are
significantly increased risks for this loan regarding uncertainties
since issuance in the sponsor's commitment to the loan and the
current prospects for a return to historical performance levels for
the collateral hotel. As such, DBRS Morningstar applied a
probability of default penalty to increase the expected loss in the
analysis for this review.
At issuance, DBRS Morningstar shadow rated the 32 Old Slip Fee loan
(Prospectus ID#2; 7.1% of the pool) investment grade. With this
review, DBRS Morningstar confirmed that the performance of this
loan remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2021-L5: Fitch Rates Class G Certs 'B-sf'
--------------------------------------------------------
Fitch Ratings has issued a presale report on MSC 2021-L5,
commercial mortgage pass-through certificates, Series 2021-L5.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $10,000,000 class A-1 'AAAsf'; Outlook Stable
-- $68,700,000 class A-2 'AAAsf'; Outlook Stable
-- $210,000,000ab class A-3 'AAAsf'; Outlook Stable
-- $0b class A-3-1 'AAAsf'; Outlook Stable
-- $0bc class A-3-X1 'AAAsf'; Outlook Stable
-- $0b class A-3-2 'AAAsf'; Outlook Stable
-- $0bc class A-3-X2 'AAAsf'; Outlook Stable
-- $23,644,000 class A-SB 'AAAsf'; Outlook Stable
-- $259,597,000ab class A-4 'AAAsf'; Outlook Stable
-- $0b class A-4-1 'AAAsf'; Outlook Stable
-- $0bc class A-4-X1 'AAAsf'; Outlook Stable
-- $0b class A-4-2 'AAAsf'; Outlook Stable
-- $0bc class A-4-X2 'AAAsf'; Outlook Stable
-- $571,941,000c class X-A 'AAAsf'; Outlook Stable
-- $147,070,000c class X-B 'A-sf'; Outlook Stable
-- $71,492,000b class A-S 'AAAsf'; Outlook Stable
-- $0b class A-S-1 'AAAsf'; Outlook Stable
-- $0bc class A-S-X1 'AAAsf'; Outlook Stable
-- $0b class A-S-2 'AAAsf'; Outlook Stable
-- $0bc class A-S-X2 'AAAsf'; Outlook Stable
-- $39,832,000b class B 'AA-sf'; Outlook Stable
-- $0b class B-1 'AA-sf'; Outlook Stable
-- $0bc class B-X1 'AA-sf'; Outlook Stable
-- $0b class B-2 'AA-sf'; Outlook Stable
-- $0bc class B-X2 'AA-sf'; Outlook Stable
-- $35,746,000b class C 'A-sf'; Outlook Stable
-- $0b class C-1 'A-sf'; Outlook Stable
-- $0bc class C-X1 'A-sf'; Outlook Stable
-- $0b class C-2 'A-sf'; Outlook Stable
-- $0bc class C-X2 'A-sf'; Outlook Stable
-- $39,832,000cd class X-D 'BBB-sf'; Outlook Stable
-- $19,405,000cd class X-F 'BB-sf'; Outlook Stable
-- $8,171,000cd class X-G 'BB-sf'; Outlook Stable
-- $22,469,000d class D 'BBBsf'; Outlook Stable
-- $17,363,000d class E 'BBB-sf'; Outlook Stable
-- $19,405,000d class F 'BB-sf'; Outlook Stable
-- $8,171,000d class G 'B-sf'; Outlook Stable
The following class is not expected to be rated by Fitch:
-- $30,639,742de class H-RR.
(a) The initial certificate balances of class A-3 and class A-4 are
not yet known but expected to be $469,597,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-3 balance range is $0 - $210,000,000, and the expected
class A-4 balance range is $259,597,000 - $469,597,000. The
balances of classes A-3 and A-4 shown above are the hypothetical
balance for A-3 if A-4 were sized at the minimum of its range. In
the event that the class A-3 certificates are issued with an
initial certificate balance of $469,597,000, the class A-4
certificates will not be issued.
(b) Exchangeable Certificates. The class A-3, A-4, A-S, B and C
certificates are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the corresponding
classes of exchangeable certificates. Class A-3 may be surrendered
(or received) for the received (or surrendered) classes A-3-1 and
A-3-X1. Class A-3 may be surrendered (or received) for the received
(or surrendered) classes A-3-2 and A-3-X2. Class A-4 may be
surrendered (or received) for the received (or surrendered) classes
A-4-1 and A-4-X1. Class A-4 may be surrendered (or received) for
the received (or surrendered) classes A-4-2 and A-4-X2. Class A-S
may be surrendered (or received) for the received (or surrendered)
classes A-S-1 and A-S-X1. Class A-S may be surrendered (or
received) for the received (or surrendered) classes A-S-2 and
A-S-X2. Class B may be surrendered (or received) for the received
(or surrendered) classes B-1 and B-X1. Class B may be surrendered
(or received) for the received (or surrendered) classes B-2 and
B-X2. Class C may be surrendered (or received) for the received (or
surrendered) classes C-1 and C-X1. Class C may be surrendered (or
received) for the received (or surrendered) classes C-2 and C-X2
(c) Notional amount and interest only.
(d) Privately placed and pursuant to Rule 144A
(e) Horizontal Risk Retention
The expected ratings are based on information provided by the
issuer as of April 26, 2021.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 65 loans secured by 125
commercial properties having an aggregate principal balance of
$817,058,743 as of the cut-off date. The loans were contributed to
the trust by Starwood Mortgage Capital LLC, KeyBank National
Association, Morgan Stanley Mortgage Capital Holdings LLC, Argentic
Real Estate Finance LLC and Barclays Capital Real Estate Inc. The
Master Servicer is expected to be KeyBank, National Association and
the Special Servicer is expected to be LNR Partners, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 17.7% of the properties
by balance, cash flow analyses of 81.4% of the pool, and asset
summary reviews on 100% of the pool.
Coronavirus Impact: The ongoing containment effort related to the
coronavirus pandemic may have an adverse impact on near-term
revenue (i.e. bad debt expense, rent relief) and operating expenses
(i.e. sanitation costs) for some properties in the pool.
Delinquencies may occur in the coming months as forbearance
programs are put in place, although the ultimate impact on credit
losses will depend heavily on the severity and duration of the
negative economic impact of the coronavirus pandemic and to what
degree fiscal interventions by the U.S. federal government can
mitigate the impact on consumers.
Per the offering documents, all the loans are current and are not
subject to any ongoing forbearance requests.
KEY RATING DRIVERS
Higher Fitch Leverage Than Recent Transactions: The pool has higher
leverage than other recent multiborrower transactions rated by
Fitch. The pool's trust Fitch LTV of 105.4% is worse than the 2020
and 2021 YTD averages of 99.6% and 101.2%, respectively.
Additionally, the pool's Fitch DSCR of 1.34x is slightly better
than the 2020 average of 1.32x but slightly worse than 2021 YTD
average of 1.41x. Excluding the credit opinion loan (4.5%), Fitch
trust DSCR and LTV are 1.30x and 108.1%, respectively.
Property Type Exposure. Loans secured by industrial properties
represent 21.0% of the pool by balance including two of the top 10
and five of the top 20. The total industrial concentration is much
larger than the 2020 average of 9.8% and the 2021 YTD average of
11.8%. Loans secured by office represent 20.0% of the pool by
balance, below the 2020 average of 41.2% for 2020 and slightly
lower than 40.5% for 2021 YTD. Loans secured by multifamily
properties represent 17.7% of the pool, higher than the 2020 and
2021 YTD averages of 16.3% and 13.1%.
Above-Average Pool Diversification. The top 10 loans comprise 45.9%
of the pool by balance. This is a lower concentration than in 2020
or 2021 YTD, with averages of 56.8% and 55.5%, respectively. The
Loan Concentration Index (LCI) of 310 is lower than the 2020 and
2021 YTD averages of 440 and 427, respectively. The Sponsor
Concentration Index (SCI) of 315 is also lower than the 2020 and
2021 YTD averages of 474 and 468, respectively.
Below-Average Amortization. Forty-one loans (73.6%) are full
interest-only loans, which is above the 2020 and 2021 YTD averages
of 67.7% and 70.7%, respectively. Nineteen loans (20.4%) are
partial interest-only loans, which is just above the 2020 and 2021
YTD averages, both 20.0%. Based on the scheduled balances at
maturity, the pool will pay down by 3.9%, which is below the 2020
and 2021 YTD averages of 5.3% and 4.9%, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes in one variable, Fitch
NCF:
-- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf'.
-- 20% NCF Increase:
'AAAsf'/'AAAsf'/'AAAsf'/'AA+sf'/'AA-sf'/'A-sf'/'BBB+sf'.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Similarly, declining cash flow decreases property value and
capacity to meet its debt service obligations. The table below
indicates the model implied rating sensitivity to changes to the
same one variable, Fitch NCF:
-- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BBsf'/'B-sf'
-- 10% NCF Decline:
'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'BB+sf'/'BBsf'/'CCCsf'
-- 20% NCF Decline:
'A+sf'/'BBB+sf'/'BBBsf'/'BB+sf'/'Bsf'/'CCCsf'/'CCCsf'
-- 30% NCF Decline:
'BBB+sf'/'BBBsf'/'B+sf'/'CCCsf'/'CCCsf'/'CCCsf'/'CCCsf'
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 Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
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.
MSC MORTGAGE 2012-C4: DBRS Cuts Rating on 3 Classes to C(sf)
------------------------------------------------------------
DBRS Limited downgraded four classes of the Commercial Mortgage
Pass-Through Certificates, Series 2012-C4 issued by MSC Mortgage
Securities Trust, 2012-C4 as follows:
-- Class D to BBB (high) (sf) from A (low) (sf)
-- Class E to C (sf) from BBB (low) (sf)
-- Class F to C (sf) from BB (sf)
-- Class G to C (sf) from B (sf)
DBRS Morningstar confirmed the remaining classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class C at A (high) (sf)
In addition, DBRS Morningstar discontinued its rating on Class X-B
as the applicable reference obligation now has a C (sf) rating.
DBRS Morningstar changed the trend on Class D to Negative from
Stable. Classes E, F, and G have ratings that do not carry trends.
All other trends are Stable. DBRS Morningstar also designated Class
G as having Interest in Arrears.
The downgrades and Negative trends generally reflect the increased
likelihood of losses to the trust for the two specially serviced
loans in the pool as of March 2021. These loans collectively
represent 18.6% of the pool and include the largest loan in the
pool, Shoppes at Buckland Hills (Prospectus ID#1, 15.7% of the
pool), and was analyzed with a loss severity of 50.0% with this
review. DBRS Morningstar is also monitoring the pool's high
concentration of loans backed by retail properties, which represent
45.1% of the pool, as this property type has been most acutely
affected by the Coronavirus Disease (COVID-19) pandemic.
As of the March 2021 remittance, 30 of the original 38 loans remain
in the pool, with an aggregate principal balance of $704.5 million,
representing a collateral reduction of 35.8% since issuance. In
addition to the significant paydown, the pool also benefits from
defeasance as 10 loans, representing 31.8% of the current pool
balance, are fully defeased. There are three loans, representing
4.8% of the current trust balance, on the servicer's watchlist. The
servicer is monitoring these loans for a variety of reasons,
including low debt service coverage ratios (DSCRs) and occupancy
issues.
The Shoppes at Buckland Hills loan is secured by a regional mall
located in Manchester, Connecticut, within the Hartford
metropolitan statistical area. The loan was transferred to special
servicing in October 2020 and, as of the March 2021 remittance,
reported 30 days to 59 days delinquent. According to the servicer,
the loan sponsor, an affiliate of Brookfield Property Partners, had
advised that operating and debt service shortfalls will no longer
be supported, and the servicer is currently working to reach an
agreement regarding a plan to move forward with the loan workout.
As of September 2020, the property reported an occupancy rate of
97.1% and the loan reported a DSCR of 0.86 times (x), compared with
the YE2019 occupancy of 97.0% and DSCR of 1.42x. The non-collateral
anchors at the property include Macy's, Macy's Men's & Home, and
JCPenney. The former non-collateral anchor, Sears, was closed in
January 2021. Macy's recently announced plans to close two stores
in Connecticut, but the subject location was not included in that
set. JCPenney, which was recently acquired out of bankruptcy by a
joint venture that includes the loan sponsor, Brookfield, has not
provided any indication of plans to close the subject location. The
collateral also includes a pad site near the property that houses a
Walmart store operating on a ground lease.
The largest collateral mall tenants include Dick's Sporting Goods,
Dave & Buster's, and Barnes & Noble. Although the occupancy rate
and cash flows have consistently held near the issuance figures for
the life of the loan prior to the coronavirus pandemic, the
performance has declined significantly with the 2020 figures, and
the sponsor does not appear to be committed to the loan. Although
the Sears anchor was neither a collateral tenant nor likely a
significant draw for the mall, the loss of the store is an
increased risk for the loan, as is the continued uncertainty for
some of the collateral tenants including Dave & Buster's, which
remains closed amid the pandemic. The subject is the inferior of
two regional malls in the Hartford area, with the other property,
the Taubman-owned Westfarms, also suffering from the loss of a
recently closed Lord & Taylor anchor that would likely mean
increased competition for backfilling the Sears space at the
subject mall.
Sales figures have not been provided to DBRS Morningstar since
December 2017, when the comparable sales per square foot (sf) for
tenants with less than 10,000 sf was $348 per sf (psf), down from
$378 psf at issuance. If trends have continued in that direction
over the last few years, the sales could be well below the issuance
figures and, if that is the case, would explain some of
Brookfield's notice to the servicer regarding the unwillingness to
fund shortfalls out of pocket. Given the sales trends, the loss of
the Sears anchor and the general unknowns amid the coronavirus
pandemic, particularly for the less well-positioned mall properties
located in secondary markets, DBRS Morningstar believes the
property's as-is value has fallen well below the issuance figure.
Given the outstanding delinquency and Brookfield's notice to the
servicer that suggests the trust could soon own this property, DBRS
Morningstar liquidated the loan in the analysis for this review,
based on a stressed value that resulted in a loss severity of
50.0%.
The second-largest loan in special servicing, Hilton Springfield
(Prospectus ID#15, 2.9% of the current trust balance), transferred
to special servicing in April 2020 for imminent monetary default.
The loan is secured by a 245-key full-service hotel located in
Springfield, Virginia. As of the March 2021 remittance, the loan
was 90 days to 120 days delinquent, with the servicer noting that
the borrower gave consent to a receivership and the petition has
been filed. According to the servicer, a note sale is being
considered, but nothing has been finalized with regard to the
workout strategy to date.
Although the loan was current for the life of the loan until the
transfer to special servicing, the hotel performance has
consistently held at a level well below the issuance figures since
2013. As of YE2020, the property reported a DSCR of -0.24x,
compared with the September 2019 DSCR of 0.68x and the YE2018 DSCR
of 0.77x. An updated appraisal has not been provided to date, but
given the sustained performance declines and the additional stress
for the property amid the coronavirus pandemic, it is likely the
as-is value is well below the issuance figure. DBRS Morningstar
liquidated the loan in the analysis for this review, based on a
significant haircut to the issuance value that resulted in a loss
severity in excess of 60.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
NEUBERGER BERMAN 41: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Neuberger Berman Loan
Advisers CLO 41 Ltd./Neuberger Berman Loan Advisers CLO 41 LLC's
floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests. The notes are
managed by Neuberger Berman Loan Advisers II LLC.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Neuberger Berman Loan Advisers CLO 41 Ltd./Neuberger Berman Loan
Advisers CLO 41 LLC
Class A, $310.00 million: AAA (sf)
Class B, $70.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $50.00 million: Not rated
NEWREZ WAREHOUSE 2021-1: Moody's Gives (P)B3 Rating on Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of notes issued by NewRez Warehouse Securitization Trust
2021-1 (the transaction). This is the first Warehouse
Securitization by NewRez LLC. The ratings range from (P)Aaa (sf) to
(P)B3 (sf). The securities in this transaction are backed by a
revolving pool of newly originated first-lien, fixed rate and
adjustable rate, residential mortgage loans which are eligible for
purchase by Fannie Mae, Freddie Mac or in accordance with the
criteria of Ginnie Mae for the guarantee of securities backed by
mortgage loans to be pooled in connection with the issuance of
Ginnie Mae securities. The pool may also include FHA Streamline
mortgage loans or VA-IRRR mortgage Loans, which may have limited
valuation and documentation. The revolving pool has a total size of
$500,000,000.
Issuer: NewRez Warehouse Securitization Trust 2021-1
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa2 (sf)
Cl. C, Assigned (P)A2 (sf)
Cl. D, Assigned (P)Baa2 (sf)
Cl. E, Assigned (P)B3 (sf)
RATINGS RATIONALE
The transaction is based on a repurchase agreement between NewRez
LLC ("NewRez"), as repo seller, and NewRez Warehouse Securitization
Trust 2021-1 as buyer.
Moody's expected losses in a based case scenario are 5.67% at the
mean and 4.75% at the median. Moody's loss at a stress level
consistent with Moody's Aaa ratings is 31.43%. The loss levels are
based on a scenario in which the repo seller does not pay the
aggregate repurchase price to pay off the notes at the end of the
facility's three-year revolving term, and the repayment of the
notes will depend on the credit performance of the remaining static
pool of mortgage loans. To assess the credit quality of the static
pool, Moody's created a hypothetical adverse pool based on the
facility's eligibility criteria, which includes no more than 5% (by
unpaid balance) adjustable-rate mortgage (ARM) loans. Loans which
are subject to payment forbearance, a trial modification, or
delinquency are ineligible to enter the facility. However, with
respect to any purchased mortgage loan that fails to satisfy the
definition of an eligible mortgage loan after being purchased, the
repo seller may keep such loan in the trust with an assigned market
value and principal balance of zero. The repo seller must
repurchase ineligible loans that are subject to Level C or D
exceptions or a TILA-RESPA Integrated Disclosure (TRID) violation
in a third-party diligence (TPR) report, or have breached
representations in the master repurchase agreement (MRA) related to
predatory lending, HOEPA or environmental matters.
Moody's analyzed the pool using its US MILAN model and made
additional pool level adjustments to account for risks related to
(i) a weak representation and warranty enforcement framework and
(ii) potential non-compliance findings related to the (TRID) Rule
in TPR reports. This transaction does not include mortgage loans
evidenced with eNotes as of the time of closing, but the issuer may
exercise its option to amend the transaction documents to include
eNotes after closing. Such amendment will be subject to
satisfaction of the rating agency condition (RAC).
The final rating levels are based on Moody's evaluation of the
credit quality of the collateral as well as the transaction's
structural and legal framework. The ratings on the notes are based
on the credit quality of the mortgage loans backing the notes.
Collateral Description:
The mortgage loans will be newly originated, first-lien, fixed-rate
and adjustable rate mortgage loans that also comply with the
eligibility criteria set forth in the master repurchase agreement.
The aggregate principal balance of the purchased loans at closing
will be $500,000,000. Per the transaction documents, the mortgage
pool will have a minimum weighted average FICO of 730 and a maximum
weighted average LTV of 82%.
The ultimate composition of the pool of mortgage loans remaining in
the facility at the end of the three-year term upon default of
NewRez is unknown. Moody's modeled this risk through evaluating the
credit risk of an adverse pool constructed using the eligibility
criteria. In generating the adverse pool: 1) Moody's assumed the
worst numerical value from the criteria range for each loan
characteristic. For example, the credit score of the loans is not
less than 660 and the weighted average credit score of the
purchased mortgage loans is not less than 730; the maximum
debt-to-income ratio is 50% in the adverse pool (per eligibility
criteria); 2) Moody's assumed risk layering for the loans in the
pool within the eligibility criteria. For example, loans with the
highest LTV also had the lowest FICO to the extent permitted by the
eligibility criteria; 3) Moody's took into account the specified
restrictions in the eligibility criteria such as the weighted
average LTV and FICO; 4) Since these loans are eligible for
purchase by the agencies, Moody's also took into account the
specified restrictions in the underwriting criteria.
The transaction allows the warehouse facility to include up to 25%
of mortgage loans (by outstanding principal balance) whose
collateral documents have not yet been delivered to the custodian
(wet loans). This transaction is more vulnerable to the risk of
losses owing to fraud from wet loans during the time it does not
hold the collateral documents. There are risks that a settlement
agent will fail to deliver the mortgage loan files after receipt of
funds, or the sponsor of the securitization, either by committing
fraud or by mistake, will pledge the same mortgage loan to multiple
warehouse lenders. However, Moody's analysis has considered several
operational mitigants to reduce such risks, including (i)
collateral documents must be delivered to the custodian within 10
business days following a wet loan's funding or it becomes
ineligible, (ii) the transaction will only fund NewRez's warehouse
lenders, not the individual settlement agents, (iii) NewRez, as the
repo seller, has a fidelity bond in place in the event of fraud in
connection with the crime or dishonesty of its employees.
The mortgage loans will be originated by NewRez or Caliber Home
Loans, Inc. (Caliber) following the acquisition by NRZ. An eligible
mortgage loan originated by Caliber will be originated as a
correspondent for NewRez and will be originated in accordance with
NewRez's origination guidelines. NewRez has the necessary
processes, staff, technology and overall infrastructure in place to
effectively originate agency-eligible mortgage loans for this
transaction.
The loans will be serviced by NewRez LLC d/b/a Shellpoint Mortgage
Servicing (Shellpoint). U.S. Bank National Association will be the
standby servicer. Moody's consider the overall servicing
arrangement for this pool to be adequate. At the transaction
closing date, the servicer acknowledges that it is servicing the
purchased loans for the joint benefit of the issuer and the
indenture trustee.
Transaction Structure:
Moody's analysis of the securitization structure includes reviewing
bankruptcy remoteness, assessing the ability of the indenture
trustee to take possession of the collateral in an event of
default, conformity of the collateral with the eligibility criteria
as well as allocation of funds to the notes.
The transaction is structured as a master repurchase agreement
between NewRez (the repo seller) and the NewRez Warehouse
Securitization Trust 2021-1 (the trust or issuer). The U.S.
Bankruptcy Code provides repurchase agreements, security contracts
and master netting agreements a "safe harbor" from the Bankruptcy
Code automatic stay. Due to this safe harbor, in the event of a
bankruptcy of NewRez , the issuer will be exempt from the automatic
stay and thus, the issuer will be able to exercise remedies under
the master repurchase agreement, which includes seizing the
collateral.
During the revolving period, the repo seller's obligations will
include making timely payments of interest accrued on the notes as
well as the aggregate monthly fees. Failure to make such payments
will constitute a repo trigger event whereby the indenture trustee
will seize the collateral and terminate the repo agreement. It is
expected that the notes will not receive payments of principal
until the expected maturity date or after the occurrence and
continuance of an event of default under the indenture unless the
repo seller makes an optional prepayment. In an event of default,
principal will be distributed sequentially amongst the classes.
Realized losses will be allocated in a reverse sequential order.
In addition, since the pool may consist of both fixed rate and
adjustable rate mortgages, the transaction may be exposed to
potential risk from interest rate mismatch. To account for the
mismatch, Moody's assumed a stressed LIBOR curve by increasing the
one-month LIBOR rate incrementally for a certain period until it
reaches the maximum allowable interest rate as described in the
transaction documents.
Ongoing Due Diligence
During the revolving period, Clayton Services LLC (or a qualified
successor diligence provider appointed by the repo seller) will
conduct ongoing due diligence every 180 days on 100 randomly
selected loans (other than wet loans and ineligible loans). The
first review will be performed 30 days following the closing date.
The scope of the review will include credit underwriting,
regulatory compliance, valuation and data integrity. On any review
date, to the extent that a final due diligence report identifies
Level C or D exceptions greater than or equal to 6% by loan count
of the purchased mortgage loans reviewed, the next review date will
be 90 days thereafter such review.
Because Moody's analysis is based on a scenario in which the
facility terms out, due diligence reviews provide some control on
the credit quality of the collateral. The due diligence framework
in this transaction combined with the collateral eligibility
controls help mitigate the risks of adverse selection in this
transaction.
Loans that have compliance findings related to the TRID Rule will
be purchased out of the facility. However, in a scenario where the
transaction terms out due to an event of default, the trust maybe
exposed to potential losses as there may not be an active
counterparty to resolve any issues related to TRID.
While the due diligence review will provide some validation on the
quality of the loans, it may not be fully representative of the
collateral quality of the facility at all times. This is mainly due
to the frequency of the due diligence review, the revolving nature
of the collateral pool, and that the review will be conducted on a
sample basis. Also, by the time the due diligence review is
completed, some of the sampled loans may no longer be in the pool.
Representation and Warranties
For a mortgage loan to qualify as an eligible mortgage loan, the
loan must meet the repo seller's representations and warranties.
The substance of the representations and warranties are consistent
with those in Moody's published criteria for representations and
warranties for U.S. RMBS transactions. After a repo event of
default, a delinquent loan reviewer will conduct a review of loans
that are more than 120 days delinquent to identify any breaches of
the representations and warranties provided by the repo seller.
Loans that breach the representations and warranties will become
ineligible mortgage loans.
While the transaction has the above described representation and
warranty enforcement mechanism, Moody's believe that in the
amortization period, after an event of default where the repo
seller did not pay the notes in full, it is unlikely that the repo
seller will repurchase the mortgage loans. In addition, the
noteholders (holding 100% of the aggregate principal amount of all
notes) may waive the requirement to appoint a delinquent loan
reviewer. Moody's Aaa expected loss and base case expected loss
includes an adjustment for the weak representation and warranties
enforcement.
Margin maintenance
On each business day, the custodian will mark to market the value
of the purchased mortgage loans. If the purchase price is greater
than the aggregate market value of the purchased mortgage loans,
then there is a margin deficit. The custodian will notify the repo
seller and the repo seller will transfer to the buyer's account
additional eligible mortgage loans and/or cash such that the margin
value of the purchased mortgage loans equals or exceeds the
repurchase price. The market value for the purpose of margin
maintenance is capped at the outstanding unpaid principal balance
of such mortgage loan. Unlike other warehouse transactions Moody's
rated, this transaction does not require a margin call unless the
margin deficit equals or exceeds the threshold of $1,000,000, as
calculated by the custodian. Moody's view this threshold as an
operational convenience and not a material credit weakness
Elevated social risks associated with the coronavirus
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 consumer assets from a gradual and unbalanced
recovery in US economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's have not made any adjustments related to coronavirus for
this transaction because (i) loans that are subject to payment
forbearance or a trial modification are ineligible to enter the
facility, and the repo seller must repurchase loans in the facility
that become subject to forbearance, (ii) delinquent loans are
ineligible to enter the facility, and (iii) loans are unlikely to
be modified while in the facility due to the seasoning constraint
specified in the eligibility criteria. There's no credit impact for
zero value ineligible loans to remain in the trust and those loans,
if any, will be flagged in monitoring data tapes and excluded from
third-party due diligence sampling.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from 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 the state of the housing
market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a weaker collateral composition than that in the
adverse pool, financial distress of any of the counterparties.
Transaction performance also depends greatly on the US macro
economy and housing market.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2020.
OBX 2021-J1: Moody's Assigns (P)B2 Rating to Cl. B-5 Notes
----------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
fifty-eight classes of residential mortgage-backed securities
(RMBS) issued by OBX 2021-J1. The ratings range from (P)Aaa (sf) to
(P)B2 (sf).
OBX 2021-J1 is a securitization of prime residential mortgages. The
pool is comprised of 367 loans, of which there are 366 30-year and
one 28-year fixed rate mortgage.
This transaction represents the first prime jumbo issuance by
Onslow Bay Financial LLC (the sponsor). The transaction includes
367 fixed rate, first lien mortgages with an aggregate loan balance
of approximately $353,840,244. The pool consists of 100% non
-conforming mortgage loans. The mortgage loans for this transaction
have been acquired by the sponsor and the seller, Onslow Bay
Financial LLC, from Bank of America, National Association (BANA).
BANA acquired the mortgage loans through its whole loan purchase
program from various originators. Approximately, 94.2% of the loans
in the pool were underwritten to BANA whole loan purchase program's
guidelines, and the remaining 5.8% were underwritten to loanDepot's
guidelines. All the loans are designated as safe harbor qualified
mortgages (QM) and meet Appendix Q to the QM rules. Shellpoint
Mortgage Servicing (SMS) will service the loans and Wells Fargo
Bank, N.A. (Aa2) will be the master servicer. SMS will be
responsible for advancing principal and interest and other
corporate advances, with the master servicer backing up SMS'
advancing obligations if SMS cannot fulfill them.
Three third-party review (TPR) firms verified the accuracy of the
loan level information that Moody's received from the sponsor.
These firms conducted detailed credit, property valuation, data
accuracy and compliance reviews on 100% of the mortgage loans in
the collateral pool. The TPR results indicate that there are no
material compliance, credit, or data issues and no appraisal
defects.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to other prime jumbo securitizations. In addition,
Moody's adjusted its expected losses based on qualitative
attributes, including the financial strength of the representation
and warranties (R&W) provider and TPR results.
OBX 2021-J1 has a shifting interest structure in which subordinates
will receive no unscheduled principal payment (prepayment) during
the first five years, which protects and accelerates the pay-down
of the senior classes and therefore protects the senior classes
from losses. The transaction also has a senior subordination floor
and a subordination lockout percentage, which accelerates the
pay-down of the senior and senior subordinate classes if losses
exceed certain thresholds.
The complete rating actions are as follows:
Issuer: OBX 2021-J1
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aaa (sf)
Cl. A-24, Assigned (P)Aaa (sf)
Cl. A-IO1*, Assigned (P)Aaa (sf)
Cl. A-IO2*, Assigned (P)Aaa (sf)
Cl. A-IO3*, Assigned (P)Aaa (sf)
Cl. A-IO4*, Assigned (P)Aaa (sf)
Cl. A-IO5*, Assigned (P)Aaa (sf)
Cl. A-IO6*, Assigned (P)Aaa (sf)
Cl. A-IO7*, Assigned (P)Aaa (sf)
Cl. A-IO8*, Assigned (P)Aaa (sf)
Cl. A-IO9*, Assigned (P)Aaa (sf)
Cl. A-IO10*, Assigned (P)Aaa (sf)
Cl. A-IO11*, Assigned (P)Aaa (sf)
Cl. A-IO12*, Assigned (P)Aaa (sf)
Cl. A-IO13*, Assigned (P)Aaa (sf)
Cl. A-IO14*, Assigned (P)Aaa (sf)
Cl. A-IO15*, Assigned (P)Aaa (sf)
Cl. A-IO16*, Assigned (P)Aaa (sf)
Cl. A-IO17*, Assigned (P)Aaa (sf)
Cl. A-IO18*, Assigned (P)Aaa (sf)
Cl. A-IO19*, Assigned (P)Aaa (sf)
Cl. A-IO20*, Assigned (P)Aaa (sf)
Cl. A-IO21*, Assigned (P)Aaa (sf)
Cl. A-IO22*, Assigned (P)Aaa (sf)
Cl. A-IO23*, Assigned (P)Aaa (sf)
Cl. A-IO24*, Assigned (P)Aaa (sf)
Cl. A-IO25*, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-IO1*, Assigned (P)Aa3 (sf)
Cl. B-1A, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-IO2*, Assigned (P)A3 (sf)
Cl. B-2A, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.22%
at the mean, 0.10% at the median, and reaches 2.59% at a stress
level consistent with Moody's Aaa ratings.
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 consumer assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's increased its model-derived median expected losses by 10.0%
(6.0% for the mean) and Moody's Aaa losses by 2.5% to reflect the
likely performance deterioration resulting from a slowdown in US
economic activity in 2020 due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated loans, post-COVID underwriting takes
into account the impact of the pandemic on a borrower's ability to
repay the mortgage. For seasoned loans, as time passes, the
likelihood that borrowers who have continued to make payments
throughout the pandemic will now become non-cash flowing due to
COVID-19 continues to decline.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the third-party due diligence and the
R&W framework of the transaction.
Collateral Description
Moody's assessed the collateral pool as of the cut-off date of
April 1, 2021. OBX 2021-J1 is a securitization of 367 prime
residential mortgage loans with an aggregate principal balance of
approximately $353,840,244. The pool comprises 366 30-year and one
28-year fixed rate mortgages.
Overall, the credit quality of the mortgage loans backing this
transaction is similar to recently-issued prime jumbo transactions.
The WA FICO for the aggregate pool is 779 with a WA LTV of 63.3%
and WA CLTV of 63.1%. Approximately 16.7% (by loan balance) of the
pool has a LTV ratio greater than 75%. High LTV loans generally
have a higher probability of default and higher loss severity
compared to lower LTV loans. There is no loan in the pool having
LTV greater than 80%.
Exterior-only appraisals: In response to the COVID-19 national
emergency, many originators/aggregators have temporarily
transitioned to allowing exterior-only appraisals, instead of a
full interior and exterior inspection of the subject property, on
many mortgage transactions. There are 7 loans in the pool, 1.73% by
aggregate loan balance, that do not have a full appraisal that
includes an exterior and an interior inspection of the property.
Instead, these loans have an exterior-only appraisal. Moody's did
not make any adjustments to Moody's losses for such loans primarily
because of strong credit characteristics such as high FICO score,
low LTV and DTI ratios, and significant liquid cash reserves and
because such loans comprise a de minimis percentage of loan pool,
by loan balance. In addition, none of these borrowers have any
prior history of delinquency.
Loans with delinquency and forbearance history: As of the cut-off
date, no borrower under any mortgage loan is currently in an active
COVID-19 related forbearance plan. None of the borrowers have
previously entered into a COVID-19 related forbearance plan. In the
event that after the cut-off date a borrower enters into or
requests an active COVID-19 related forbearance plan, such loan
will remain in the mortgage pool and the servicer will be required
to make advances in respect of delinquent interest and principal
(as well as other servicing advances) on such mortgage loan during
the forbearance period (to the extent such advances are deemed
recoverable) and the loan will be considered delinquent for all
purposes under the transaction documents. There were four borrowers
reported with recent 30-day delinquency, of which three were due to
borrower confusion under servicing transfer, and one was due to
borrower paid an incorrect amount but corrected afterwards.
Origination Quality and Underwriting Guidelines
There are 11 originators in the transaction. The largest
originators in the pool with more than 10% by loan balance are
Guaranteed Rate (31.0%), Guild Mortgage Company LLC (16.7%) and
Fairway Independent Mortgage Corporation (13.5%).
The seller, Onslow Bay Financial LLC, acquired the mortgage loans
from Bank of America, National Association (BANA). As of the
cut-off date, approximately 94.2% of the mortgage loans (by loan
balance) were acquired by BANA from various mortgage loan
originators or sellers through Bank of America whole loan purchase
program, and the remaining 5.8% were underwritten to loanDepot's
guidelines. These mortgage loans have principal balances in excess
of the requirements for purchase by Fannie Mae and Freddie Mac
(i.e. 100% of the loans in the pool are prime jumbo loans) and were
generally acquired pursuant to the underwriting criteria of BANA
whole loan purchase program. In addition, approximately 5.8% of the
mortgage loans (by loan balance) were acquired by BANA but
originated pursuant to the guidelines of loanDepot. The BANA
acquisition criteria does not apply to the eligibility criteria,
underwriting, or origination or acquisition of these mortgage
loans.
Moody's increased its base case and Aaa loss expectations for all
loans underwritten to BANA whole loan purchase program, which
include loans originated by Guaranteed Rate, Guild Mortgage Company
LLC and Fairway Independent Mortgage Corporation, because Moody's
do not have performance available for the jumbo loans underwritten
to BANA guidelines and securitized through OBX platform, and
Moody's have been considering such mortgage loans to have been
acquired to slightly less conservative prime jumbo underwriting
standards. Moody's did not make any adjustments to Moody's loss
levels for loans originated by loanDepot as these loans were
underwritten to its own guidelines. Moody's considered loanDepot's
performance history and risk management as adequate.
Servicing arrangement
Shellpoint Mortgage Servicing (SMS) will service all the mortgage
loans in the transaction. Wells Fargo Bank, N.A. (Wells Fargo) will
serve as the master servicer.
Shellpoint is generally obligated to fund monthly advances of cash
(to the extent such advances are deemed recoverable) and to make
interest payments to compensate in part for any shortfall in
interest payments due to prepayment of the mortgage loans. The
master servicer will monitor the performance of the servicer and
will be obligated to fund any required advance and interest
shortfall payments if a servicer fails in its obligation to do so.
As of the cut-off date, no borrower under any mortgage loan is
currently in an active COVID-19 related forbearance plan with the
servicer. None of the borrowers of the mortgage loans (by aggregate
loan balance as of the cut-off date) have previously entered into a
COVID-19 related forbearance plan with the servicer. In the event
that after the cut-off date a borrower enters into or requests an
active COVID-19 related forbearance plan, such mortgage loan will
remain in the mortgage pool and the servicer will be required to
make advances in respect of delinquent interest and principal (as
well as other servicing advances) on such mortgage loan during the
forbearance period (to the extent such advances are deemed
recoverable) and the mortgage loan will be considered delinquent
for all purposes under the transaction documents. At the end of the
forbearance period, as with any other modification, to the extent
the related borrower is not able to make a lump sum payment of the
forborne amount, the servicer may, subject to the servicing matrix,
offer the borrower a repayment plan, enter into a modification with
the borrower (including a modification to defer the forborne
amounts) or utilize any other loss mitigation option permitted
under the pooling and servicing agreement.
Wells Fargo provides oversight of the servicer. Moody's consider
the presence of a strong master servicer to be a mitigant for any
servicing disruptions. Moody's evaluation of Wells Fargo as a
master servicer takes into account the bank's strong reporting and
remittance procedures, servicer compliance and monitoring
capabilities and servicing stability. Wells Fargo's oversight
encompasses loan administration, default administration, compliance
and cash management.
Third Party Review
Three independent third party review (TPR) firms, Clayton Services
LLC (Clayton), Wipro Opus Risk Solutions, LLC (Opus), and
Consolidated Analytics, Inc. (Consolidated Analytics), reviewed
100% of the loans in this transaction for credit, regulatory
compliance, appraisal, and data integrity. The TPR results indicate
that the majority of reviewed loans were in compliance with
respective originators' underwriting guidelines, no material
compliance or data issues, and no appraisal defects.
For property valuation, the TPR firms identified all loans as
either A or B level grades. There were 6 loans with B grades for
appraisal review and majority of these B grades were due to
exterior-only appraisals done instead of a full appraisal.
For credit review, the TPR firms identified mostly A and B level
grades in its review, with no C or D level grades. The credit
exceptions had documented compensating factors such as high FICOs,
low LTVs, low DTIs, high reserves, and long stable employment
history.
For compliance review, the TPR firms identified mostly A and B
level grades in its review, with no C or D level grades. The
identified compliance exceptions were primarily related to
incorrect Right of Rescission form used and missing affiliated
business disclosures. Moody's did not make any adjustments to its
credit enhancement due to regulatory compliance issues because
Moody's did not view the compliance exceptions as material.
Representations and Warranties Framework
Each originator will provide comprehensive loan level reps and
warranties for their respective loans. BANA will assign each
originator's R&W to the seller, who will in turn assign to the
depositor, which will assign to the trust. To mitigate the
potential concerns regarding the originators' ability to meet their
respective R&W obligations, Onslow Bay Financing LLC (the seller)
will backstop the R&Ws for all originator's loans. The R&W
provider's obligation to backstop third party R&Ws will terminate 5
years after the closing date, subject to certain performance
conditions. The R&W provider will also provide the gap reps.
Moody's considered the R&W framework in its analysis and found it
to be adequate. Moody's therefore did not make any adjustments to
its losses based on the strength of the R&W framework.
The R&W framework is adequate in part because the results of the
independent TPRs revealed a high level of compliance with
underwriting guidelines and regulations, as well as overall
adequate appraisal quality. These results give us a clear
indication that the loans do not breach the R&Ws the originators
have made and that the originators are unlikely to face any
material repurchase requests in the future. The loan-level R&Ws are
strong and, in general, either meet or exceed the baseline set of
credit-neutral R&Ws Moody's identified for US RMBS. Among other
considerations, the R&Ws address property valuation, underwriting,
fraud, data accuracy, regulatory compliance, the presence of title
and hazard insurance, the absence of material property damage, and
the enforceability of the mortgage.
In a continued effort to focus breach reviews on loans that are
more likely to contain origination defects that led to or
contributed to the delinquency of the loan, an additional carve out
has been in recent transactions Moody's have rated from other
issuers relating to the delinquency review trigger. Similarly, in
this transaction, exceptions exist for certain excluded disaster
mortgage loans that trip the delinquency trigger. These excluded
disaster loans include COVID-19 forbearance loans.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to increased performance
volatility, known as tail risk. The transaction provides for a
senior subordination floor of 1.25% of the closing pool balance,
which mitigates tail risk by protecting the senior bonds from
eroding credit enhancement over time. Additionally, there is a
subordination lock-out amount which is 1.25% of the cut-off pool
balance.
Other Considerations
In OBX 2021-J1, the controlling holder has the option to hire at
its own expense the independent reviewer upon the occurrence of a
review event. If there is no controlling holder (no single entity
holds a majority of the Class Principal Amount of the most
subordinate class of certificates outstanding), the trustee shall,
upon receipt of a direction of the certificate holders of more than
25% of the aggregate voting interest of all certificates and upon
receipt of the deposit, appoint an independent reviewer at a cost
to the trust. However, if the controlling holder does not hire the
independent reviewer, the holders of more than 50% of the aggregate
voting interests of all outstanding certificates may direct (at
their expense) the trustee to appoint an independent reviewer. In
this transaction, the controlling holder can be the depositor or a
seller (or an affiliate of these parties). If the controlling
holder is affiliated with the depositor, seller or Sponsor, then
the controlling holder may not be motivated to discover and enforce
R&W breaches for which its affiliate is responsible.
The servicer will not commence foreclosure proceedings on a
mortgage loan unless the servicer has notified the controlling
holder at least five business days in advance of the foreclosure
and the controlling holder has not objected to such action. If the
controlling holder objects, the servicer has to obtain three
appraisals from the appraisal firms as listed in the pooling and
servicing agreement. The cost of the appraisals is borne by the
controlling holder. The controlling holder will be required to
purchase such mortgage loan at a price equal to the highest of the
three appraisals plus accrued and unpaid interest on such mortgage
loan as of the purchase date. If the servicer cannot obtain three
appraisals there are alternate methods for determining the purchase
price. If the controlling holder fails to purchase the mortgage
loan within the time frame, the controlling holder forfeits any
foreclosure rights thereafter. Moody's consider this credit neutral
because a) the appraiser is chosen by the servicer from the
approved list of appraisers, b) the fair value of the property is
decided by the servicer, based on third party appraisals, and c)
the controlling holder will pay the fair price and accrued
interest.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
OBX TRUST 2021-J1: Fitch Affirms B(EXP) Rating on Class B-5 Notes
-----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
issued by OBX 2021-J1 Trust (OBX 2021-J1).
DEBT RATING
---- ------
OBX 2021-J1
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-IO1 LT AAA(EXP)sf Expected Rating
A-IO2 LT AAA(EXP)sf Expected Rating
A-IO3 LT AAA(EXP)sf Expected Rating
A-IO4 LT AAA(EXP)sf Expected Rating
A-IO5 LT AAA(EXP)sf Expected Rating
A-IO6 LT AAA(EXP)sf Expected Rating
A-IO7 LT AAA(EXP)sf Expected Rating
A-IO8 LT AAA(EXP)sf Expected Rating
A-IO9 LT AAA(EXP)sf Expected Rating
A-IO10 LT AAA(EXP)sf Expected Rating
A-IO11 LT AAA(EXP)sf Expected Rating
A-IO12 LT AAA(EXP)sf Expected Rating
A-IO13 LT AAA(EXP)sf Expected Rating
A-IO14 LT AAA(EXP)sf Expected Rating
A-IO15 LT AAA(EXP)sf Expected Rating
A-IO16 LT AAA(EXP)sf Expected Rating
A-IO17 LT AAA(EXP)sf Expected Rating
A-IO18 LT AAA(EXP)sf Expected Rating
A-IO19 LT AAA(EXP)sf Expected Rating
A-IO20 LT AAA(EXP)sf Expected Rating
A-IO21 LT AAA(EXP)sf Expected Rating
A-IO22 LT AAA(EXP)sf Expected Rating
A-IO23 LT AAA(EXP)sf Expected Rating
A-IO24 LT AAA(EXP)sf Expected Rating
A-IO25 LT AAA(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-1A LT AA(EXP)sf Expected Rating
B-IO1 LT AA(EXP)sf Expected Rating
B-2 LT A(EXP)sf Expected Rating
B-2A LT A(EXP)sf Expected Rating
B-IO2 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
A-IO-S LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by 367 fixed-rate mortgages (FRMs) with a
total balance of approximately $353.84 million as of the cutoff
date. The loans were originated by various mortgage originators,
and the seller, Onslow Bay Financial LLC, acquired the loans from
Bank of America, National Association (BANA). 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, 28- and 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.
Per Fitch's calculation methodology, the loans are seasoned an
average of four months. The pool has a weighted average (WA)
original FICO score of 776, which is indicative of very high
credit-quality borrowers. Approximately 85% of the loans have a
borrower with an original FICO score above or equal to 750. In
addition, the original WA combined loan to value ratio (CLTV) of
63% represents substantial borrower equity in the property and
reduced default risk.
Geographic Concentration (Negative): Approximately 44% of the pool
is concentrated in California. The largest MSA concentration is in
the San Francisco MSA (16%), followed by the Los Angeles MSA (15%)
and the Seattle MSA (8%). The top three MSAs account for 39% of the
pool. As a result, there was a 1.02x probability of default (PD)
penalty for geographic concentration.
Shifting-Interest Structure (Mixed): 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 to 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.
Full Servicer Advancing (Mixed): The servicer will provide full
advancing for the life of the transaction (the servicer is also
expected to advance delinquent P&I on loans that enter a
coronavirus forbearance plan). Although full P&I advancing will
provide liquidity to the notes, it will also increase the
loan-level loss severity (LS) since the servicer looks to recoup
P&I advances from liquidation proceeds, which results in less
recoveries. Wells Fargo, as master servicer, will advance if the
servicer fails to do so.
Subordination Floor (Positive): A CE or senior subordination floor
of 1.25% has been considered to mitigate potential tail-end risk
and loss exposure as the pool size declines and performance
volatility increases due to adverse loan selection and small loan
count concentration. Additionally, the stepdown tests do not allow
principal prepayments to subordinate bondholders in the first five
years following deal closing.
Updated Economic Risk Factor (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 coronavirus 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. 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 positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. 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'.
Factor that could, individually or collectively, lead to 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 40.4% at 'AAA'. 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.
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.
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 Consolidated Analytics, Clayton and Opus. The
third-party due diligence described in Form 15E focused on credit,
compliance, data integrity and property valuation. Fitch considered
this information in its analysis and it did not have an effect on
Fitch's analysis or conclusions.
The entirety (100%) of the pool received a final grade of 'A' or
'B', which confirms no incidence of material exceptions.
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.
OCEANVIEW MORTGAGE 2021-1: Moody's Gives B3 Rating to B-5 Notes
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
fifty-six classes of residential mortgage-backed securities issued
by Oceanview Mortgage Trust (OCMT) 2021-1. The ratings range from
Aaa (sf) to B3 (sf).
Oceanview Asset Selector, LLC is the sponsor of OCMT 2021-1, an
inaugural securitization of performing prime jumbo mortgage loans
backed by 447 first lien, fully amortizing, fixed-rate qualified
mortgage (QM) loans, with an aggregate unpaid principal balance
(UPB) of $385,853,144. The transaction benefits from a collateral
pool that is of high credit quality, and is further supported by an
unambiguous R&W framework, 100% third-party review (TPR) and a
shifting interest structure that incorporates a subordination
floor. As of the cut-off date, no borrower under any mortgage loan
has entered into a COVID-19 related forbearance plan with the
servicer.
The seller, Oceanview Acquisitions I, LLC, indirectly acquired the
mortgage loans from various third-party sellers through one or more
affiliates of the seller. Both the seller and the sponsor are
wholly-owned subsidiaries of Oceanview U.S. Holdings Corp.
Community Loan Servicing, LLC (CLS) (f/k/a Bayview Loan Servicing,
LLC) will service 100% of the mortgage loans. There is no master
servicer in this transaction. The servicer will generally be
required to fund principal and interest (P&I) advances and
servicing advances unless such advances are deemed
non-recoverable.
A TPR firm verified the accuracy of the loan level information. The
firm conducted detailed credit, property valuation, data accuracy
and compliance reviews on 100% of the mortgage loans in the
collateral pool.
Transaction credit strengths include the high credit quality of the
collateral pool, the strong TPR results for credit, compliance and
valuations, and the unambiguous R&W framework. Transaction credit
weaknesses include having no master servicer to oversee the primary
servicer, unlike typical prime jumbo transactions Moody's have
rated.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to other prime jumbo securitizations and adjusted
Moody's expected losses based on qualitative attributes, including
the financial strength of the R&W provider and TPR results.
The complete rating action are as follows.
Issuer: Oceanview Mortgage Trust 2021-1
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aaa (sf)
Cl. A-14, Assigned Aaa (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aaa (sf)
Cl. A-17, Assigned Aaa (sf)
Cl. A-18, Assigned Aaa (sf)
Cl. A-19, Assigned Aaa (sf)
Cl. A-20, Assigned Aaa (sf)
Cl. A-21, Assigned Aaa (sf)
Cl. A-22, Assigned Aaa (sf)
Cl. A-23, Assigned Aaa (sf)
Cl. A-24, Assigned Aaa (sf)
Cl. A-25, Assigned Aaa (sf)
Cl. A-IO1*, Assigned Aaa (sf)
Cl. A-IO2*, Assigned Aaa (sf)
Cl. A-IO3*, Assigned Aaa (sf)
Cl. A-IO4*, Assigned Aaa (sf)
Cl. A-IO5*, Assigned Aaa (sf)
Cl. A-IO6*, Assigned Aaa (sf)
Cl. A-IO7*, Assigned Aaa (sf)
Cl. A-IO8*, Assigned Aaa (sf)
Cl. A-IO9*, Assigned Aaa (sf)
Cl. A-IO10*, Assigned Aaa (sf)
Cl. A-IO11*, Assigned Aaa (sf)
Cl. A-IO12*, Assigned Aaa (sf)
Cl. A-IO13*, Assigned Aaa (sf)
Cl. A-IO14*, Assigned Aaa (sf)
Cl. A-IO15*, Assigned Aaa (sf)
Cl. A-IO16*, Assigned Aaa (sf)
Cl. A-IO17*, Assigned Aaa (sf)
Cl. A-IO18*, Assigned Aaa (sf)
Cl. A-IO19*, Assigned Aaa (sf)
Cl. A-IO20*, Assigned Aaa (sf)
Cl. A-IO21*, Assigned Aaa (sf)
Cl. A-IO22*, Assigned Aaa (sf)
Cl. A-IO23*, Assigned Aaa (sf)
Cl. A-IO24*, Assigned Aaa (sf)
Cl. A-IO25*, Assigned Aaa (sf)
Cl. A-IO26*, Assigned Aaa (sf)
Cl. B-1, Assigned Aa3 (sf)
Cl. B-2, Assigned A3 (sf)
Cl. B-3, Assigned Baa3 (sf)
Cl. B-4, Assigned Ba3 (sf)
Cl. B-5, Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary credit analysis and rating rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.30%, in a baseline scenario-median is 0.16%, and reaches 2.88% at
stress level consistent with Moody's Aaa rating.
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 consumer assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's increased its model-derived median expected losses by 10%
(6.55% for the mean) and Moody's Aaa loss by 2.5% to reflect the
likely performance deterioration resulting from the slowdown in US
economic activity due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated loans, post-COVID underwriting takes
into account the impact of the pandemic on a borrower's ability to
repay the mortgage. For seasoned loans, as time passes, the
likelihood that borrowers who have continued to make payments
throughout the pandemic will now become non-cash flowing due to
COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
The pool characteristics are based on the April 1, 2021 cut-off
tape. This transaction consists of 447 first lien, fully
amortizing, fixed-rate QM loans, all of which have original terms
to maturity of 20, 25 or 30 years, with an aggregate unpaid
principal balance of $385,853,144. All of the mortgage loans are
secured by first liens on one- to four-family residential
properties, planned unit developments and condominiums. The
mortgage loans are approximately 3 months seasoned and are backed
by full documentation.
Geographic concentration is relatively low where the three largest
states in the transaction, California, Virginia and Texas account
for 16.15%, 10.96%, and 8.51%, by UPB, respectively. Overall, the
credit quality of the mortgage loans backing this transaction is
similar to that of transactions issued by other prime issuers. The
WA original FICO for the pool is 777 and the WA CLTV is 67.3%.
None of the mortgage loans as of the cut-off date have an original
principal balance that conformed to the guidelines of Fannie Mae
and Freddie Mac at the time of origination, including mortgage
loans with original loan amounts meeting the high-cost area loan
limits established by the Federal Housing Finance Agency and were
eligible to be purchased by Fannie Mae or Freddie Mac. As of the
cut-off date, all of the mortgage loans were contractually current
under the MBA method with respect to payments of P&I.
As of the cut-off date, none of the borrowers of the mortgage loans
are currently subject to a forbearance plan or are in the process
of being subject to a forbearance plan, including as a result of
COVID-19. In the event a borrower enters into a forbearance plan,
including as a result of COVID-19, after the cut-off date, but
prior to the closing date, such mortgage loan will be removed from
the pool.
Overall, the credit quality of the mortgage loans backing this
transaction is similar to transactions issued by other prime
issuers.
Origination Quality
Oceanview Acquisitions I, LLC is the seller and R&W provider for
this securitization and is a wholly owned subsidiary of Oceanview
Holdings Ltd. (together with its affiliates and subsidiaries
Oceanview). Oceanview is a wholly owned subsidiary of Bayview
Opportunity V Oceanview L.P., a pooled investment vehicle managed
by Bayview Asset Management (Bayview or BAM).
The seller does not originate residential mortgage loans or fund
the origination of residential mortgage loans. Instead, the seller
acquired the mortgage loans directly from Bayview Acquisitions LLC,
an affiliate of the seller (affiliated loan purchaser), which in
turn acquired the mortgage loans directly from third parties. The
affiliated loan purchaser maintains eligibility criteria for use in
the process of acquiring third-party originated loans and provides
these criteria to third parties that sell mortgage loans to the
affiliated loan purchaser to enable those third parties to
determine whether mortgage loans they consider selling to the
affiliated loan purchaser will meet such criteria.
For this transaction, the acquisition criteria includes the
affiliated loan purchaser's standard prime jumbo program. The
mortgage loans acquired under this program do not meet the
eligibility standards for purchase by Fannie Mae or Freddie Mac
primarily due to loan size. This program is designed to target
mortgagors with outstanding credit and reserves that are seeking a
mortgage loan with flexible underwriting guidelines. All mortgage
loans originated under this program are eligible for safe harbor
protection under the ATR rules and a QM designation is in the loan
file.
Oceanview is managed by a seasoned group of mortgage veterans with
industry tenure that averages over two decades. BAM is a fully
integrated investment platform focused on investments in mortgage
and consumer- related credit. Overall, Oceanview's non-agency
originations team benefits from a connection to other parts of the
Bayview organization. For example, along with CLS, Bayview has a
full suite of originations capabilities including sales,
processing, underwriting, closing and post-closing, capital
markets, and outsourcing. Overall, the same functional teams that
drive BAM's investment processes are resources for Oceanview.
Oceanview utilizes its full time employees (FTEs) in concert with
dedicated FTEs from affiliated BAM entities. This operating
leverage is achieved vis-à-vis a fulfillment services agreement.
However, because the non-agency program offered by Oceanview has
been established only recently, there is no available performance
information and more time is needed to assess Oceanview's ability
to consistently produce high-quality mortgage loans.
Servicing Arrangement
Moody's assess the overall servicing arrangement for this pool as
adequate, given the ability, scale and experience of CLS as a
servicer. However, compared to other prime jumbo transactions which
typically have a master servicer, servicer oversight for this
transaction is relatively weaker. While third-party reviews of CLS'
servicing operations will be conducted periodically by the GSEs,
the Consumer Financial Protection Bureau (CFPB) and state
regulators, such oversight may lack the depth and frequency that a
master servicer would ordinarily provide. However, Moody's did not
adjust Moody's expected losses for the weaker servicing arrangement
due to the following: (1) CLS was established in 1999 and is an
experienced primary and special servicer of residential mortgage
loans, (2) CLS is an approved servicer for both Fannie Mae and
Freddie Mac, (3) CLS had no instances of non-compliance for its
2019 Regulation AB or Uniformed Single Audit Program (USAP)
independent servicer reviews, (4) CLS has an experienced management
team and uses Black Knight's MSP servicing platform, the largest
and most highly utilized mortgage servicing system, and (5) the R&W
framework mandates reviews of poorly performing mortgage loans by a
third-party if a threshold event occurs.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the originator's
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues, and no material property valuation
issues. The loans that had exceptions to the originator's
underwriting guidelines had significant compensating factors that
were documented.
Representations & Warranties
Moody's assessed the R&W framework based on three factors: (a) the
financial strength of the remedy provider; (b) the strength of the
R&Ws (including qualifiers and sunsets) and (c) the effectiveness
of the enforcement mechanisms. Moody's evaluated the impact of
these factors collectively on the ratings in conjunction with the
transaction's specific details and in some cases, the strengths of
some of the factors can mitigate weaknesses in others. Moody's also
considered the R&W framework in conjunction with other transaction
features, such as the independent due diligence, custodial receipt,
and property valuations, as well as any sponsor alignment of
interest, to evaluate the overall exposure to loan defects and
inaccurate information.
The seller makes the loan level R&Ws for the mortgage loans. The
loan-level R&Ws meet or exceed the baseline set of credit-neutral
R&Ws Moody's have identified for US RMBS. R&W breaches are
evaluated by an independent third-party using a set of objective
criteria. The transaction requires mandatory independent reviews of
loans that become 120 days delinquent and those that liquidate at a
loss to determine if any of the R&Ws are breached.
However, Moody's applied an adjustment in its model analysis to
account for the risk that the R&W provider (unrated) may be unable
to repurchase defective loans in a stressed economic environment
(similar to the economic experience in 2008-2009 when a steep
decline in house prices triggered a financial crisis), given that
it is a non-bank entity whose monoline business of mortgage
origination and servicing is highly correlated with the economy.
Transaction Structure
OCMT 2021-1 has one pool with a shifting interest structure that
benefits from a subordination floor. Funds collected, including
principal, are first used to make interest payments and then
principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
OCTAGON 53: S&P Assigns BB- (sf) Rating on $18.75MM Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Octagon 53 Ltd./Octagon
53 LLC's floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Octagon 53 Ltd./Octagon 53 LLC
Class A, $310.00 million: AAA (sf)
Class B, $70.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $48.05 million: Not rated
PALMER SQUARE 2019-1: Moody's Rates $13.75M Class E Notes 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
refinancing notes issued by Palmer Square Credit Funding 2019-1,
Ltd. (the "Issuer").
Moody's rating action is as follows:
US$36,000,000 Class B-R Senior Secured Fixed Rate Notes due 2037
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$18,000,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class C-R Notes"), Assigned A2 (sf)
US$10,250,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class D-R Notes"), Assigned Baa2 (sf)
US$13,750,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2037 (the "Class E Notes"), Assigned Ba2 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
Issuer's portfolio and structure.
The Issuer is a managed cash flow collateralized debt obligation
(CDO). The issued notes are collateralized primarily by a portfolio
of corporate bonds and loans. At least 30% of the portfolio must
consist of first lien senior secured loans, senior secured notes,
and eligible investments, up to 20% of the portfolio may consist of
second lien loans, up to 70% of the portfolio may consist of
second-lien loans, unsecured loans, bonds, subordinated bonds and
unsecured bonds, and up to 5% of the portfolio may consist of
letters of credit.
Palmer Square Capital Management LLC (the "Manager") will continue
to 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 remaining
three year reinvestment period.
The Issuer previously issued one other class of secured notes and
one class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extensions of the non-call period
for the Refinancing Notes; additions to the CDO's ability to hold
workout and restructured assets, and changes to the definition of
"Adjusted Weighted Average Moody's Rating Factor".
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $300,000,000
Defaulted par: $0
Diversity Score: 86
Weighted Average Rating Factor (WARF): 3222
Weighted Average Coupon (WAC): 4.607%
Weighted Average Recovery Rate (WARR): 39.61%
Weighted Average Life (WAL): 8 years
In consideration of the current high uncertainties around the
global economy, and the ultimate performance of the CDO portfolio,
Moody's conducted a number of additional sensitivity analyses
representing a range of outcomes that could diverge, both to the
downside and the upside, from Moody's base case. Some of the
additional scenarios that Moody's considered in its analysis of the
transaction include, among others: an additional cashflow analysis
assuming a lower WAS to test the sensitivity to LIBOR floors.
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 the US economic activity.
Moody's regard 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.
PALMER SQUARE 2021-2: Moody's Gives B1 Rating on $7M Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Palmer Square Loan Funding 2021-2, Ltd. (the
"Issuer" or "Palmer Square 2021-2").
Moody's rating action is as follows:
US$476,000,000 Class A-1 Senior Secured Floating Rate Notes due
2029 (the "Class A-1 Notes"), Definitive Rating Assigned Aaa (sf)
US$84,000,000 Class A-2 Senior Secured Floating Rate Notes due 2029
(the "Class A-2 Notes"), Definitive Rating Assigned Aa1 (sf)
US$42,000,000 Class B Senior Secured Deferrable Floating Rate Notes
due 2029 (the "Class B Notes"), Definitive Rating Assigned A2 (sf)
US$24,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2029 (the "Class C Notes"), Definitive Rating Assigned and
Upgraded to Baa2 (sf)
US$24,500,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2029 (the "Class D Notes"), Definitive Rating Assigned Ba2
(sf)
US$7,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2029 (the "Class E Notes"), Definitive Rating Assigned B1 (sf)
The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the
Class C Notes, the Class D Notes, and the Class E Notes are
referred to herein, collectively, as the "Rated Notes."
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.
Palmer Square 2021-2 is a static CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. We expect the portfolio to be 100% ramped as of
the closing date.
Palmer Square Capital Management LLC (the "Servicer") may engage is
disposition of the assets on behalf of the Issuer during the life
of the transaction. Reinvestment is not permitted and all sale and
unscheduled principal proceeds received will be used to amortize
the notes in sequential order.
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: $700,000,000
Diversity Score: 76
Weighted Average Rating Factor (WARF): 2628
Weighted Average Spread (WAS): 3.29% (actual spread vector of the
portfolio)
Weighted Average Recovery Rate (WARR): 48.10%
Weighted Average Life (WAL): 5.2 years (actual amortization vector
of the portfolio)
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 regard 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.
PROGRESS RESIDENTIAL 2021-SFR2: DBRS Gives B(low) Rating on G Certs
-------------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Single-Family Rental Pass-Through Certificates to be issued by
Progress Residential 2021-SFR2 Trust (PROG 2021-SFR2):
-- $354.1 million Class A at AAA (sf)
-- $91.1 million Class B at AAA (sf)
-- $46.9 million Class C at AA (high) (sf)
-- $54.7 million Class D at A (high) (sf)
-- $96.9 million Class E-1 at BBB (high) (sf)
-- $70.8 million Class E-2 at BBB (low) (sf)
-- $106.2 million Class F at BB (low) (sf)
-- $47.9 million Class G at B (low) (sf)
The AAA (sf) rating on the Class A Certificates reflects 64.2% and
55.0% of credit enhancement provided by subordinated notes in the
pool. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (low)
(sf), BB (low) (sf), and B (low) (sf) ratings reflect 50.3%, 44.7%,
34.9%, 27.8%, 17.1%, and 12.2% credit enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
PROG 2021-SFR2's 5,421 properties are in 12 states, with the
largest concentration by broker price opinion value in Texas
(26.4%). The largest metropolitan statistical area (MSA) by value
is Atlanta (16.8%), followed by Memphis (15.7%). The geographic
concentration dictates the home-price stresses applied to the
portfolio and the resulting market value decline (MVD). The MVD at
the AAA (sf) rating level for this deal is 52.2%. PROG 2021-SFR2
has properties from 34 MSAs, most of which did not experience
home-price index declines as dramatic as those in the recent
housing downturn.
DBRS Morningstar assigned the provisional ratings for each class of
certificates by performing a quantitative and qualitative
collateral, structural, and legal analysis. This analysis uses DBRS
Morningstar's single-family rental subordination model and is based
on DBRS Morningstar's published criteria. DBRS Morningstar
developed property-level stresses for the analysis of single-family
rental assets. DBRS Morningstar's analysis includes estimated
base-case net cash flow (NCF) by evaluating the gross rent,
concession, vacancy, operating expenses, and capital expenditure
data. The DBRS Morningstar NCF analysis resulted in a minimum debt
service coverage ratio higher than 1.0 times.
Furthermore, DBRS Morningstar reviewed the third-party participants
in the transaction, including the property manager, servicer, and
special servicer. These transaction parties are acceptable to DBRS
Morningstar. DBRS Morningstar also conducted a legal review and
found no material rating concerns.
Notes: All figures are in U.S. dollars unless otherwise noted.
RIN IV: Moody's Assigns Ba3 Rating to $11M Class E Notes
--------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by RIN IV Ltd. (the "Issuer" or "RIN IV").
Moody's rating action is as follows:
US$248,000,000 Class A Floating Rate Senior Notes due 2033 (the
"Class A Notes"), Definitive Rating Assigned Aaa (sf)
US$56,000,000 Class B Floating Rate Senior Notes due 2033 (the
"Class B Notes"), Definitive Rating Assigned Aa3 (sf)
US$24,000,000 Class C Deferrable Floating Rate Mezzanine Notes due
2033 (the "Class C Notes"), Definitive Rating Assigned A3 (sf)
US$20,000,000 Class D Deferrable Floating Rate Mezzanine Notes due
2033 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf)
US$11,000,000 Class E Deferrable Floating Rate Mezzanine Notes due
2033 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes, and the Class E Notes are referred to herein,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the project finance collateralized loan obligations' (PF CLO)
portfolio and structure.
RIN IV is a managed cash flow PF CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
project finance and corporate infrastructure loans. At least 50% of
the portfolio must consist of project finance infrastructure loans
and eligible investments. The PF CLO permits up to 43% of the
portfolio to be in project finance loans in the electricity (gas)
contracted or merchant sectors. At least 95.0% of the portfolio
must consist of senior secured loans and eligible investments, up
to 5% of the portfolio may consist of second lien loans or
permitted debt securities (i.e., senior secured bonds, senior
secured notes and high-yield bonds), and up to 4% of the portfolio
may consist of senior unsecured loans. The portfolio is
approximately 86.25% ramped as of the closing date.
RREEF America L.L.C., a subsidiary of DWS Group GmbH & Co. KGaA
(the "Portfolio Advisor") 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 four year reinvestment period. Thereafter, the
Portfolio Advisor is not permitted to purchase additional assets,
and unscheduled principal payments and proceeds from the sale of
assets will be used to amortized the Rated Notes in sequential
order.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's ratings of the Rated Notes also took into account the
concentrated nature of the portfolio. The PF CLO's indenture allows
for a portfolio that is highly concentrated by sector and
individual asset size. Up to 43% of the portfolio's assets may be
in the electricity (gas) contracted or merchant sectors. The four
largest sub-sectors could constitute up to 55% of the portfolio,
with the largest sub-sector potentially being up to 25% of the
portfolio. Additionally, the portfolio may only have 38 obligors
with the largest obligor potentially comprising up to 4.50% of the
portfolio. Credit deterioration in a single sector or in a few
obligors could have an outsized negative impact on the PF CLO
portfolio's overall credit quality. In Moody's analysis, Moody's
considered several stress scenarios assuming higher asset
correlation.
Moody's modeled the transaction by applying the Monte Carlo
simulation framework in Moody's CDOROM(TM), as described in the
"Project Finance and Infrastructure Asset CDOs Methodology" rating
methodology published in April 2020 and by using a cash flow model
which estimates expected loss on a CLO's tranche, 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.
In Moody's analysis, Moody's assumed a 1.5 year lag on recoveries
for defaulted securities. To account for the recovery lag, Moody's
also conducted additional analysis in which the certainty
equivalent recovery rate for each tranche was determined using the
base case portfolio and the recovery rate was then applied with the
default distribution in the cash flow model. This scenario was an
importation consideration in the assigned ratings.
Moody's also applied a default probability stress on the WARF
covenant listed for the project finance pool in accordance with
Footnote 12 in "Project Finance and Infrastructure Asset CDOs
Methodology." For project finance loans with a WARR of 75%, the
default probability stress is 120% and for project finance loans
with a WARR of 65%, the default probability stress is approximately
57.1%.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Weighted Average Rating Factor (WARF) of Project Finance Loans:
2002
Weighted Average Rating Factor (WARF) of Corporate Infrastructure
Loans: 2608
Weighted Average Spread (WAS): 3.38%
Weighted Average Coupon (WAC): 6.0%
Weighted Average Recovery Rate (WARR) of Project Finance Loans:
69.9%
Weighted Average Recovery Rate (WARR) of Corporate Infrastructure
Loans: 42%
Weighted Average Life (WAL): 8 years
Second Lien Loans, Permitted Debt Securities, Senior Unsecured
Loans: 4.5%
Total Obligors: 38
Largest Obligor: 4.50%
Largest 5 Obligors: 21.5%
B2 Default Probability Rating Obligations: 17.0%
B3 Default Probability Rating Obligations: 10.0%
PF Infrastructure Obligors: 50.0%
Corporate Power Infrastructure Obligors: 8.0%
Power Infrastructure Obligors: 50.5%
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 regard 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 methodologies used in these ratings were "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 Portfolio Advisor's
investment decisions and management of the transaction will also
affect the performance of the Rated Notes.
SEQUOIA MORTGAGE 2021-3: Fitch Gives Final BB- Rating on B-4 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
certificates to be issued by Sequoia Mortgage Trust 2021-3.
DEBT RATING PRIOR
---- ------ -----
Sequoia Mortgage Trust 2021-3
A-1 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-IO1 LT AAAsf New Rating AAA(EXP)sf
A-IO10 LT AAAsf New Rating AAA(EXP)sf
A-IO11 LT AAAsf New Rating AAA(EXP)sf
A-IO12 LT AAAsf New Rating AAA(EXP)sf
A-IO13 LT AAAsf New Rating AAA(EXP)sf
A-IO14 LT AAAsf New Rating AAA(EXP)sf
A-IO15 LT AAAsf New Rating AAA(EXP)sf
A-IO16 LT AAAsf New Rating AAA(EXP)sf
A-IO17 LT AAAsf New Rating AAA(EXP)sf
A-IO18 LT AAAsf New Rating AAA(EXP)sf
A-IO19 LT AAAsf New Rating AAA(EXP)sf
A-IO2 LT AAAsf New Rating AAA(EXP)sf
A-IO20 LT AAAsf New Rating AAA(EXP)sf
A-IO21 LT AAAsf New Rating AAA(EXP)sf
A-IO22 LT AAAsf New Rating AAA(EXP)sf
A-IO23 LT AAAsf New Rating AAA(EXP)sf
A-IO24 LT AAAsf New Rating AAA(EXP)sf
A-IO25 LT AAAsf New Rating AAA(EXP)sf
A-IO26 LT AAAsf New Rating AAA(EXP)sf
A-IO3 LT AAAsf New Rating AAA(EXP)sf
A-IO4 LT AAAsf New Rating AAA(EXP)sf
A-IO5 LT AAAsf New Rating AAA(EXP)sf
A-IO6 LT AAAsf New Rating AAA(EXP)sf
A-IO7 LT AAAsf New Rating AAA(EXP)sf
A-IO8 LT AAAsf New Rating AAA(EXP)sf
A-IO9 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 392 loans with a total balance of
approximately $355.92 million as of the cutoff date. The pool
consists of prime fixed-rate mortgages acquired by Redwood
Residential Acquisition Corp. (Redwood) from various mortgage
originators. Distributions of principal and interest and loss
allocations are based on a senior-subordinate, shifting-interest
structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
392 full documentation loans, totaling $355.92 million and seasoned
approximately one month in aggregate. The borrowers have a strong
credit profile (776 model FICO and 29% DTI) and moderate leverage
(76.1% sLTV). The pool consists of 96.3% of loans where the
borrower maintains a primary residence, while 3.7% is a second
home. Additionally, 90.9% of the loans were originated through a
retail channel, and 100% are designated as QM loan.
Shifting Interest Structure (Negative): 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.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in
high-stress scenarios.
120-Day Stop Advance (Mixed): The deal is structured to four months
of servicer advances for delinquent principal and interest. The
limited advancing reduces loss severities as a lower amount is
repaid to the servicer when a loan liquidates.
Credit Enhancement Floor (Positive): To mitigate tail risk, which
arises as the pool seasons and fewer loans are outstanding, a
subordination floor of 0.75% of the original balance will be
maintained for the certificates.
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-19 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."
The transaction has an ESG Relevance Score of '4[+]' for Exposure
to Governance as a result of the strong counterparties and well
controlled operational considerations. Operational risk is well
controlled for in this transaction. Redwood is assessed as an
'Above Average' aggregator and primary servicing functions will be
majority performed by Select Portfolio Servicing, which Fitch rates
'RPS1-'.
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. 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 41.3% at 'AAA'. 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 positive home price growth of
10% with no assumed overvaluation. 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.
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.
CRITERIA VARIATION
There is one variation from Fitch's "U.S. RMBS Cash Flow Analysis
Criteria." Fitch expects the subordination floor to exceed: a) the
sum of the 25 largest 'AAAsf' expected loss amounts, b) the 'AAAsf'
expected losses of 100 average loans, and c) the amount of loss
resulting from the default of the five largest loans applying the
'AAAsf' loss severity. The minimum subordination floor sensitivity
outline in Fitch's criteria is designed to capture the tail-risk
from a typical Prime 2.0 transaction. Given this is outside of the
norm, there are some structural nuances, like the limited servicer
advance, the stronger CE test, which recognizes stop advance loans,
and post-test failure re-direction of scheduled principal to the
senior classes, all of which should protect from tail risk. From a
loss perspective, there was a significant amount of conservatism
built into the losses, as loss severity floors were applied at
'AAAsf' rating, and only four of the largest 20 loans had an
expected loss above Fitch's loss severity floors in the 'AAAsf'
rating stress.
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 Clayton and EdgeMac. The third-party due diligence
described in Form 15E focused on credit, compliance and property
valuations. Fitch considered this information in its analysis and,
as a result, Fitch made the following adjustment to its analysis: a
5% reduction to the loan's probability of default. This adjustment
resulted in a less than 25bps reduction to the 'AAAsf' expected
loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 80% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton and EdgeMac, were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
Sequoia Mortgage Trust 2021-3 has an ESG Relevance Score of '4[+]'
for Exposure to Governance as a result of the strong counterparties
and well controlled operational considerations. 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.
SIXTH STREET XVIII: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sixth Street CLO XVIII
Ltd./Sixth Street CLO XVIII LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Sixth Street CLO XVIII Ltd./Sixth Street CLO XVIII LLC
Class A, $252.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $14.50 million: BB- (sf)
Subordinated notes, $41.25 million: Not rated
SIXTH STREET XVIII: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Sixth Street
CLO XVIII Ltd./Sixth Street CLO XVIII LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of April 21,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Sixth Street CLO XVIII Ltd./Sixth Street CLO XVIII LLC
Class A, $252.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $14.50 million: BB- (sf)
Subordinated notes, $41.25 million: Not rated
SLC STUDENT 2004-1: Fitch Assigns B- Ratings on 2 Tranches
----------------------------------------------------------
Fitch Ratings has affirmed the ratings on SLC Student Loan Trust
(SLC) 2004-1, 2005-1, 2005-3 and 2006-2. The Rating Outlooks have
been maintained for all classes.
DEBT RATING PRIOR
---- ------ -----
SLC Student Loan Trust 2004-1
A-7 784423AG0 LT B-sf Affirmed B-sf
B 784423AH8 LT B-sf Affirmed B-sf
SLC Student Loan Trust 2005-3
A-3 784420AP6 LT AAAsf Affirmed AAAsf
A-4 784420AQ4 LT AAAsf Affirmed AAAsf
B 784420AR2 LT Asf Affirmed Asf
SLC Student Loan Trust 2005-1
A-4 784420AD3 LT AAAsf Affirmed AAAsf
B-1 784420AE1 LT Asf Affirmed Asf
SLC Student Loan Trust 2006-2
A-5 784428AE4 LT AAAsf Affirmed AAAsf
A-6 784428AF1 LT AAAsf Affirmed AAAsf
B 784428AG9 LT Asf Affirmed Asf
TRANSACTION SUMMARY
SLC 2004-1: Cash flow modeling for the class A-7 notes miss their
legal final maturity date under Fitch's credit and maturity base
cases. A default of the senior class would result in interest
payments being diverted away from class B, which would cause that
note to default as well. In affirming the rating at 'B-sf' rather
than 'CCCsf' or below, Fitch has considered qualitative factors
such as Navient's ability to call the notes upon reaching 10% pool
factor, the time horizon until the A-7 maturity date, and the
eventual full payment of principal in modeling. Since there is no
revolving credit facility in place from Navient for SLC 2004-1,
Fitch has affirmed the class A-7 and B notes at 'B-sf'.
SLC 2005-1, SLC 2005-3, SLC 2006-2: Fitch's cash flow modeling for
the outstanding senior classes supports 'AAAsf' ratings under
Fitch's credit and maturity stresses. The ratings on the junior
classes are affirmed and are at their highest achievable ratings
currently, because the total parity of these trusts is less than
the 101% minimum parity threshold for 'AAsf' ratings, in line with
Fitch's FFELP rating criteria.
In addition to transaction specific discussions above, the Rating
Outlooks of all 'AAAsf'-rated notes remain Negative due to Fitch's
affirmation of the U.S. sovereign's 'AAA' Issuer Default Rating and
revision of its Outlook to Negative from Stable on July 31, 2020.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Negative.
Collateral Performance
SLC 2004-1: Fitch assumed a base case default rate of 8.25% and
24.75% under the 'AAA' credit stress scenario and maintained the
sustainable constant default rate (sCDR) assumption of 1.50%. Fitch
applied the standard default timing curve in its credit stress cash
flow analysis. The claim reject rate was assumed to be 0.25% in the
base case and 2.0% in the 'AAA' case. The TTM levels of deferment,
forbearance and income-based repayment are 3.20%, 11.39%, and
15.13% respectively, and are used as the starting point in cash
flow modeling. The sustainable constant payment rate (sCPR)
assumption was maintained at 8.00%. For these assumptions,
subsequent declines or increases are modelled as per criteria. The
borrower benefit was assumed to be approximately 0.31%, based on
information provided by the sponsor.
SLC 2005-1: Fitch assumed a base case default rate of 8.25% and
24.75% under the 'AAA' credit stress scenario and maintained the
sCDR at 1.50%. Fitch applied the standard default timing curve in
its credit stress cash flow analysis. The claim reject rate was
assumed to be 0.25% in the base case and 2.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 3.16%, 11.13%, and 13.19%, respectively, and are used as the
starting point in cash flow modeling. The sCPR was maintained at
6.30%. For these assumptions, subsequent declines or increases are
modelled as per criteria. The borrower benefit was assumed to be
approximately 0.28%, based on information provided by the sponsor.
SLC 2005-3: Fitch assumed a base case default rate of 13.25% and
39.50% under the 'AAA' credit stress scenario and maintained the
sCDR at 2.00%. Fitch applied the standard default timing curve in
its credit stress cash flow analysis. The claim reject rate was
assumed to be 0.25% in the base case and 2.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 4.02%, 12.95%, and 18.88%, respectively, and are used as the
starting point in cash flow modeling. The sCPR was maintained at
7.0%. For these assumptions, subsequent declines or increases are
modelled as per criteria. The borrower benefit was assumed to be
approximately 0.19%, based on information provided by the sponsor.
In the cash flow analysis for SLC 2005-3, Fitch used a higher
servicing fee than the standard fees in Fitch's rating criteria to
reflect those paid by the transaction.
SLC 2006-2: Fitch assumed a base case default rate of 13.50% and
40.50% under the 'AAA' credit stress scenario and maintained the
sCDR at 2.0%. Fitch applied the standard default timing curve in
its credit stress cash flow analysis. The claim reject rate was
assumed to be 0.25% in the base case and 2.0% in the 'AAA' case.
The TTM levels of deferment, forbearance and income-based repayment
are 4.17%, 13.66%, and 15.86%, respectively, and are used as the
starting point in cash flow modeling. The sCPR was maintained at
8.0%. For these assumptions, subsequent declines or increases are
modelled as per criteria. The borrower benefit was assumed to be
approximately 0.18%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. Over 99.6% of the loans are indexed to one-month LIBOR
with the rest indexed to 91 Day T-bill. All notes are indexed to
three-month LIBOR plus a spread. Fitch applied its standard basis
and interest rate stresses as per criteria.
Payment Structure
SLC 2004-1: CE is provided by excess spread and, for the class A
notes, subordination. As of February 2021, total and senior
effective parity ratios (including the reserve) are 100.85% (0.84%
CE) and 105.87% (5.55% CE). Liquidity support is provided by a
reserve sized at 0.25% of the pool balance (with a floor of
$2,250,000), currently equal to $2,250,000. The transaction will
continue to release cash as long as the target total parity
threshold of 100.0% is maintained.
SLC 2005-1: CE is provided by excess spread and, for the class A
notes, subordination. As of February 2021, total and senior
effective parity ratios (including the reserve) are 100.62% (0.61%
CE) and 105.29% (5.03% CE). Liquidity support is provided by a
reserve sized at 0.25% of the pool balance (with a floor of
$3,056,269), currently equal to $3,056,269. The transaction will
continue to release cash as long as the target total parity
threshold of 100% is maintained.
SLC 2005-3: CE is provided by excess spread and, for the class A
notes, subordination. As of March 2021, total and senior effective
parity ratios (including the reserve) are 100.58% (0.58% CE) and
105.18% (4.93% CE). Liquidity support is provided by a reserve
sized at 0.25% of the pool balance (with a floor of $1,828,029),
currently equal to $1,828,029. The transaction will continue to
release cash as long as the target total parity threshold of 100.0%
is maintained.
SLC 2006-2: CE is provided by excess spread, overcollateralization,
and for the Class A notes, subordination. As of March 2021, total
and senior effective parity ratio (including the reserve) are,
respectively, 100.54% (0.54% CE) and 105.59% (5.30% CE). Liquidity
support is provided by a reserve sized at 0.25% of the pool balance
(with a floor of $3,778,125), currently equal to its floor of
$3,778,125. Excess cash will continue to be released as long as the
total parity release level of 100% is maintained.
Operational Capabilities: SLC Trusts are the securitizations of The
Student Loan Corporation, now a subsidiary of Discover Bank.
Navient purchased the SLC Trust certificates and assumed servicing
responsibilities in December 2010. Discover Bank serves as master
servicer, while day-to-day servicing is provided by Navient
Solutions, LLC. Fitch believes Navient to be an acceptable servicer
due to its extensive track record as the largest servicer of FFELP
loans. Fitch confirmed with the servicer the availability of a
business continuity plan to minimize disruptions in the collection
process during the coronavirus pandemic.
Coronavirus Impact: Fitch assessed the sCDR and sCPR under Fitch's
coronavirus baseline (rating) scenario by assuming a decline in
payment rates and an increase in defaults to previous recessionary
levels for two years and then a return to recent performance for
the remainder of the life of the transaction.
Fitch did not change these assumptions for this review; however,
Fitch revised the sCDR from 1.70% and 1.80% for SLC 2005-3 and SLC
2006-2 to 2.00% and revised the sCPR from 8.40% to 8.00% for 2006-2
during the review in 2020 to reflect this analysis.
The risk of negative rating actions will increase under Fitch's
coronavirus downside (sensitivity) scenario, which contemplates a
more severe and prolonged period of stress. As a downside
sensitivity reflecting this scenario, Fitch increased the default
rate, IBR and remaining term assumptions by 50%. The results are
provided in Rating Sensitivities.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transaction is
exposed to multiple dynamic risk factors and should not be used as
an indicator of possible future performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The current ratings for SLC 2004-1 are most sensitive to
Fitch's maturity risk scenario. Key factors that may lead to
positive rating action are increased payment rate and a
material reduction in weighted average remaining loan term. A
material increase of CE from lower defaults and positive
excess spread, given favorable basis spread conditions, is a
secondary factor that may lead higher loss coverage multiples.
-- An upside scenario was not run for SLC 2005-1, 2005-3, and
2006-2, because improved performance on the underlying
collateral would not result in an upgrade due to the notes
being at their highest achievable rating of 'Asf'. However,
should parity increase over the criteria threshold, the class
B notes may be considered for an upgrade.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
SLC 2004-1:
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR Usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR Usage increase 50%: class A 'CCCsf'; class B 'CCCsf'.
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
SLC 2005-1:
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- Default increase 50%: class A 'AAAsf'; class B 'AAAsf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'AAAsf';
-- Basis Spread increase 0.50%: class A 'AAAsf'; class B 'AAsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 50%: class A 'AAAsf'; class B 'AAAsf'.
-- Remaining Term increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- Remaining Term increase 50%: class A 'AAAsf'; class B 'AAAsf'.
SLC 2005-3:
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'AAsf';
-- Default increase 50%: class A 'AAAsf'; class B 'AAsf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'AAsf';
-- Basis Spread increase 0.50%: class A 'AAAsf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 50%: class A 'AAAsf'; class B 'AAAsf'.
-- Remaining Term increase 25%: class A 'AAsf'; class B 'AAAsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'AAAsf'.
SLC 2006-2:
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- Default increase 50%: class A 'AAAsf'; class B 'AAsf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'AAAsf';
-- Basis Spread increase 0.50%: class A 'AAAsf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'AAsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'Asf';
-- IBR Usage increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 50%: class A 'AAAsf'; class B 'AAsf'.
-- Remaining Term increase 25%: class A 'Bsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
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.
SLC STUDENT 2004-1: S&P Cuts Clas A-7/B Trusts Ratings to 'B (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class A-7 and B notes
from SLC Student Loan Trust 2004-1 to 'B (sf)' from 'BB (sf)' and
removed them from CreditWatch with negative implications, where
they were placed Jan. 29, 2021. The transaction is backed by a pool
of student loans originated through the U.S. Department of
Education's (ED's) Federal Family Education Loan Program (FFELP).
S&P said, "Our review primarily considered the transaction's asset
or bond payment rate relative to each class' legal final maturity
date, expected future collateral performance, payment priority, and
current credit enhancement levels. We also considered the evolving
macroeconomic environment that has resulted from the COVID-19
pandemic, which will likely present employment challenges for
student loan borrowers. Additionally, we considered secondary
credit factors, such as credit stability, peer comparisons, and
issuer-specific analyses."
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."
Rating Action Rationale
The downgrades reflect the liquidity pressure the senior notes are
experiencing, not the available credit enhancement levels. S&P's
loss expectations remain low because the loans are backed by a
guarantee of at least 97% of a defaulted loan's principal and
interest from ED, as described below.
S&P said, "Our liquidity analysis calculates a principal payment
haircut that takes into consideration a class' maturity date
relative to its average bond principal payments. The higher the
principal payment haircut, the greater likelihood the bond will be
repaid by its legal final maturity date. In 2019, we published
guidance that generally indicates that the maximum rating for
classes with a principal payment haircut of less than 20% and
maturing within seven years (A-7 matures in seven years) is 'AA
(sf)'. A negative principal payment haircut indicates a maximum
rating of 'B (sf)'.
"We lowered our ratings on both classes to 'BB (sf)' and placed
them on Creditwatch negative based on the November 2020 reporting
data, which showed a steep decline in the A-7 class' principal
payment haircut, a metric we use to monitor a transaction's
liquidity profile." Since then, the haircut trend has continued to
deteriorate, falling negative for the class A-7.
Prior to the COVID-19 pandemic, the transaction was impacted by a
slow pace of principal payments to the notes. Additionally, in
response to the pandemic, certain borrowers requested a 90-day
forbearance, which further slowed the principal repayment to the
noteholders. Principal payments to the noteholders largely consist
of amounts derived from borrower loan payments and guarantee
payments that ED pays for reimbursement of defaulted loans that
were properly serviced.
The class A-7 notes are in a stronger position than the class B
notes, as they receive their share of principal and interest first
and may receive additional preferences in the case of an event of
default. S&P said, "We lowered the rating on class A-7 to 'B (sf)'
because the haircut for class A-7, which matures within seven
years, has declined below 0% to approximately -3%. The higher
principal payment haircut for class B at approximately 34% is
primarily due to the class having a maturity date that is four
years longer, allowing for this class to benefit from a higher
number of borrower payments. While the class B benefits from the
longer maturity date, it could be negatively impacted by a default
of class A-7 at its legal final maturity date. There are many
potential outcomes that could occur after an event of default such
as a potential sale of the estate or a reprioritization of the
class B interest payment behind the class A principal.
Additionally, the waterfall could remain the same as the current
waterfall after an event of default. This leads to uncertainty as
to the impact that an event of default on class A could have on
class B. A reprioritization could weaken the likelihood that class
B would receive its interest and principal payments by its legal
final maturity date. As such, our rating on the class B notes is
not higher than the lowest-rated senior note. Accordingly, we also
lowered the rating on class B to 'B (sf)'."
S&P said, "Although the liquidity for the bonds may continue to
deteriorate, we believe in a base case 'B' scenario that Navient
Solutions LLC, an active issuer in the market and the current
servicer and certificateholder for the trust, will exercise its
option to call the collateral when the pool factor falls below 10%.
We expect the pool factor to fall below 10% prior to class A-7's
legal final maturity date."
Current Capital Structure
The transaction in this review is comprised of one senior and one
subordinate note, with coupons based on a spread above a LIBOR
index.
Payment Structure And Credit Enhancement
The transaction utilizes a payment mechanism that defines a
principal distribution amount as the change in the adjusted pool
balance from previous quarter to current quarter. This principal
distribution amount is allocated pro-rata to the class A and B
notes. Generally, remaining available funds can be released to the
trust after the payment of senior fees, note interest, and the
class A and B notes' principal distribution amount. The transaction
releases certain amounts until its respective clean-up call date
(at approximately a 10% pool factor). After the call date, releases
are no longer permitted.
If the class A notes do not receive full principal by their
respective legal final maturity date, the payment priority may
change, requiring payments of principal and interest to the class B
notes after the full repayment of the senior note.
Credit enhancement includes overcollateralization (as measured by
parity), subordination (for the senior class), the reserve account,
and excess spread.
Collateral
The transaction is backed by FFELP consolidation loans guaranteed
by the ED. In addition, the majority of the loans are floor income
loans. Floor income loans allow the trust to retain the borrower
interest that exceeds the special allowance payment rate paid by
the U.S. government, which can increase excess spread when interest
rates are low. Loans that have been serviced according to the FFELP
guidelines are supported by a guarantee from the ED of at least 97%
of a defaulted loan's principal and interest; therefore, net losses
are expected to be minimal. Student Loan Corp., a subsidiary of
Discover Financial Services, is the master administrator and master
servicer, and Navient Solutions LLC is the subservicer and
subadministrator for the loans.
S&P will continue to monitor the performance of the student loan
receivables backing the transactions relative to its ratings and
the available credit enhancement and liquidity for the classes.
THOMPSON PARK: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to Thompson Park CLO
Ltd./Thompson Park CLO LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Thompson Park CLO Ltd./Thompson Park CLO LLC
Class A-1, $286.000 million: AAA (sf)
Class A-2, $30.000 million: AAA (sf)
Class B-1, $46.250 million: AA (sf)
Class B-2, $17.750 million: AA (sf)
Class C (deferrable), $30.000 million: A (sf)
Class D (deferrable), $30.000 million: BBB- (sf)
Class E (deferrable), $19.500 million: BB- (sf)
Subordinated notes, $48.525 million: Not rated
TRINITAS CLO XV: S&P Assigns B- (sf) Rating on $5MM Class F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned ratings to Trinitas CLO XV
Ltd./Trinitas CLO XV LLC's floating-rate notes.
The note issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
that are governed by collateral quality tests. The notes are
managed by Trinitas Capital Management LLC.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Trinitas CLO XV Ltd./Trinitas CLO XV LLC
Class A-1, $297.00 million: AAA (sf)
Class A-2, $23.00 million: AAA (sf)
Class B-1, $50.00 million: AA (sf)
Class B-2, $10.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $25.00 million: BBB- (sf)
Class E (deferrable), $22.50 million: BB- (sf)
Class F (deferrable), $ 5.00 million: B- (sf)
Subordinated notes, $48.50 million: Not rated
UBS-BARCLAYS 2012-C3: DBRS Confirms B(high) Rating on Class F Certs
-------------------------------------------------------------------
DBRS, Inc. confirmed all classes of Commercial Mortgage
Pass-Through Certificates, Series 2012-C3 issued by UBS-Barclays
Commercial Mortgage Trust 2012-C3 as follows:
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (high) (sf)
-- Class X-B at BB (low) (sf)
-- Class F at B (high) (sf)
DBRS Morningstar changed the trends on Classes B and C to Stable
from Positive because of increased risk associated with the
specially serviced loans as well as upcoming maturity risk. All
trends are now Stable.
As of the March 2021 remittance, the pool's balance had been
reduced to $758.7 million from $1.1 billion at issuance, as a
result of the payoff of eight loans and scheduled amortization. All
68 loans remaining in the pool are approaching either an
anticipated repayment date or a final maturity date over the next
18 months.
The largest loan in the pool is the 1000 Harbor Boulevard loan
(Prospectus ID#1, 14.9% of the pool). The $120.0 million whole loan
consists of a $113.0 million pari passu component in this deal and
a $7.0 million pari passu component in UBSBB 2012-C4 (not rated by
DBRS Morningstar). It is secured by a 617,187 square foot Class A
office building in Weehawken, New Jersey, and is fully leased to
two tenants: UBS Financial Services, Inc. (UBS), an affiliate of
the loan seller, and Hartz Financial Corp., an affiliate of the
sponsor. UBS has a lease that covers 95% of the gross leasable area
through 2035. Performance has been stable since issuance with the
YE2020 financial reporting net cash flow of $9.0 million, a 1.52
times (x) debt service coverage ratio (DSCR), and 100% occupancy
compared to the issuance figures of $8.7 million, 1.47x, and 100%,
respectively.
Five loans, representing 5.5% of the pool, are with the special
servicer. The largest specially serviced loan is the Cooper Retail
Portfolio loan (Prospectus ID#19, 1.7% of the pool), which is
secured by three anchored retail centers totaling 211,750 square
feet. The portfolio includes Magnolia Place, a 103,638 square foot
shopping center built in 1995 in Columbus, Mississippi; Saufley
Plaza, a 51,282 square foot shopping center built in 1998 in
Pensacola, Florida; and Somerset Center, a 56,840 square foot
shopping center built in 2000 in Somerset, Kentucky. The loan
transferred to the special servicer in June 2020 after the borrower
requested Coronavirus Disease (COVID-19) relief. Winn-Dixie vacated
the Saufley Plaza property in March 2019, approximately one year
after its bankruptcy filing and subsequent restructuring.
Additionally, Office Depot (30,808 square feet) closed its location
in the Somerset Center property in May 2019 and the loan's DSCR is
projected to fall below 1.00x if releasing efforts are not
successful. According to the servicer's commentary, the Saufley
Plaza property has a letter of intent pending for a 30,000 sf
lease. Additionally, the borrower has submitted a lease for
approval for tenant Ross Dress for Less (22,000 square feet, 10.4%
of net rentable area, lease expiry in January 2031) at the Magnolia
Place property. While there are no recent financials reported, the
special servicer has coded the workout strategy on the March 2021
remittance as a modification. As part of this analysis, DBRS
Morningstar applied stresses to the loan to account for the risk
associated with two empty anchor spaces.
There are 19 loans, representing 21.9% of the pool, on the
servicer's watchlist. These loans are being monitored for various
reasons, including low DSCRs or occupancy, tenant rollover risk,
and/or pandemic-related forbearance requests.
Notes: All figures are in U.S. dollars unless otherwise noted.
UBS-BARCLAYS 2012-C4: DBRS Cuts Class F Certs Rating to CCC(sf)
---------------------------------------------------------------
DBRS, Inc. downgraded the ratings on three classes of Commercial
Mortgage Pass-Through Certificates, Series 2012-C4 issued by
UBS-Barclays Commercial Mortgage Trust 2012-C4 as follow:
-- Class D to BB (sf) from BBB (low) (sf)
-- Class E at B (low) (sf) from BB (sf)
-- Class F to CCC (sf) from B (sf)
DBRS Morningstar also confirmed the ratings on the remaining
classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
DBRS Morningstar changed the trends on Classes X-B, C, D, and E to
Negative from Stable. Class F has a rating that does not carry a
trend. All other trends remain Stable.
The rating downgrades are primarily driven by the projected loss on
the second-largest loan in special servicing, Newgate Mall
(Prospectus ID #6, 4.9% of the pool), and the Negative trends are
largely the result of the increased risk to the pool for the
remaining loans in special servicing, which combined represent an
additional 10.2% of the pool. Regarding the specially serviced
loans, two are secured by regional malls, representing 11.2% of the
pool, while the remaining loans are secured by retail and hotel
properties. As of the March 2021 remittance, the transaction
consists of 79 of the original 89 loans, with collateral reduction
of 18.7% since issuance. The pool also benefits from defeasance as
24 loans, representing 19.4% of the pool balance, are defeased.
The transaction is concentrated by property type as 21 loans,
representing 28.1% of the pool, are secured by retail properties,
and eight loans, representing 21.0% of the pool, are secured by
hotel properties. Both asset types have been disproportionately
affected by the Coronavirus Disease (COVID-19) pandemic. There are
also 22 loans, representing 22.8% of the pool, secured by office
properties, including the largest loan in the transaction, KBR
Tower (Prospectus ID#2; 10.8% of the pool). In addition to the five
loans in special servicing that collectively represent 15.1% of the
pool, there are 14 loans on the servicer's watchlist, representing
14.6% of the pool.
The Newgate Mall loan is secured by a regional mall in Ogden, Utah.
The collateral includes the in-line space, the Cinemark 14 Theatre,
a former Sports Authority anchor pad that was closed and backfilled
by home goods retailer Downeast Home, and a former Sears anchor pad
that remains vacant. Non-collateral anchors include Dillard's,
Burlington Coat Factory, and Fly High Adventure Park. The loan
transferred to special servicing in March 2020; however, the
property's cash flow declines began in 2017 and accelerated quickly
after the loss of Sears in 2018. The servicer has installed The
Woodmont Company as the receiver, and news articles suggest the
trust was the winning bidder in a foreclosure auction in March
2021. According to the September 2020 rent roll, the collateral was
62.0% occupied. The subject was appraised in November 2020 with an
updated value of $20.0 million, down 75.9% from the issuance value
of $83.0 million. Based on a haircut to the most recent valuation,
DBRS Morningstar liquidated the loan in the analysis for this
review, with a loss severity exceeding 75.0%.
The largest loan in special servicing, Visalia Mall (Prospectus
ID#3; 6.3% of the pool), is secured by a regional mall in Visalia,
California, owned by Brookfield Properties Retail, Inc.
(Brookfield). The collateral includes the entire mall, which is
anchored by JCPenney and Macy's, with junior anchors including Old
Navy and Forever 21. The loan transferred to the special servicer
in May 2020 for imminent monetary default, ahead of the June 2020
maturity date. The special servicer granted a forbearance to the
borrower, with terms including a maturity date extension to June
2021 and the installation of a cash flow sweep. Brookfield also
paid the $740,000 workout fee. Through the modification, the loan
will maintain its interest-only payments. According to the
September 2020 rent roll, the property was 96.2% occupied with
in-line occupancy of 92.4%. DBRS Morningstar did not receive 2020
tenant sales data; however, at YE2019, in-line tenants reported a
combined sales figure of $553 per square foot. According to the
YE2019 financial reporting, the net cash flow figure of $10.2
million represents a 39.7% improvement from the issuance figure.
Despite the significant cash flow growth from issuance, an updated
appraised value obtained by the special servicer as of August 2020
estimated the mall's current value at $86.2 million, down 25.0%
from the issuance value of $115.0 million and indicative of a
loan-to-value ratio of 85.8% for the trust debt. The value decline
for a property with sustained performance improvements over the
past nine years is somewhat surprising, but is a product of the
current environment for regional malls, which has led to appraisers
and investors alike using significantly increased capitalization
rates. Regarding the August 2020 valuation, the appraiser assumed a
capitalization rate of 9.5%, compared with a capitalization rate of
7.3% at issuance. While the loan remains current and Brookfield
appears firmly committed to the property and the loan, there are
increased risks to the trust with the decline in value and the
general uncertainty around the sponsor's ability to secure a
replacement loan within the extended term. As such, DBRS
Morningstar made a probability of default adjustment in the
analysis for this review to increase the expected loss for the
loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
VENTURE 35 CLO: Moody's Hikes Rating on $30MM Class E Notes to Ba3
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
CLO refinancing notes issued by Venture 35 CLO, Limited (the
"Issuer").
Moody's rating action is as follows:
US$305,000,000 Class A-LR Senior Secured Floating Rate Notes Due
2031 (the "Class A-LR Notes"), Assigned Aaa (sf)
US$36,475,000 Class B-LR Senior Secured Floating Rate Notes Due
2031 (the "Class B-LR Notes"), Assigned Aa1 (sf)
Additionally, Moody's has taken rating actions on the following
outstanding notes:
US$30,525,000 Class B-FR Senior Secured Fixed Rate Notes Due 2031
(the "Class B-FR Notes"), Upgraded to Aa1 (sf); previously on
October 22, 2020 Assigned Aa2 (sf)
US$40,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes Due 2031 (the "Class C Notes"), Upgraded to A2 (sf);
previously on December 18, 2020 Confirmed at A3 (sf)
US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes Due 2031 (the "Class D Notes"), Upgraded to Baa3 (sf);
previously on December 18, 2020 Confirmed at Ba1 (sf)
US$30,000,000 Class E Junior Secured Deferrable Floating Rate Notes
Due 2031 (the "Class E Notes"), Upgraded to Ba3 (sf); previously on
July 1, 2020 Downgraded to B1 (sf)
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.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
MJX Asset Management LLC, (the "Manager") will continue to 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 remaining
reinvestment period.
The Issuer previously issued five other classes of secured notes
and one class of subordinated notes, which will remain
outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the non-call period
for the Refinancing Notes; the inclusion of alternative benchmark
replacement provisions; and changes to the definition of "Adjusted
Weighted Average Rating Factor" and "Maximum Moody's Rating Factor
Test".
Moody's upgrade actions on the Class B-FR Notes, Class C Notes,
Class D Notes, and Class E Notes are primarily a result of the
refinancing, which increases excess spread available as credit
enhancement to the rated notes.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $582,387,089
Defaulted par: $11,379,179
Diversity Score: 107
Weighted Average Rating Factor (WARF): 2966
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.67%
Weighted Average Recovery Rate (WARR): 46.92%
Weighted Average Life (WAL): 6.03 years
In consideration of the current high uncertainties around the
global economy, and the ultimate performance of the CLO portfolio,
Moody's conducted a number of additional sensitivity analyses
representing a range of outcomes that could diverge, both to the
downside and the upside, from Moody's base case. Some of the
additional scenarios that Moody's considered in its analysis of the
transaction include, among others: additional near-term defaults of
companies facing liquidity pressure; an additional cashflow
analysis assuming a lower WAS to test the sensitivity to LIBOR
floors; and a lower recovery rate assumption on defaulted assets to
reflect declining loan recovery rate expectations.
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 the US economic activity.
Moody's regard 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.
VENTURE 42: S&P Assigns BB- (sf) Rating on $18.75MM Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Venture 42 CLO
Ltd./Venture 42 CLO LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Venture 42 CLO Ltd./Venture 42 CLO LLC
Class X, $2.00 million: AAA (sf)
Class A-1A, $295.00 million: AAA (sf)
Class A-1B, $10.00 million: AAA (sf)
Class A-2, $10.00 million: AAA (sf)
Class B, $65.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $51.50 million: Not rated
VISIO 2021-1R: S&P Assigns Prelim B (sf) Rating on Class B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Visio
2021-1R Trust's mortgage-backed notes.
The note issuance is an RMBS securitization backed by first-lien,
fixed-rate, and adjustable-rate fully amortizing investment
property mortgage loans secured by single-family residential
properties, planned-unit developments, condominiums, and two- to
four-family residential properties to both prime and nonprime
borrowers. The pool has 936 business-purpose investor loans and are
exempt from the qualified mortgage/ability-to-repay rules.
The preliminary ratings are based on information as of April 26,
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 pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage originators, Visio Financial Services Inc. and
Lima One Capital LLC; and
-- The impact the economic stress brought on by the COVID-19
pandemic will likely have on the performance of the mortgage
borrowers in the pool and the 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
Visio 2021-1R Trust
Class A-1, $120,860,000: AAA (sf)
Class A-2, $12,643,000: AA(sf)
Class A-3, $19,098,000: A (sf)
Class M-1, $7,161,000: BBB+ (sf)
Class B-1, $8,576,000: BB (sf)
Class B-2, $4,598,000: B (sf)
Class B-3, $3,890,267: Not rated
Class XS, Notional(i): Not rated
(i)The notional amount equals the loans' unpaid principal
balance.
WELLS FARGO 2015-NXS1: DBRS Confirms B(sf) Rating on Class F Certs
------------------------------------------------------------------
DBRS, Inc. confirmed the ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2015-NXS1 issued by
Wells Fargo Commercial Mortgage Trust 2015-NXS1 as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction, which has been paid down by 19.8% since issuance.
As of the March 2021 remittance, the trust collateral consists of
62 of the original 68 loans, totaling $765.9 million. The
transaction has a concentration of office properties, which benefit
from leases to tenants that have generally shown greater resilience
during the Coronavirus Disease (COVID-19) pandemic than others,
such as restaurants and retailers. In total, 14 loans, representing
38.1% of the pool, are secured by office properties, including the
three largest loans in the transaction: Stanford Research Park
(Prospectus ID#3; 6.5% of the pool), Eastgate One Phases I-VII &
XII (Prospectus ID#3; 6.4% of the pool), and Eastgate Two Phases
VIII-X (Prospectus ID#5; 5.1% of the pool). The transaction also
benefits from defeasance collateral, as seven loans, representing
12.3% of the current pool balance, are defeased.
The transaction has exposure to retail and hotel properties,
representing 23.9% and 11.8% of the current pool balance,
respectively, which have been disproportionately affected by the
ongoing pandemic. As of the March 2021 reporting, three loans,
representing 6.3% of the pool, are in special servicing and 10
loans, representing 16.3% of the pool, are on the servicer's
watchlist. The largest specially serviced loan, Hotel Andra
(Prospectus ID#13; 3.1% of pool), is secured by a 119-key boutique
hotel in downtown Seattle. The loan transferred to special
servicing in March 2020 for imminent monetary default at the
borrower's request. The hotel has remained closed since March 2020,
and the loan remains outstanding for the May 2020 debt service
payment. According to the February 2021 asset status report
provided by the servicer, the borrower indicated it does not have
the ability to fund the loan shortfalls or contribute additional
capital toward the property. The special servicer has received
consent to take the necessary steps to appoint Manhattan
Hospitality Advisors as receiver of the property and enter into a
deed in lieu of foreclosure or initiate foreclosure proceedings.
The property was reappraised in October 2020 for $40.0 million,
down 27.0% from the issuance value of $54.8 million; however, the
appraiser did indicate collateral value upside in the near term,
provided the impact from the pandemic subsides. The loan was
liquidated from the trust as part of the subject analysis,
resulting in an implied loss severity exceeding 10.0%.
The second-largest loan in special servicing, 9990 Richmond
(Prospectus ID#17; 2.5% of the pool), is secured by a Class B
office property in the Westchase submarket of Houston. The loan
transferred to special servicing in January 2021 for imminent
monetary default; however, the property had reported declining cash
flows since 2018 as a result of increased vacancy. According to the
servicer, the borrower has executed a pre-negotiation letter and
made a relief proposal, and the workout is in the initial stages
given the recent transfer. According to the YE2020 rent roll, the
property was 65.7% occupied at an average rental rate of $19.92 per
square foot (psf) gross. The subject is in a soft submarket, as
according to a Q4 2020 Reis report, Class B office product in the
Westheimer/Westchase submarket reported an average vacancy rate of
24.3% with an average asking rental rate of $20.61 psf gross. The
servicer has not obtained an updated appraisal as of yet, but DBRS
Morningstar expects the as-is value has fallen significantly from
issuance given the performance declines and deterioration in the
market. In the analysis for this review, a liquidation scenario was
analyzed that resulted in a loss severity exceeding 40.0%.
The transaction structure benefits from an unrated $46.1 million
first loss piece in the Class G certificate, which absorbs the
losses assumed by DBRS Morningstar in the analysis for the two
specially serviced loans as discussed above. There has been one
small loss incurred by the trust to date caused by$478,215 in fees
that were collected by the special servicer with the resolution of
the Patriots Park loan, which was repaid in full in October 2019.
Notes: All figures are in US dollars unless otherwise noted.
WELLS FARGO 2015-NXS2: DBRS Cuts Class F Certs Rating to CCC(sf)
----------------------------------------------------------------
DBRS, Inc. downgraded two classes of the Commercial Mortgage
Pass-Through Certificates, Series 2015-NXS2 issued by Wells Fargo
Commercial Mortgage Trust 2015-NXS2 as follows:
-- Class X-F to B (low) (sf) from B (sf)
-- Class F to CCC (sf) from B (low) (sf)
In addition, DBRS Morningstar confirmed the remaining classes as
follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
All trends are Stable with the exception of Class F, which does not
carry a trend because of the CCC (sf) rating. As part of this
review, DBRS Morningstar removed Classes F and X-F from Under
Review with Negative Implications where it had placed them on
August 6, 2020.
The downgrades capture the increased risk of principal losses to
the trust as there are nine loans, totaling 19.6% of the trust
balance, in special servicing as of the March 2021 remittance
report. DBRS Morningstar notes the special servicer is pursuing
foreclosure actions for most of the specially serviced loans, which
could lead to additional losses to the unrated Class G
certificates. The downgrades to Classes F and X-F reflect the lower
projected credit enhancement levels following the forecasted losses
to the trust in a hypothetical liquidation scenario for some of the
specially serviced loans.
At issuance, the trust consisted of 63 fixed-rate loans secured by
77 commercial properties with a trust balance of $914.4 million.
Per the March 2021 remittance report, 61 loans secured by 75
commercial properties remain in the trust with a total balance of
$760.5 million, representing a 16.8% collateral reduction since
issuance. The original largest loan in the pool, Patriots Park,
which had represented 10.0% of the pool balance, was in special
servicing for a non-permitted equity transfer, but ultimately
repaid in full, although the special servicing fees of
approximately $900,000 were applied as a loss to the unrated Class
G certificates with the October 2019 remittance.
The trust benefits from nine loans, representing 9.0% of the trust
balance, being fully defeased. The pool is relatively granular by
loan size as the largest 15 loans comprise 56.9% of the trust
balance. The pool also benefits from the relatively high amount of
properties located in urban markets with 11 loans, totaling 28.2%
of the trust balance, secured by properties with a DBRS Morningstar
Market Rank of 6 or greater. Maturity risk is nonexistent in the
near term as there is only one loan that has a maturity date before
2025; however, that loan was fully defeased as of the March 2021
reporting. The trust does feature a relatively high number of loans
with full interest-only (IO) terms (nine loans totaling 31.8% of
the trust balance).
Per the March 2021 remittance report, the pool is exhibiting a
moderate level of stress as there are nine loans, representing
19.6% of the trust balance, in special servicing and an additional
15 loans, representing 22.1% of the trust balance, on the
servicer's watchlist. Seven loans, totaling 13.6% of the trust
balance, transferred to the special servicer during the Coronavirus
Disease (COVID-19) pandemic. The high concentration of specially
serviced loans is anticipated to decrease in the near term as the
special servicer noted the Embassy Suites Nashville loan
(Prospectus ID#5 – 5.3% of the trust balance) is expected to be
transferred back to the master servicer after a forbearance
agreement was executed in February 2021. DBRS Morningstar also
notes the second-largest specially serviced loan, Sea Harbor Office
Center (Prospectus ID#6 – 5.3% of the trust balance), continues
to be a strong performer despite being in special servicing for
over two years. The loan is secured by a mid-rise Class A office
building in Orlando that transferred to the special servicer in
January 2019 as a result of the sponsor's noncompliance with a
lockbox provision related to the credit rating for the parent
company of the property's largest tenant, Wyndham Vacation
Ownership, Inc. (Wyndham Vacation). The property remained 100%
occupied as of September 2020 and the property's net cash flow
(NCF) has been well above the issuer's underwritten NCF since 2016.
An online listing on Commercial Cafe is marketing a floor at the
subject property for sublease, indicating Wyndham Vacation may not
be utilizing all of its space.
DBRS Morningstar is closely monitoring the 70 Broad Street
(Prospectus ID#18 – 1.9% of the trust balance) and Hotel Andra
(Prospectus ID#20 – 1.8% of the trust balance) loans as those
loans transferred to the special servicer since the last review and
the special servicer is pursuing foreclosure of the respective
collateral properties. The 70 Broad Street loan is secured by the
fee-simple interest in a mixed-use commercial/corporate residential
housing property located in Lower Manhattan. The loan transferred
to the special servicer in March 2020 after an event of default was
triggered due to failure to provide financial information since
2016 and to comply with the cash management provisions. In May
2020, a representative of the borrower reported all in-place leases
at issuance had been terminated in April 2017 and the property had
been 100% vacant since that time. The special servicer has
initiated the foreclosure process and will appoint a receiver to
manage the property after taking title. The property was
reappraised in July 2020 for a value of $15.6 million, down 31.0%
from the appraised value of $22.6 million at issuance. As part of
the subject analysis, the loan was liquidated from the trust based
on the July 2020 appraised value, resulting in an implied loss
severity in excess of 20.0%.
The Hotel Andra loan is a secured by the borrower's fee-simple
interest in a 119-key boutique hotel in downtown Seattle. The loan
transferred to special servicing in March 2020 for imminent
monetary default at the borrower's request as performance has been
severely affected by the pandemic and the borrower was unable to
make its May 2020 debt service payment. The hotel has remained
closed since March 2020. Per a February 2021 asset status report,
the borrower indicated it does not have the ability to fund the
loan shortfalls or contribute additional capital toward the
property. The special servicer has received consent to take the
necessary steps to appoint Manhattan Hospitality Advisors as
receiver of the property and enter into a deed in lieu of
foreclosure or initiate foreclosure proceedings. The property was
reappraised in October 2020 for $40.0 million, down 27.0% from the
issuance value of $54.8 million; however, the appraiser did
indicate collateral value upside in the near term as the
coronavirus pandemic subsides. The loan was liquidated from the
trust as part of the subject analysis based on the October 2020
appraised value, which would yield an implied loss severity in
excess of 10.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2021-FCMT: Fitch Affirms B- Rating on Class F Certs
---------------------------------------------------------------
Fitch Ratings has issued a presale report on Wells Fargo Commercial
Mortgage Trust 2021-FCMT, commercial mortgage pass-through
certificates, series 2021-FCMT.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $221,300,000 class A 'AAAsf'; Outlook Stable;
-- $38,700,000a class X-CP 'AA-sf'; Outlook Stable;
-- $38,700,000a class X-NCP 'AA-sf'; Outlook Stable;
-- $38,700,000 class B 'AA-sf'; Outlook Stable;
-- $26,500,000 class C 'A-sf'; Outlook Stable;
-- $37,900,000 class D 'BBB-sf'; Outlook Stable;
-- $61,600,000 class E 'BB-sf'; Outlook Stable;
-- $46,200,000 class F 'B-sf'; Outlook Stable.
Fitch does not expect to rate $22,800,000 class HRR, which is a
non-offered horizontal risk retention interest representing
approximately 5.0% of the estimated fair value of all classes.
All offered classes are privately placed and pursuant to Rule
144A.
(a) Notional amount and interest only.
TRANSACTION SUMMARY
Wells Fargo Commercial Mortgage Trust 2021-FCMT, commercial
mortgage pass-through certificates, series 2021-FCMT, represents
the beneficial ownership interest in a five-year fully extended,
floating-rate, interest-only first lien mortgage loan with an
original principal balance of $455.0 million.
The mortgage loan is secured by the fee simple interests in a
648,340-sf portion of Fashion Centre at Pentagon City, a
super-regional mall, and Metro Tower at Pentagon City, a 169,551-sf
office property and the leased fee interest in the connected Ritz
Carlton at Pentagon City hotel located in Arlington, VA. The loan
has a three-year initial term with two one-year extension options.
Loan proceeds, together with a $7.1 million borrower equity
contribution, were used to refinance $450.0 million of debt, fund
an upfront $3.7 million upfront reserve and pay $8.5 million of
closing costs. The certificates will follow a sequential-pay
structure.
KEY RATING DRIVERS
High Fitch Leverage: The $455.0 million mortgage loan has high
leverage metrics, with a Fitch stressed LTV, DSCR and debt yield of
106.6%, 0.83x and 7.0%, respectively, and debt of $556psf. The
issuer's LTV, DSCR and debt yield are 49.1%, 2.57x and 8.3%,
respectively, based on an appraised value of $926.2 million. The
borrower contributed $7.1 million of new equity as part of the
refinance.
Location: The property is located in the Pentagon City neighborhood
of Arlington, VA and approximately five miles southwest of
Washington, D.C. The Fashion Centre at Pentagon City is connected
to an office (169,551-sf Metro Tower - collateral), a 366-key Ritz
Carlton (ground lease is collateral; hotel improvements are not),
and the Yellow and Blue Metro lines. Given the property's
accessible urban location, it draws from a dense local trade area
within five miles and has a diverse customer base that includes
local shoppers, office workers, and domestic and international
tourists.
Competitive Retail Position and Property Quality: Fashion Centre is
one of only 34 malls to receive the highest (A++) designation in
GreenStreet's mall database, which tracks approximately 1,250 malls
across the U.S. Fitch assigned Fashion Centre and Metro Tower
property quality grades of 'A-' and 'B+', respectively.
Strong Pre-Pandemic Sales Performance but High Occupancy Costs:
Fitch considers Fashion Centre's reported 2019 in-line sales (over
10,000sf) of $993 psf strong. The mall's reported in-line sales
excluding Apple are $786 psf. The 2019 in-line occupancy cost,
excluding Apple, was 22.2% prior to any occupancy cost adjustments.
Fitch applied an occupancy cost adjustment to 10 tenants after
excluding jewelry and watch retailers, restaurants and tenants with
sales in excess of $500psf. Given the strong sales at the property,
Fitch applied an occupancy cost adjustment to 25.0% to those 10
tenants, resulting in an overall mark-to-market adjustment of $1.8
million.
Coronavirus Pandemic - Declining Sales: The Fashion Centre at
Pentagon City is a super-regional mall with over half of its
foot-traffic driven by domestic and international visitors as well
as office workers in the surrounding area and therefore,
experienced sales declines as a result of the pandemic.
Eighty-three tenants, representing 40.6% of the NRA, reported sales
in 2018, 2019 and 2020. Total sales for those 83 tenants were
$133.0 million, or $505psf, in 2020, which represents declines
relative to 2019 and 2018 of 44.0% ($902psf) and 42.3% ($875psf),
respectively. The entire mall closed on March 19, 2020 with the
majority of the stores closed for approximately three months. Even
after accounting for the mall closure in 2020, adjusted 2020 sales
of $673psf are still 25.4% and 23.0% below 2019 and 2018 sales,
respectively.
Institutional Sponsorship: The borrowers are each indirect
subsidiaries of joint ventures between affiliates of Simon Property
Group, L.P. (SPG) and Institutional Mall Investors (IMI), a
co-investment venture owned by an affiliate of Miller Capital
Advisory, Inc. (MCA) and California Public Employees' Retirement
System (CalPERS). Fitch simultaneously affirmed SPG's A- rating and
withdrew it due to commercial reasons in January 2021. SPG is a
real estate investment trust with an interest in 234 properties
comprising 191 million sf, located in North America, Asia and
Europe as of December 2020. The sponsor's U.S. portfolio includes
99 malls, 83 outlet properties (including 14 properties within the
company's Mills portfolio), four lifestyle centers and 17 other
retail properties.
As of YE20, SPG's total U.S. portfolio was over 91.3% leased (down
from 95.1% at YE19). SPG's U.S. mall and outlet portfolio generated
sales psf of $693 in 2019, but the company did not report sales psf
in its 2020 annual report because the company does not believe the
trends for the period are indicative of future operating trends.
MCA is the investment manager for IMI. CalPERS is the largest
public pension fund in the U.S. with $438 billion in assets under
management including $45 billion in real estate as of January 2021.
IMI's portfolio consists of 21.3 million sf of retail space and 1.2
million sf of office space as of December 2020.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes to the same one
variable, Fitch NCF:
-- Original Rating: AAAsf / AA-sf / A-sf / BBB-sf / BB-sf / B-sf
-- 20% NCF Increase: AAAsf / AAAsf / AAsf / Asf / BBB-sf/ BBsf
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the model
implied rating sensitivity to changes in one variable, Fitch NCF:
-- Original Rating: AAAsf / AA-sf / A-sf / BBB-sf / BB-sf / B-sf
-- 10% NCF Decline: AAsf / BBB+sf / BBB-sf / BBsf / B-sf / CCCsf
-- 20% NCF Decline: Asf / BB+sf / BBsf / Bsf / CCCsf / CCCsf
-- 30% NCF Decline: BBB-sf / BB-sf / Bsf / CCCsf / CCCsf / CCCsf
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 15") as
prepared by KPMG LLP. The third-party due diligence described in
Form 15E focused on a comparison and re-computation of certain
characteristics with respect to the mortgage loan and related
mortgaged property in the data file. Fitch considered this
information in its analysis, and it did not have an effect on
Fitch's analysis or conclusions.
DATA ADEQUACY
Fitch received information in accordance with its published
criteria. Sufficient data, including asset summaries, three years
of property financials and third-party reports on the property,
were received from the issuer. Ongoing performance monitoring,
including data provided, is described in the Performance Analytics
section.
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.
WESTLAKE AUTOMOBILE 2021-1: DBRS Finalizes B(sf) Rating on F Notes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by Westlake Automobile Receivables Trust
2021-1:
-- $212,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $655,340,000 Class A-2-A Notes at AAA (sf)
-- $50,000,000 Class A-2-B Notes at AAA (sf)
-- $135,680,000 Class B Notes at AA (sf)
-- $174,870,000 Class C Notes at A (sf)
-- $131,160,000 Class D Notes at BBB (sf)
-- $55,020,000 Class E Notes at BB (sf)
-- $85,930,000 Class F Notes at B (sf)
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
DBRS Morningstar-projected cumulative net loss (CNL) assumption
under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the rating addresses the
timely payment of interest on a monthly basis and principal by the
legal final maturity date for each class.
(2) DBRS Morningstar's projected CNL assumption includes an
assessment of how collateral performance could deteriorate because
of macroeconomic stresses related to the Coronavirus Disease
(COVID-19) pandemic.
(3) The transaction assumptions consider DBRS Morningstar's set of
macroeconomic scenarios for select economies related to the
coronavirus pandemic, available in its commentary "Global
Macroeconomic Scenarios: January 2021 Update," published on January
28, 2021. DBRS Morningstar initially published macroeconomic
scenarios on April 16, 2020, that have been regularly updated. The
scenarios were last updated on January 28, 2021, and are reflected
in DBRS Morningstar's rating analysis. The assumptions also take
into consideration observed performance during the 2008–09
financial crisis and the possible impact of stimulus. The
assumptions consider the moderate macroeconomic scenario outlined
in the commentary, with the moderate scenario serving as the
primary anchor for current ratings. The moderate scenario factors
in increasing success in containment during the first half of 2021,
enabling the continued relaxation of restrictions.
(4) The consistent operational history of Westlake Services, LLC
and the strength of the overall Company and its management team.
-- The Westlake senior management team has considerable experience
and a successful track record within the auto finance industry.
(5) The capabilities of Westlake with regard to originations,
underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Westlake
and considers the entity to be an acceptable originator and
servicer of subprime automobile loan contracts with an acceptable
backup servicer.
(6) DBRS Morningstar used the static pool approach exclusively
because Westlake has enough data to generate a sufficient amount of
static pool projected losses.
-- DBRS Morningstar was conservative in the loss forecast analysis
performed on the static pool data.
(7) The Company indicated that it may be subject to various
consumer claims and litigation seeking damages and statutory
penalties. Some litigation against Westlake could take the form of
class action complaints by consumers; however, the Company
indicated that there is no material pending or threatened
litigation.
(8) Westlake 2021-1 provides for Class F Notes with an assigned
rating of B (sf). While DBRS Morningstar's "Rating U.S. Retail Auto
Loan Securitizations" methodology does not set forth a range of
multiples for this asset class at the B (sf) level, the analytical
approach for this rating level is consistent with that contemplated
by the methodology. The typical range of multiples DBRS Morningstar
applies in its stress analysis for a B (sf) rating is 1.00 times
(x) to 1.25x.
(9) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with Westlake, that the trust has a
valid first-priority security interest in the assets, and the
consistency with DBRS Morningstar's "Legal Criteria for U.S.
Structured Finance."
DISCONTINUATION OF LIBOR
-- The Westlake 2021-1 transaction documents include provisions
based on the recommended contractual fallback language for
U.S.-dollar Libor-denominated securitizations published by the
Federal Reserve’s Alternative Reference Rates Committee (ARRC) on
May 31, 2019.
-- In the event that the Libor-denominated Class A-2-B Notes are
issued and Libor is discontinued, the Class A-2-B Notes will be
allowed to transition to ARRC's recommended alternative reference
rate (which is the Secured Overnight Financing Rate (SOFR)).
-- DBRS Morningstar assumes that, because the sum of the new
benchmark replacement rate and the benchmark replacement adjustment
(as further defined in the transaction documents) is intended to be
a direct replacement for Libor, the contemplation of SOFR as a
benchmark replacement rate is not a material deviation from the
framework provided under DBRS Morningstar's "Interest Rate Stresses
for U.S. Structured Finance Transactions" and related
methodologies.
-- Document provisions will provide for prior notification to DBRS
Morningstar of any subsequent change to the benchmark.
The collateral securing the notes consists entirely of a pool of
retail automobile contracts secured by predominantly used vehicles
that typically have high mileage. The loans are primarily made to
obligors who are categorized as subprime, largely because of their
credit history and credit scores.
Westlake is an independent full-service automotive financing and
servicing company that provides (1) financing to borrowers who do
not typically have access to prime credit-lending terms for the
purchase of late-model vehicles and (2) refinancing of existing
automotive financing.
The ratings on the Class A-1, A-2-A, and A-2-B Notes reflect 40.15%
of initial hard credit enhancement provided by subordinated notes
in the pool (38.65%), the reserve account (1.00%), and OC (0.50%).
The ratings on the Class B, Class C, Class D, Class E, and Class F
Notes reflect 31.15%, 19.55%, 10.85%, 7.20%, and 1.50% of initial
hard credit enhancement, respectively. Additional credit support
may be provided from excess spread available in the structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
WFRBS COMMERCIAL 2012-C10: DBRS Cuts Class F Certs Rating to B(low)
-------------------------------------------------------------------
DBRS Limited downgraded its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2012-C10 issued by WFRBS
Commercial Mortgage Trust 2012-C10 as follows:
-- Class E to BB (low) (sf) from BB (sf)
-- Class F to B (low) (sf) from B (sf)
In addition, DBRS Morningstar confirmed the ratings on the
remaining classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-FL at AAA (sf)
-- Class A-FX at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
With this review, DBRS Morningstar removed Classes E and F from
Under Review with Negative Implications, where they were placed on
August 6, 2020. The trends for Classes E and F are Negative. All
other trends are Stable.
The rating downgrades and Negative trends are reflective of DBRS
Morningstar's concerns surrounding the larger watchlisted loans in
the pool as well as the transaction's specially serviced loan, all
of which are secured by regional malls in tertiary markets. As of
the March 2021 remittance, the initial trust balance of $1.3
billion has been reduced by 22.5% to $1.0 billion, with 69 of the
original 85 loans remaining in the pool. The transaction is
concentrated by property type, as 20 loans, representing 46.6% of
the pool, are secured by retail collateral and, more specifically,
five loans, representing 29.7% of pool, are secured by regional
malls. In addition, there are 17 loans, representing 9.9% of the
pool, that are fully defeased.
The transaction's sole specially serviced loan, Rogue Valley Mall
(Prospectus ID#5, 4.9% of the pool), is secured by a regional mall
in Medford, Oregon. The mall was originally owned by General Growth
Properties but was sold to Brixton Capital in 2016 for a price of
$61.5 million, well below the issuance appraised value of $80
million. The mall has been severely impacted by the pandemic and
was closed for two months during 2020 as a result of local
restrictions. A significant number of tenants requested rent relief
or lease modifications and the loan eventually transferred to
special servicing in July 2020 for payment default. In addition to
the tenants affected by the pandemic, the property also has
exposure to several retailers that have struggled over the past
several years including JCPenney (19.0% of net rentable area (NRA),
lease expires October 2021), Macy's Home Store (18.6% of NRA, lease
expires October 2022), and Macy's (noncollateral) and will also
have to deal with a significant amount of tenant rollover ahead of
the loan's October 2022 maturity. Coronavirus Disease (COVID-19)
relief has been requested and the special-servicer commentary notes
that the lender is dual-tracking a potential loan modification and
foreclosure. For this review, DBRS Morningstar liquidated the loan
from the trust, which resulted in an implied loss severity in
excess of 40%.
The transaction's largest watchlist loan, Dayton Mall (Prospectus
ID#3, 7.6% of pool), secured by a Washington Prime Group
(WPG)-operated regional mall in Dayton, Ohio, is being monitored on
the watchlist for low debt service coverage ratio (DSCR). In
addition, WPG stated in its Fiscal Year End 2020 10-K filing that
there is "substantial doubt about the company's ability to continue
as a going concern," adding sponsor risk in addition to performance
risk. DBRS Morningstar had already been monitoring this loan after
the mall lost both its noncollateral anchor tenants in 2018. Both
of those spaces remain vacant. The loan's DSCR dropped below 1.0
times (x) in 2019 and was reported at 0.93x as of Q3 2020.
Occupancy has also continued to trend lower, most recently reported
at 90.7% as of September 2020. T-12 inline tenant sales were
reported at $288 per square foot (psf) as of June 2020,
representing a slight improvement from the T-12 August 2019 sales
of $261 psf. DBRS Morningstar maintains the risks for this loan are
significantly increased from issuance resulting from the challenges
in backfilling two empty anchor boxes and the loan's declining
performance metrics as the loan's September 2022 maturity
approaches.
The Towne Mall loan (Prospectus ID#12, 2.0% of the pool), is
secured by a Macerich-operated regional mall in Elizabethtown,
Kentucky, 45 miles south of Louisville. This loan was added to the
servicer's watchlist in January 2020 for low occupancy and DSCR.
The mall's collateral Sears tenant (19.6% of NRA) vacated in 2018
and, outside of a seasonal Halloween tenant, the space has remained
vacant. Cash flow has trended lower nearly every year since
issuance and as of Q3 2020, the DSCR was reported at 0.98x with an
occupancy rate of 66.6%. The majority of the mall's vacancies are
concentrated in the former Sears wing of the mall, making
re-leasing increasingly difficult. DBRS Morningstar analyzed both
Dayton Mall and Towne Mall with elevated probabilities of default
to reflect their current risk profiles.
Notes: All figures are in U.S. dollars unless otherwise noted.
WFRBS COMMERCIAL 2013-C17: DBRS Confirms BB Rating on Class E Certs
-------------------------------------------------------------------
DBRS Limited confirmed the ratings of the Commercial Mortgage
Pass-Through Certificates, Series 2013-C17 issued by WFRBS
Commercial Mortgage Trust 2013-C17 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at BB (low) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
According to the March 2021 remittance, 74 of the original 84 loans
remain in the pool, representing a collateral reduction of 31.0%
since issuance. In addition, there are 18 loans, representing 13.1%
of the pool, that are fully defeased. Four loans, representing 7.3%
of the pool, are in special servicing while 19 loans, representing
35.2% of the pool, are on the servicer's watchlist. The watchlisted
loans are being monitored primarily for low debt service coverage
ratios (DSCRs) and occupancy related issues. The pool is fairly
concentrated by property type with 32.1% of the pool secured by
retail properties and 25.1% of the pool secured by lodging
properties.
In general, the performance for the lodging properties backing
loans in the trust had been quite healthy prior to 2020; however,
the disruptions in tourism and business travel alike amid the
Coronavirus Disease (COVID-19) pandemic have had a significant and
immediate impact on hotel properties in the United States and
around the world. The largest loan in special servicing, Marriott
Courtyard - Goleta (Prospectus ID#6, 4.2% of the pool) is secured
by a 115-room limited-service hotel property in Goleta, California.
The loan transferred to special servicing in August 2020 due to
imminent monetary default. The special servicer is working with the
sponsor to finalize the terms of a forbearance agreement and the
loan is expected to return to the master within the near term. As
of the trailing 12 months ended September 2020, the servicer
reported a DSCR of 0.83 times (x), down from the year-end (YE) 2019
DSCR of 2.14x and the YE2018 DSCR of 2.10x. The loan has remained
current throughout the transfer to special servicing, outside of
one late but less than 30 days delinquent payment shown in January
2021. The loan reported current for March 2021. Given the
uncertainty surrounding the final terms of the loan modification
and the prospects for a return to historical performance, DBRS
Morningstar applied a probability of default penalty in the
analysis of this loan to increase the expected loss for this
review.
The second-largest loan in special servicing, Oak Hill Apartments
(Prospectus ID#27, 1.4% of pool), has been in special servicing
since May 2017 and is secured by a 108-unit multifamily property
located in Washington, D.C. The sponsor, Sanford Capital, agreed to
divest its real estate holdings in Washington, D.C. because of
numerous housing law violations. As of this review the property
remains in receivership with an anticipated foreclosure date in
2021. Based on the most recent appraisal dated April 2020, the
property was valued at $10.9 million, which is a decrease from the
issuance value of $14.2 million. DBRS Morningstar assumed a
liquidation scenario for this loan based on the most recent
valuation, which an implied loss severity in excess of 80.0%, all
of which would be contained to the unrated Class G certificate.
The largest loan in the pool and on the servicer's watchlist is
Hilton Sandestin Beach Resort and Spa (Prospectus ID#1, 11.6% of
the pool), which is secured by a 598-key full-service Hilton hotel
located in Destin, Florida. The loan was added to the servicer's
watchlist in September 2020 for a low DSCR, a direct result of the
coronavirus pandemic. Performance prior to 2020 was quite strong,
with a YE2019 DSCR of 4.36x. The sponsor has not submitted a
coronavirus relief request to date and the loan has remained
current through the period of significant decline in performance
for the collateral hotel. Given the historically stable performance
and high coverage ratio, DBRS Morningstar believes the increased
risks from issuance for this loan are relatively moderate.
Notes: All figures are in U.S. dollars unless otherwise noted.
WFRBS COMMERCIAL 2013-C18: DBRS Cuts Rating on 2 Classes to CCC(sf)
-------------------------------------------------------------------
DBRS Limited downgraded three ratings of the Commercial Mortgage
Pass-Through Certificates, Series 2013-C18 issued by WFRBS
Commercial Mortgage Trust 2013-C18 as follows:
-- Class D to BB (sf) from BBB (low) (sf)
-- Class E to CCC (sf) from BB (sf)
-- Class F to CCC (sf) from B (sf)
In addition, DBRS Morningstar confirmed the remaining classes as
follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
With this review, DBRS Morningstar removed Classes D, E, and F from
Under Review with Negative Implications where they were placed on
August 6, 2020. DBRS Morningstar also changed the trends on Classes
C and PEX to Negative from Stable. Class D also has a Negative
trend. All other trends remain Stable. In addition, DBRS
Morningstar designated Classes D, E, and F as having Interest in
Arrears.
The downgrades and Negative trends generally reflect the overall
weakened performance of the collateral since the last review and
the increased likelihood of losses to the trust upon the resolution
of the specially serviced loans, Hotel Felix Chicago (Prospectus
ID#5, 6.4% of the current trust balance), the Cedar Rapids Office
Portfolio (Prospectus ID#9, 3.0% of the current trust balance) and
the HIE Magnificent Mile (Prospectus ID#10, 2.6% of the current
trust balance). Based on the 2020 appraised values, these
properties had a weighted-average (WA) decline in value of 66.1%
over the issuance-appraised values. DBRS Morningstar is also
closely monitoring the largest watchlisted loan, JFK Hilton
(ProspectusID#4, 8.7% of the current trust balance), which was
recently returned to the master servicer after entering into a
forbearance agreement, but reported a value decline of 58.4% when
it was reappraised in 2020 during its stint in special servicing.
The pool has a high concentration of retail and hospitality
properties, representing 57.2% of the pool, which is noteworthy as
these property types have been most acutely affected by the
Coronavirus Disease (COVID-19) pandemic.
As of the February 2021 remittance, 60 of the original 67 loans
remain in the pool, with an aggregate principal balance of $710.1
million, representing a collateral reduction of 31.6% since
issuance as a result of loan repayment and scheduled loan
amortization. The second-largest loan, The Outlet Collection -
Jersey Gardens (Prospectus ID#3), which represented 13.5% of the
issuance trust balance, repaid in full with the November 2020
remittance. Five loans, representing 3.4% of the current pool
balance, are fully defeased.
Two of the three loans in special servicing, representing 9.0% of
the current trust balance, are secured by hotel properties that are
located less than a mile from one another in Chicago and are owned
and operated by the same sponsor, Oxford Capital Group, LLC
(Oxford). The firm has developed 14 hotels in the market
(3,815/keys), 11 of which have been downtown. The Hotel Felix
Chicago loan was previously in special servicing, but was returned
to the master servicer in February 2019 as a corrected loan, while
the HIE Magnificent Mile loan had been on the servicer's watchlist
since January 2018. Both loans were transferred to special
servicing in April 2020 for imminent default and neither loan has
made a payment since transferring. While the servicer notes that
discussions with the borrower are ongoing, the borrower's proposals
have been rejected thus far, the servicer has filed for foreclosure
and receivers were installed in January 2021.
The respective properties both struggled prior to the outbreak of
the pandemic with coverages hovering around or below breakeven over
the past couple of years stemming from sustained performance
declines driven by supply additions, soft market conditions and
increased expenses, primarily a result of increased real estate
taxes and general and administrative costs. While both properties
benefited from heavy capital expenditure to reposition the assets
prior to issuance, no significant renovations have been completed
in recent years. According to the July 2020 appraisals, Hotel Felix
Chicago reported an as-is value of $23.5 million (104,000/key),
well below the issuance value of $68.6 million, reflecting a
decline of 65.7% and a loan-to-value (LTV) of 193.6%; HIE
Magnificent Mile reported an as-is value of $12.4 million
($71,000/key), well below the issuance value of $36.3 million
($209,000/key), reflecting a decline of 65.8% and a LTV of 175.2%.
DBRS Morningstar has liquidated both loans from the trust in the
analysis for this review, scenarios that resulted in respective
implied loss severity in excess of 60.0%.
The remaining loan in special servicing, The Cedar Rapids Office
Portfolio, was initially transferred in May 2017 and has been REO
since June 2020. The loan is secured by two cross-collateralized
Class A office buildings located in Cedar Rapids, Iowa. According
to the December 2020 appraisal, the property was valued at $11.9
million, down from the July 2019 figure of $16.2 million and the
issuance figure of $36.2 million. In the analysis for this review,
DBRS Morningstar assumed a loss severity in excess of 90.0% based
on a discount to the recent appraised value of $11.9 million.
There are 14 loans, representing 21.6% of the current trust
balance, on the servicer's watchlist. The servicer is monitoring
these loans for a variety of reasons, including low debt service
coverage ratio and occupancy issues; however, the primary reason
for the increase of loans on the watchlist is the
coronavirus-driven stress for retail and hospitality properties,
with watchlisted loans backed by those property types generally
reporting a declining DSCR.
The largest loan on the servicer's watchlist is JFK Hilton, which
is secured by a 356-key, full service hotel adjacent to JFK Airport
in Jamaica, New York. The loan was initially added to the
servicer's watchlist in October 2019 following a declining debt
service coverage ratio (DSCR), which fell to 0.93 times (x) at
YE2019, primarily driven by a $1.4 million (198%) increase in real
estate taxes. As of Q3 2020, updated reporting showed that
performance had been further exacerbated by the effects of the
pandemic given the dependence on commercial and contract demand,
with coverage falling to -0.41x. The loan was transferred to
special servicing in August 2020 upon the borrower's request for
relief, but was recently returned to the master servicer in January
2021 after a loan modification agreement was approved. The borrower
was granted the use of furniture, fixtures, and equipment reserves
to fund June 2020 through November 2020 debt service payments and
will be required to repay those funds over a 24-month period
beginning in June 2021. The borrower was also approved for a $1.6
million paycheck protection program loan. At issuance, the property
had a value of $103.3 million ($290,000/key), but was reappraised
in November 2020 for $52.1 million ($146/key), reflecting a 50.3%
reduction in value and an LTV of 144.2%. The appraisal also
provides a stabilized figure of $78.0 million ($219,000/key),
projected in January 2024. While the loan remains current, DBRS
Morningstar has elevated the probability of default for this loan
and will continue to monitor the loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
WIND RIVER 2017-1: Moody's Gives Ba3 Rating on $24M Cl. E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes issued by Wind River 2017-1 CLO Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$6,000,000 Class X Senior Secured Floating Rate Notes due 2036
(the "Class X Notes"), Assigned Aaa (sf)
US$384,000,000 Class A-RR Senior Secured Floating Rate Notes due
2036 (the "Class A-RR Notes"), Assigned Aaa (sf)
US$24,000,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2036 (the "Class E-R Notes"), Assigned Ba3 (sf)
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.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, up to 10.0% of the portfolio
may consist of loans that are not senior secured, and up to 5% may
consist of bonds.
First Eagle Alternative Credit, LLC (the "Manager") will continue
to 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 issuance of the Refinancing Notes, the other
classes of secured notes and additional subordinated notes, a
variety of other changes to transaction features will occur in
connection with the refinancing. These include: extension of the
reinvestment period; extensions of the stated maturity and non-call
period; changes to certain collateral quality tests; and changes to
the overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Adjusted Weighted Average Rating Factor" and changes to the base
matrix and modifiers.
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.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
For modeling purposes, Moody's used the following base-case
assumptions:
Par Amount: $600,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 3024
Weighted Average Spread (WAS): 3.40%
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 regard 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 Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
[*] S&P Takes Various Actions on 104 Classes From 14 RMBS Deals
---------------------------------------------------------------
S&P Global Ratings completed its review of 104 ratings from 14 U.S.
RMBS transactions issued between 2003 and 2007. The review yielded
29 downgrades, 33 affirmations, and 42 withdrawals.
Analytical Considerations
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 incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations may include:
-- Factors related to COVID-19;
-- Collateral performance/delinquency trends;
-- Erosion of credit support;
-- Small loan count;
-- Tail Risk;
-- Reduced interest payments due to loan modifications; and
-- Interest-only criteria.
Rating Actions
The rating changes reflect our opinion regarding the associated
transaction-specific collateral performance or structural
characteristics and/or reflect the application of specific criteria
applicable to these classes.
The ratings affirmations reflect S&P's opinion that our projected
credit support and collateral performance on these classes has
remained relatively consistent with our prior projections.
S&P said, "We withdrew our ratings on 41 classes from five
transactions due to the small number of loans remaining in the
related group. Once a pool has declined to a de minimis amount,
their future performance becomes more difficult to project. As
such, we believe there is a high degree of credit instability that
is incompatible with any rating level.
"We lowered our ratings on classes A-1, A-2, and A-3 issued from
Merrill Lynch Mortgage Investors Trust Series MLCC 2004-HB1 to
'BBB+ (sf)' from 'AA+ (sf)' due to the erosion of credit support
that can be used to cover losses. Credit support decreased to
24.57% ($1.22 million) in March 2021 from 25.07% ($2.24 million)
during the last full review in February 2019 as subordination from
the junior classes continues to decrease due to both write-downs
and paydowns. Additionally, we have seen higher reported
modifications when compared to those reported during the previous
review dates. As a result, the increased modifications have had an
adverse impact on the performance of the mortgage loans and
increased our projected losses.
"We applied our interest-only criteria," Global Methodology For
Rating Interest-Only Securities," published April 15, 2010, on
class X-A issued from Merrill Lynch Mortgage Investors Trust Series
MLCC 2004-HB1's series 2004-HB1, which resulted in the rating being
withdrawn as all principal and interest paying classes rated 'AA-'
or higher have been retired or downgraded below that rating
level."
A list of Affected Rating can be reached through:
https://bit.ly/2S47feY
[*] S&P Took Actions on 12 Classes from 2 US RMBS Non-QM Deal
-------------------------------------------------------------
S&P Global Ratings completed its review of 12 classes from two U.S.
RMBS non-qualified mortgage (non-QM) transactions. The review
resulted in one downgrade and 11 affirmations.
S&P said, "On April 17, 2020, we revised our 'B' rating level
foreclosure frequency (FF) assumption for an archetypal pool of
U.S. residential mortgage loans upward to 3.25% from 2.50%.
"The revision of our 'B' archetypal FF assumption accounted for a
portion of borrowers entering COVID-19-related payment assistance
plans and the impact on the overall credit quality of
collateralized pools. However, to the extent those forbearance,
deferral, and modification levels exceed our previous expectations,
additional adjustments to our FF assumptions may be applied. For
the two transactions in this review, we believe the revised 'B'
archetypal FF assumption of 3.25% adequately accounted for current
forbearance, deferral, and modification levels and that no
additional adjustments were necessary. As such, loans that we
deemed to be delinquent solely due to being on a COVID-19-related
payment assistance plan did not receive a delinquency adjustment
factor in our credit analysis.
"For each transaction within this review, we used the same mortgage
operational assessment, representation and warranty, and due
diligence factors that were applied at issuance. Our geographic
concentration and prior-credit-event adjustment factors were based
on the transactions' current pool composition.
"Further, we applied an additional delinquency stress scenario to
address the potential liquidity stress to cash flows due to loans
entering COVID-19-related forbearance, deferrals, and modifications
for which the principal and interest (P&I) advancing party (e.g.,
the servicer) may not be obligated to advance any or only a limited
number of monthly P&I payments. We assumed that 35.00% of the pool
balance is delinquent for the first six months, with any P&I
payments related to this delinquent portion coming back to the
transaction after all defaults have been passed through to the
transaction.
"The downgrade of the B-2 class from Homeward Opportunities Fund I
Trust 2019-2 to 'B- (sf)' from 'B (sf)' reflects our belief that
the projected credit enhancement for the affected class will be
insufficient to cover our projected loss at higher rating levels.
In our analyses, we examined various factors such as delinquencies,
the relative level of hard credit support, the effects of triggers
(where applicable) on payment mechanics, and prepayments (which can
erode excess spread but can also build credit enhancement due to
the deleveraging of the capital structure).
"The affirmations reflect our view that the projected collateral
performance relative to our projected credit support on the
affected classes remains sufficient to cover our projected losses
for those rating scenarios."
Analytical Considerations
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 incorporate various considerations into our decisions
to raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes." Some of these considerations may include:
-- Factors related to the COVID-19 pandemic,
-- Collateral performance or delinquency trends,
-- Loan modifications (through deferrals), and
-- Available credit enhancement.
A list of Affected Ratings can be viewed at:
https://bit.ly/3aGwj2e
[*] S&P Took Various Actions on 103 Classes From 20 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 103 classes from 20 U.S.
RMBS transactions issued between 2002 and 2008. All of these
transactions are backed by prime jumbo collateral. The review
yielded 28 downgrades, 30 affirmations, 44 withdrawals, and one
discontinuance.
Analytical Considerations
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, "e 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 incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations may include:
-- Factors related to the COVID-19 pandemic;
-- Collateral performance or delinquency trends;
-- Erosion of or increases in credit support;
-- A small loan count; and
-- Tail risk.
Rating Actions
S&P said, "The rating changes reflect our opinion regarding the
associated transaction-specific collateral performance and/or
structural characteristics, as well as the application of specific
criteria applicable to these classes.
"The rating affirmations reflect our opinion that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections.
"We withdrew our ratings on 40 classes from nine transactions due
to the small number of loans remaining within the related group or
structure. Once a pool has declined to a de minimis amount, we
believe there is a high degree of credit instability that is
incompatible with any rating level. Additionally, as a result, we
applied our principal-only criteria, "Methodology For Surveilling
U.S. RMBS Principal-Only Strip Securities For Pre-2009
Originations," published Oct. 11, 2016, on three classes from three
transactions, which resulted in rating withdrawals."
A list of Affected Ratings can be viewed at:
https://bit.ly/2Qsbd0L
*********
Monday's edition of the TCR delivers a list of indicative prices
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however, be complete or accurate. The Monday Bond Pricing table
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*********
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