/raid1/www/Hosts/bankrupt/TCR_Public/220102.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, January 2, 2022, Vol. 26, No. 1
Headlines
AIG CLO 2021-3: Moody's Rates $22.5MM Class E Notes 'Ba3'
AMMC CLO 24: Moody's Assigns Ba3 Rating to $20MM Class E Notes
ANCHORAGE CREDIT 14: Moody's Rates $38MM Class E Notes 'Ba3'
ANGEL OAK 2021-8: Fitch Assigns Final B Rating on B-2 Tranche
APIDOS CLO XXXIV: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
ARES LVII CLO: Moody's Gives Ba3 Rating to $18MM Class E-R Notes
ARES LXII: S&P Assigns BB- (sf) Rating on $22.5MM Class E Notes
ATLAS SENIOR XVIII: Moody's Rates $18MM Class E Notes 'Ba3'
BALBOA BAY 2020-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
BANK 2021-BNK38: Fitch Assigns Final B- Rating on 2 Certs
BARINGS CLO 2021-III: Moody's Rates $17.6MM Class E Notes 'Ba3'
BATTALION CLO XVI: S&P Assigns BB+ (sf) Rating on Class E Notes
BENCHMARK 2021-B31: Fitch Assigns Final B- Rating on 2 Certs
BENEFIT STREET XXV: Moody's Assigns Ba3 Rating to Class E Notes
BIRCH GROVE 3: Moody's Rates $21MM Class E Notes 'Ba3'
BLACKROCK BAKER 2021-1: S&P Assigns Prelim 'BB-' Rating on E Notes
BLUEMOUNTAIN FUJI II: S&P Affirms BB- (sf) Rating on Class D Notes
BPR TRUST 2021-NRD: Moody's Assigns B3 Rating to Class F Certs
BX COMMERCIAL 2021-CIP: Moody's Assigns B3 Rating to Class F Debt
CAPITAL FOUR I: Moody's Rates $20.8MM Class E Notes 'Ba3'
CARLYLE US 2019-2: S&P Assigns BB- (sf) Rating on Class D Notes
CARLYLE US 2019-3: S&P Assigns BB- (sf) Rating on Class D-R Notes
CARLYLE US 2021-11: S&P Assigns Prelim BB- (sf) Rating on E Notes
CARVAL CLO V-C: Moody's Gives B3 Rating to $6.38MM Class F Notes
CARVANA AUTO 2021-P4: S&P Assigns BB+ (sf) Rating on Class N Notes
CATHEDRAL LAKE VIII: S&P Assigns BB- (sf) Rating on Class E Notes
CIFC FUNDING 2019-V: Moody's Rates Class D-R Notes 'Ba3'
COLT 2021-6: Fitch Assigns Final B Rating on B-2 Certs
COLUMBIA CENT 27: Moody's Rates $2.8MM Class F-R Notes 'B3'
CQS US 2021-1: Fitch Assigns BB- Rating on Class E Tranche
CROWN POINT 11: Moody's Gives Ba3 Rating on $19.2MM Class E Notes
CSAIL 2016-C5: Fitch Affirms CCC Rating on 2 Certs
CSFB HOME 2005-6: Moody's Hikes Class M-5 Debt Rating to Caa2
CSMC 2019-SPL1: Fitch Assigns B Rating on M-7 Tranche
CSMC 2021-NQM8: S&P Assigns B (sf) Rating on Class B-2 Notes
DIAMETER CREDIT IV: Moody's Rates $11.2MM Class E Notes 'Ba2'
ECAF I LTD: S&P Lowers Rating on Class B-1 Notes to 'CCC+ (sf)'
ELEVATION CLO 2021-15: Moody's Rates $20MM Class E-R Notes 'Ba3'
FANNIE MAE 2021-R03: S&P Assigns BB (sf) Rating on Cl. 1B-1 Notes
GCAT 2021-NQM7: S&P Assigns B (sf) Rating on Class B-2 Certs
GENERATE CLO 6: Moody's Rates $21.6MM Class E-R Notes 'Ba3'
GOLUB CAPITAL 58(B): Moody's Rates Class E Notes 'Ba3'
GS MORTGAGE 2013-GC13: Moody's Cuts Class C Debt Rating to B1
GS MORTGAGE 2021-PJ11: Moody's Rates Class B-5 Debt 'B3'
HALSEYPOINT CLO 5: Moody's Rates $24.5MM Class E Notes 'Ba3'
HPS LOAN 2021-16: Moody's Rates $22MM Class E Notes 'Ba3'
JAMESTOWN CLO XVII: Moody's Gives Ba3 Rating to $19MM Class E Notes
JP MORGAN 2021-15: Moody's Assigns (P)B3 Rating to Class B-5 Debt
JP MORGAN 2021-INV8: Moody's Gives (P)B3 Rating to Class B-5 Debt
JP MORGAN 2021-LTV2: Moody's Gives (P)B2 Rating to Class B-2 Debt
KINGS PARK: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
LCM 36 LTD: Moody's Rates $16MM Class E Notes 'Ba3'
LCM XIII: S&P Affirms B (sf) Rating on Class E-R Notes
MAN GLG I: Moody's Affirms B1 Rating on Class F Notes
MARATHON CLO 2020-15: S&P Affirms BB- (sf) Rating on Class D Notes
MARATHON CLO 2021-17: Moody's Gives Ba3 Rating to $17MM Cl. D Notes
MARATHON CLO X: S&P Affirms B- (sf) Rating on Class D Notes
MF1 2021-W10X: S&P Assigns B- (sf) Rating on Class F Certificates
MFA 2021-AEINV2 TRUST: Moody's Gives B3 Rating to Class B-5 Debt
MORGAN STANLEY 2012-C4: Moody's Cuts Class F Debt Rating to C
NELNET STUDENT 2005-4: Fitch Affirms B Rating on 4 Note Classes
NEUBERGER BERMAN 46: Moody's Rates $24MM Class E Notes 'Ba3'
OAKTREE CLO 2021-2: S&P Assigns B- (sf) Rating on Class F Notes
OHA CREDIT 10: Moody's Assigns Ba3 Rating to Class E Notes
OSD CLO 2021-23: Fitch Assigns BB+ Rating on Class E Tranche
PALMER SQUARE 2020-3: S&P Assigns B- (sf) Rating on Class E-R Notes
PMT LOAN 2021-INV2: Moody's Assigns (P)B2 Rating to Class B-5 Debt
PMT LOAN 2021-INV2: Moody's Assigns B2 Rating to Class B-5 Debt
RAD CLO 14: Moody's Assigns Ba3 Rating to $20MM Class E Notes
RAD CLO 15: Moody's Assigns Ba3 Rating to $15MM Class E Notes
RATE MORTGAGE 2021-HB1: Moody's Rates Class B-5 Debt 'B3'
REGATTA XXIII FUNDING: Moody's Rates $26.5MM Class E Notes 'Ba3'
ROMARK CLO V: Moody's Rates $18.6MM Class E Notes 'Ba3'
SCULPTOR CLO XXVIII: S&P Assigns BB- (sf) Rating on Class E Notes
SIGNAL PEAK 10: Moody's Rates $18MM Class E Notes 'Ba3'
SOUND POINT XXXII: Moody's Rates Class E Notes 'Ba3'
STRATUS CLO 2021-2: Fitch Assigns BB+ Rating on Class F Tranche
STRATUS CLO 2021-3: Fitch Assigns BB+ Rating on Class F Debt
TIKEHAU US I: Moody's Rates $21MM Class E Notes 'Ba3'
TOWD POINT 2021-SJ2: Fitch Assigns B- Rating on 7 Tranches
TRIMARAN CAVU 2021-3: Moody's Rates $22.5MM Class E Notes 'Ba3'
UWM MORTGAGE 2021-INV5: Moody's Rates Class B-5 Debt 'B3'
UWM MORTGAGE 2021-J1: Moody's Gives (P)B3 Rating to Class B-5 Debt
VERUS SECURITIZATION 2021-8: S&P Assigns B-(sf) Rating on B-2 Notes
VIBRANT CLO XV: Moody's Assigns Ba3 Rating to Class D-2 Debt
VOYA CLO 2019-4: S&P Assigns BB- (sf) Rating on Class E-R Notes
WELLFLEET CLO 2021-3: Moody's Rates $21.5MM Class E Notes 'Ba3'
WELLS FARGO 2013-LC12: Moody's Lowers Class C Debt Rating to B3
WELLS FARGO 2020-2: Moody's Hikes Class B-5 Debt Rating to Ba3
WFRBS COMMERCIAL 2014-C20: Moody's Cuts Class C Debt Rating to B1
WIND RIVER 2021-4: Moody's Assigns B3 Rating to Class F Notes
[*] Moody's Hikes $219MM of US RMBS Issued 2006-2007
[*] S&P Lowers Ratings on 24 Classes from 19 US RMBS Transactions
*********
AIG CLO 2021-3: Moody's Rates $22.5MM Class E Notes 'Ba3'
---------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by AIG CLO 2021-3, LLC
Moody's rating action is as follows:
US$315,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$65,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$25,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$22,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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 2021-3, LLC is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and bonds. The portfolio is approximately 100%
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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2897
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 46.70%
Weighted Average Life (WAL): 8 years
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.
AMMC CLO 24: Moody's Assigns Ba3 Rating to $20MM Class E Notes
--------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by AMMC CLO 24, Limited (the "Issuer" or "AMMC CLO
24").
Moody's rating action is as follows:
US$256,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$45,500,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$21,000,000 Class C Secured Deferrable Floating Rate Notes due
2035, Assigned A2 (sf)
US$25,300,000 Class D Secured Deferrable Floating Rate Notes due
2035, Assigned Baa3 (sf)
US$20,200,000 Class E Secured Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above 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.
AMMC CLO 24 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, cash, and eligible investments, and up to 10%
of the portfolio may consist of second lien loans, unsecured loans,
and senior secured bonds, of which 5% may consist of senior secured
bonds. The portfolio is 100% ramped as of the closing date.
American Money Management Corporation (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 subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2815
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.0 years
ANCHORAGE CREDIT 14: Moody's Rates $38MM Class E Notes 'Ba3'
------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Anchorage Credit Funding 14, Ltd. (the "Issuer" or
"Anchorage Credit Funding 14").
Moody's rating action is as follows:
US$191,000,000 Class A Senior Secured Fixed Rate Notes due 2040,
Assigned Aaa (sf)
US$57,000,000 Class B Senior Secured Fixed Rate Notes due 2040,
Assigned Aa3 (sf)
US$20,000,000 Class C Mezzanine Secured Deferrable Fixed Rate Notes
due 2040, Assigned A3 (sf)
US$18,000,000 Class D Mezzanine Secured Deferrable Fixed Rate Notes
due 2040, Assigned Baa3 (sf)
US$38,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2040, Assigned Ba3 (sf)
The notes listed above 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.
ACF 14 is a managed cash flow CDO. The issued notes will be
collateralized primarily by corporate loans and bonds. At least 30%
of the portfolio must consist of senior secured loans, senior
secured notes, and eligible investments, and up to 15% of the
portfolio may consist of second lien loans. Moody's expects the
portfolio to be approximately 35% ramped as of the closing date.
Anchorage Capital Group, L.L.C. (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.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 45
Weighted Average Rating Factor (WARF): 3427
Weighted Average Coupon (WAC): 5.10%
Weighted Average Recovery Rate (WARR): 38.5%
Weighted Average Life (WAL): 10 years
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.
ANGEL OAK 2021-8: Fitch Assigns Final B Rating on B-2 Tranche
-------------------------------------------------------------
Fitch Ratings has assigned final ratings to Angel Oak Mortgage
Trust 2021-8 (AOMT 2021-8).
DEBT RATING PRIOR
---- ------ -----
AOMT 2021-8
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBB-sf New Rating BBB-(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-X LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed certificates to be
issued by Angel Oak Mortgage Trust 2021-8, Mortgage-Backed
Certificates, Series 2021-8 (AOMT 2021-8), as indicated. The
certificates are supported by 841 loans with a balance of $418.16
million as of the cut-off date. This will be the 20th Fitch-rated
AOMT transaction, and the eighth Fitch-rated AOMT transaction in
2021.
The certificates are secured by mortgage loans originated by Angel
Oak Home Loans LLC (AOHL) and Angel Oak Mortgage Solutions LLC
(AOMS), as well as various third-party originators, with each
contributing less than 10% to the pool. Of the loans, 78.0% are
designated as non-qualified mortgage (non-QM) and 21.7% are
investment properties not subject to the Ability to Repay (ATR)
Rule. One loan (0.03%) is designated as safe harbor QM in the
pool.
There is LIBOR exposure in this transaction. Of the pool, 37 loans
represent adjustable-rate mortgage (ARM) loans that reference
one-year LIBOR. The offered certificates are fixed-rate and capped
at the net weighted average coupon (WAC) or based on the net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Given Fitch's updated
view on sustainable home prices, home price values for this pool
are viewed as 10.2% above a long-term sustainable level (versus
11.7% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.6% yoy nationally as of June 2021.
Non-QM Credit Quality (Mixed): The collateral consists of 841
loans, totaling $418.16 million and seasoned approximately nine
months in aggregate, according to Fitch. The borrowers have a
strong credit profile (739 FICO and 36% debt to income ratio [DTI],
as determined by Fitch) and relatively moderate leverage with an
original combined loan to value ratio (CLTV) of 72.9% as determined
by Fitch that translates to a Fitch-calculated sustainable LTV
(sLTV) of 78.6%. Of the pool, 71.8% represent loans where the
borrower maintains a primary residence, while 28.3% comprises an
investor property or second home based on Fitch's analysis; 13.3%
of the loans were originated through a retail channel.
Additionally, 78.0% are designated as non-QM, while the remaining
21.7% are exempt from QM status since they are investor loans, and
0.03% of the pool are designated as safe harbor QM.
The pool contains 84 loans over $1 million, with the largest
amounting to $3.0 million.
Loans on investor properties (6.5% underwritten to the borrowers'
credit profile and 15.3% comprising investor cash flow loans)
represent 21.7% of the pool. There is one second lien loan, and
1.7% of borrowers were viewed by Fitch as having a prior credit
event in the past seven years. Per the transaction documents, 0.0%
of the loans have subordinate financing; however, in Fitch's
analysis Fitch considers the 12 loans with deferred balances to
have subordinate financing.
Five loans in the pool are to foreign nationals/non-permanent
residents. Fitch treated these borrowers as investor occupied,
coded as ASF1 (no documentation) for employment and income
documentation; if a credit score was not available, Fitch used a
credit score of 650 for these borrowers and removed the liquid
reserves.
None of the loans in the pool are agency eligible loans that were
underwritten to DU/LP and received an Approved/Eligible status. One
loan is a second lien originated to Angel Oak's Agency Second
program.
The largest concentration of loans is in California (30.3%),
followed by Florida and Texas. The largest MSA is Los Angeles
(13.1%), followed by Miami (12.5%) and San Diego (5.4%). The top
three MSAs account for 31% of the pool.
Although the credit quality of the borrowers is higher than that of
the prior AOMT transactions securitized in 2020 and 2019, the pool
characteristics resemble non-prime collateral, and therefore, the
pool was analyzed using Fitch's non-prime model.
Loan Documentation (Negative): Fitch determined that 88.3% of the
loans in the pool were underwritten to borrowers with less than
full documentation. Of this amount, 70% were underwritten to a 12-
or 24-month bank statement program for verifying income, which is
not consistent with Appendix Q standards and Fitch's view of a full
documentation program. To reflect the additional risk, Fitch
increases the probability of default (PD) by 1.5x on the bank
statement loans. Besides loans underwritten to a bank statement
program, 2.2% are an asset depletion product and 15.4% comprise a
debt service coverage ratio product. The pool does not have any
loans underwritten to a CPA or PnL product, which Fitch viewed as a
positive.
Five loans to foreign nationals/non-permanent residents were
underwritten to a full documentation program; however, in Fitch's
analysis, these loans were treated as no documentation loans for
income and employment.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent P&I. The limited advancing reduces
loss severities as a lower amount is repaid to the servicer when a
loan liquidates and liquidation proceeds are prioritized to cover
principal repayment over accrued but unpaid interest. The downside
is the additional stress on the structure as liquidity is limited
in the event of large and extended delinquencies.
Sequential Payment Structure (Positive): The transaction's cash
flow is based on a sequential-pay structure whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class with limited advancing.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- 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.
-- 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 41.8% 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 positive
rating action/upgrade:
-- 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.
-- 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 Consolidated Analytics, Inc., Infinity IPS, Covius Real
Estate Services, LLC, AMC Diligence, LLC, Evolve Mortgage Services,
and Inglet Blair. The third-party due diligence described in Form
15E focused on three areas: compliance review, credit review, and
valuation review. Fitch considered this information in its analysis
and, as a result, Fitch did not make any adjustment(s) to its
analysis due to the due diligence findings. Based on the results of
the 100% due diligence performed on the pool, the overall expected
loss was reduced by 0.45%.
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." The sponsor
engaged Consolidated Analytics, Inc., Infinity IPS, Covius Real
Estate Services, LLC, AMC Diligence, LLC, Evolve Mortgage Services,
and Inglet Blair to perform the review. Loans reviewed under these
engagements were given compliance, credit and valuation grades and
assigned initial grades for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
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
AOMT 2021-8 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk due to strong due diligence results on
100% of the pool and a 'RPS1-' Fitch-rated servicer, which 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.
APIDOS CLO XXXIV: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R, A-2R, B-1R, B-2R, C-R, D-R, and E-R replacement notes from
Apidos CLO XXXIV/Apidos CLO XXXIV LLC, a CLO originally issued in
November 2020 that is managed by CVC Credit Partners U.S. CLO
Management LLC.
The preliminary ratings are based on information as of Dec. 22,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Dec. 29, 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."
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 A-1R, A-2R, B-1R, B-2R, C-R, D-R, and E-R
notes will be issued at a lower weighted average cost of debt than
the original notes.
-- The existing class B notes will be split into two classes:
classes B-1R and B-2R, which will be issued at a floating spread
and a fixed coupon, respectively.
-- The noncall period will be extended by approximately two
years.
-- The stated maturity will be extended by two years.
-- The reinvestment period will be extended by three years.
-- There will be no additional collateral purchased in connection
with this refinancing. The target initial par amount will remain at
$400.00 million, and the first payment date following the first
refinancing date is expected to be April 20, 2022.
-- There will be no additional subordinated notes issued in
connection with this refinancing. However, the stated maturity date
will be amended to match that of the replacement notes.
-- The transaction is amending its ability to purchase
workout-related assets and the required minimums on the
overcollateralization tests, and it also conforming to updated
rating agency methodology.
-- Of the identified underlying collateral obligations, 99.36%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 96.76%
have recovery ratings (which may include confidential ratings,
private ratings, and credit estimates) 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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Apidos CLO XXXIV/Apidos CLO XXXIV LLC
Class A-1R, $237.00 million: AAA (sf)
Class A-2R, $15.00 million: AAA (sf)
Class B-1R, $45.00 million: AA (sf)
Class B-2R, $7.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-R (deferrable), $24.00 million: BBB- (sf)
Class E-R (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $40.50 million: Not rated
ARES LVII CLO: Moody's Gives Ba3 Rating to $18MM Class E-R Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes (the "Refinancing Notes") issued by Ares LVII
CLO Ltd. (the "Issuer").
Moody's rating action is as follows:
US$4,000,000 Class X-R Senior Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$256,000,000 Class A-R Senior Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$18,000,000 Class E-R Mezzanine Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on our 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 first lien senior secured loans,
cash, and eligible investments, and up to 10% of the portfolio may
consist of second lien loans, unsecured loans and bonds.
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 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, and the other
classes of secured 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; 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:
Portfolio par: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3044
Weighted Average Spread (WAS): 3.35%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 9 years
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.
ARES LXII: S&P Assigns BB- (sf) Rating on $22.5MM Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Ares LXII CLO Ltd./Ares
LXII CLO LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans
that are governed by collateral quality tests. The transaction is
managed by Ares U.S. CLO Management III LLC, a subsidiary of Ares
Management Corp.
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
Ares LXII CLO Ltd./Ares LXII CLO LLC
Class A-1, $369.0 million: AAA (sf)
Class A-2, $21.0 million: Not rated
Class B, $66.0 million: AA (sf)
Class C (deferrable), $36.0 million: A (sf)
Class D (deferrable), $36.0 million: BBB- (sf)
Class E (deferrable), $22.5 million: BB- (sf)
Subordinated notes, $57.0 million: Not rated
ATLAS SENIOR XVIII: Moody's Rates $18MM Class E Notes 'Ba3'
-----------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued by Atlas Senior Loan Fund XVIII, Ltd. (the "Issuer" or
"Atlas XVIII").
Moody's rating action is as follows:
US$4,000,000 Class X Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$248,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$12,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$18,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Atlas XVIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10% of the portfolio may consist of second lien loans and unsecured
loans. The portfolio is approximately 75% ramped as of the closing
date.
Crescent Capital Group LP (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 three other
classes of secured notes and one class 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: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2823
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 45.0%
Weighted Average Life (WAL): 9.0 years
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.
BALBOA BAY 2020-1: 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 Balboa Bay Loan Funding 2020-1
Ltd./Balboa Bay Loan Funding 2020-1 LLC, a CLO originally issued in
2020 that is managed by Pacific Investment Management Co. LLC. At
the same time, S&P withdrew its ratings on the class A, B, C, D,
and E notes following payment in full on the Dec. 23, 2021,
refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period was extended to December 2022.
-- The transaction now restricts against purchases of ESG
prohibited collateral obligations.
Replacement And Refinanced Note Issuances
Replacement notes
Class A-R, $248.00 million: Three-month LIBOR + 1.12%
Class B-R, $56.00 million: Three-month LIBOR + 1.65%
Class C-R, $24.00 million: Three-month LIBOR + 2.10%
Class D-R, $20.00 million: Three-month LIBOR + 3.15%
Class E-R, $14.00 million: Three-month LIBOR + 6.40%
Refinanced notes
Class A, $248.00 million: Three-month LIBOR + 1.35%
Class B, $56.00 million: Three-month LIBOR + 1.75%
Class C, $24.00 million: Three-month LIBOR + 2.55%
Class D, $20.00 million: Three-month LIBOR + 4.00%
Class E, $14.00 million: Three-month LIBOR + 7.89%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Balboa Bay Loan Funding 2020-1 Ltd./
Balboa Bay Loan Funding 2020-1 LLC
Class A-R, $248.00 million: AAA (sf)
Class B-R, $56.00 million: AA (sf)
Class C-R, $24.00 million: A (sf)
Class D-R, $20.00 million: BBB- (sf)
Class E-R, $14.00 million: BB- (sf)
Ratings Withdrawn
Balboa Bay Loan Funding 2020-1 Ltd./
Balboa Bay Loan Funding 2020-1 LLC
Class A 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)'
Class E to NR from 'BB- (sf)'
Other Outstanding Classes
Balboa Bay Loan Funding 2020-1 Ltd./
Balboa Bay Loan Funding 2020-1 LLC
Subordinated notes: NR
NR--Not rated.
BANK 2021-BNK38: Fitch Assigns Final B- Rating on 2 Certs
---------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
BANK 2021-BNK38, commercial mortgage pass-through certificates,
Series 2021-BNK38.
-- $5,800,000 class A-1 'AAAsf'; Outlook Stable;
-- $11,800,000 class A-2 'AAAsf'; Outlook Stable;
-- $17,100,000 class A-3 'AAAsf'; Outlook Stable;
-- $8,200,000 class A-SB 'AAAsf'; Outlook Stable;
-- $174,000,000a class A-4 'AAAsf'; Outlook Stable;
-- $0a class A-4-1 'AAAsf'; Outlook Stable;
-- $0a class A-4-2 'AAAsf'; Outlook Stable;
-- $0ab class A-4-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-4-X2 'AAAsf'; Outlook Stable;
-- $267,894,000a class A-5 'AAAsf'; Outlook Stable;
-- $0a class A-5-1 'AAAsf'; Outlook Stable;
-- $0a class A-5-2 'AAAsf'; Outlook Stable;
-- $0ab class A-5-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-5-X2 'AAAsf'; Outlook Stable;
-- $484,794,000b class X-A 'AAAsf'; Outlook Stable;
-- $97,825,000b class X-B 'A-sf'; Outlook Stable;
-- $69,256,000a class A-S 'AAAsf'; Outlook Stable;
-- $0a class A-S-1 'AAAsf'; Outlook Stable;
-- $0a class A-S-2 'AAAsf'; Outlook Stable;
-- $0ab class A-S-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-S-X2 'AAAsf'; Outlook Stable;
-- $28,569,000a class B 'AA-sf'; Outlook Stable;
-- $0a class B-1 'AA-sf'; Outlook Stable;
-- $0a class B-2 'AA-sf'; Outlook Stable;
-- $0ab class B-X1 'AA-sf'; Outlook Stable;
-- $0ab class B-X2 'AA-sf'; Outlook Stable;
-- $31,165,000a class C 'A-sf'; Outlook Stable;
-- $0a class C-1 'A-sf'; Outlook Stable;
-- $0a class C-2 'A-sf'; Outlook Stable;
-- $0ab class C-X1 'A-sf'; Outlook Stable;
-- $0ab class C-X2 'A-sf'; Outlook Stable;
-- $31,165,000bc class X-D 'BBB-sf'; Outlook Stable;
-- $8,657,000bc class X-F 'BB+sf'; Outlook Stable;
-- $7,792,000bc class X-G 'BB-sf'; Outlook Stable;
-- $6,925,000bc class X-H 'B-sf'; Outlook Stable;
-- $17,314,000c class D 'BBBsf'; Outlook Stable;
-- $13,851,000c class E 'BBB-sf'; Outlook Stable;
-- $8,657,000c class F 'BB+sf'; Outlook Stable;
-- $7,792,000c class G 'BB-sf'; Outlook Stable;
-- $6,925,000c class H 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $24,240,455bc class X-J;
-- $24,240,455c class J;
-- $36,450,708cd RR Interest.
(a)Exchangeable Certificates. The class A-4, class A-5, class A-S,
class B, and class C 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 surrendered
classes of certificates. The class A-4 may be surrendered (or
received) for the received (or surrendered) classes A-4-1, A-4-2,
A-4-X1 and A-4-X2. The class A-5 may be surrendered (or received)
for the received (or surrendered) class A-5-1, A-5-2, A-5-X1 and
A-5-X2. The class A-S may be surrendered (or received) for the
received (or surrendered) class A-S-1, A-S-2, A-S-X1 and A-SX2. The
class B may be surrendered (or received) for the received (or
surrendered) class B-1, B-2, B-X1 and B-X2. The class C may be
surrendered (or received) for the received (or surrendered) class
C-1, C-2, C-X1 and C-X2. The ratings of the exchangeable classes
would reference the ratings on the associated referenced or
original classes.
(b)Notional amount and interest only.
(c)Privately placed and pursuant to Rule 144A.
(d)Represents the "eligible vertical interest" comprising 5.0% of
the pool.
Since Fitch published its expected ratings on Dec. 8, 2021, the
balances for classes A-4 and A-5 were finalized. At the time the
expected ratings were published, the initial certificate balances
of classes A-4 and A-5 were expected to be $441,894,000 in the
aggregate, subject to a 5% variance. The final class balances for
classes A-4 and A-5 are $174,000,000 and $267,894,000,
respectively.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 65 loans secured by 84
commercial properties having an aggregate principal balance of
$729,014,163 as of the cut-off date. The loans were contributed to
the trust by Wells Fargo Bank, National Association, Bank of
America, National Association, Morgan Stanley Mortgage Capital
Holdings LLC, and National Cooperative Bank, N.A. The Master
Servicers are expected to be Wells Fargo Bank, National Association
and National Cooperative Bank, N.A. and the Special Servicers are
expected to be Midland Loan Services, a Division of PNC Bank,
National Association and National Cooperative Bank, N.A.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 36.7% of the loans by
balance, cash flow analyses of 80.6% 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. Per the
offering documents, all of the loans are current and are not
subject to any ongoing forbearance requests.
KEY RATING DRIVERS
Lower Fitch Leverage Than Recent Transactions: This transaction's
leverage is lower than that of other multiborrower transactions
recently rated by Fitch. The pool's Fitch debt service coverage
ratio (DSCR) of 1.75x is higher than the 2021 YTD and 2020 averages
of 1.38x and 1.32x, respectively. Additionally, the pool's Fitch
loan to value (LTV) ratio of 97.1% is below the 2021 YTD and 2020
average of 103.0% and 99.6%, respectively. Excluding the
co-operative (co-op) and the credit opinion loans, the pool's DSCR
and LTV are 1.34x and 112.6%, respectively. The YTD 2021 and 2020
averages excluding credit opinions and co-op loans are 1.30x/110.3%
and 1.24x/111.3%, respectively.
Investment-Grade Credit Opinions and Co-op Loans: The pool includes
three loans, representing 19.9% of the pool, that received
investment-grade credit opinions. This falls between the YTD 2021
and 2020 average credit opinion concentrations of 13.7% and 24.5%,
respectively. On a standalone basis, Park Avenue Plaza (9.6% of
pool) received a credit opinion of 'BBB-sf', Cambridge Crossing -
350 & 450 Water (7.5%) received a credit opinion of 'BBB-sf' and
Twin Ridge (2.7%) received a credit opinion of 'BBB-sf'.
Additionally, the pool contains 21 loans, representing 9.1% of the
pool, that are secured by residential cooperatives and exhibit
leverage characteristics significantly lower than typical conduit
loans. The weighted average (WA) Fitch DSCR and LTV for the co-op
loans are 6.06x and 29.5%, respectively.
Highly Concentrated Pool: The pool's 10 largest loans represent
59.2% of the pool's cutoff balance. This is greater than the YTD
2021 and 2020 averages of 51.1% and 56.8%, respectively. The pool's
Loan Concentration Index (LCI) is 467, which is greater than the
YTD 2021 and 2020 averages of 378 and 440, respectively.
Limited Amortization: The pool is scheduled to only amortize by
2.1% of the initial pool balance prior to maturity, which is below
the 2021 YTD and 2020 averages of 4.9% and 5.3%, respectively.
Forty-five loans (88.9%) are full-term interest only, which is
higher than the YTD 2021 and 2020 averages of 70.4% and 67.7%,
respectively. Four loans (3.5%) are partial-term interest only,
which is below the 2021 YTD and 2020 averages of 17.1% and 20.0%,
respectively.
RATING SENSITIVITIES
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 to the same one variable,
Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB+sf'/ 'BB-sf'/ 'B-sf';
-- 10% NCF Decline: 'A+sf' / 'A-sf' / 'BBB-sf' / 'BB+sf' / 'BB-
sf' / 'B-sf'/ 'CCCsf' / 'CCCsf';
-- 20% NCF Decline: 'A-sf' / 'BBBsf' / 'BB+sf' / 'Bsf' / 'CCCsf'
/ 'CCCsf'/ 'CCCsf' / 'CCCsf';
-- 30% NCF Decline: 'BBBsf' / 'BB+sf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'/ 'CCCsf' / 'CCCsf'.
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'/ 'BB-sf'/ 'B-sf';
-- 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'AA-sf' /
'Asf' / 'A-sf' / 'BBBsf' / 'BBB-sf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (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.
BARINGS CLO 2021-III: Moody's Rates $17.6MM Class E Notes 'Ba3'
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Barings CLO Ltd. 2021-III (the "Issuer").
Moody's rating action is as follows:
US$248,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$50,750,000 Class B-1 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aa2 (sf)
US$5,250,000 Class B-2 Senior Secured Fixed Rate Notes due 2035,
Definitive Rating Assigned Aa2 (sf)
US$21,600,000 Class C Secured Deferrable Mezzanine Floating Rate
Notes due 2035, Definitive Rating Assigned A2 (sf)
US$24,800,000 Class D Secured Deferrable Mezzanine Floating Rate
Notes due 2035, Definitive Rating Assigned Baa3 (sf)
US$17,600,000 Class E Secured Deferrable Mezzanine Floating Rate
Notes due 2035, Definitive Rating Assigned Ba3 (sf)
The notes listed above 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.
Barings CLO Ltd. 2021-III is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, unsecured
loans and bonds. The portfolio is approximately 80% ramped as of
the closing date.
Barings 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 one class 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2852
Weighted Average Spread (WAS): 3.45%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.0 years
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.
BATTALION CLO XVI: S&P Assigns BB+ (sf) Rating on Class E 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 Battalion CLO XVI
Ltd./Battalion CLO XVI LLC, a CLO originally issued in December
2019 that is managed by Brigade Capital Management L.P. At the same
time, we withdrew our ratings on the original class A, AF, B, C, D,
and E notes following payment in full on the Dec. 20, 2021,
refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period will be extended by approximately one year
to Dec. 20, 2022.
-- The weighted average life test will be extended to eight years
from the refinancing date.
-- No additional assets will be purchased on the Dec. 20, 2021,
refinancing date, and the target initial par amount will remain at
$400.00 million. There will be no additional effective date or
ramp-up period, and the first payment date following the
refinancing is Jan. 20, 2022.
-- No additional subordinated notes will be issued on the
refinancing date.
-- The transaction restricts against purchases of assets relating
to thermal coal, coal mining, or coal-based power generation;
pornography or prostitution; tobacco; marijuana and illegal
drug-related business; and weapons.
-- The transaction is adding the ability to purchase permitted
non-loan assets.
-- The transaction has amended its benchmark replacement language
and made updates to conform to current rating agency methodology.
Replacement And Original Note Issuances
Replacement notes
Class A-R, $252.00 million: Three-month LIBOR + 1.12%
Class B-R, $52.00 million: Three-month LIBOR + 1.75%
Class C-R, $20.00 million: Three-month LIBOR + 2.25%
Class D-R, $24.00 million: Three-month LIBOR + 3.25%
Class E-R, $16.00 million: Three-month LIBOR + 6.60%
Original notes
Class A, $233.00 million: Three-month LIBOR + 1.37%
Class AF, $19.00 million: 2.94%
Class B, $52.00 million: Three-month LIBOR + 2.00%
Class C, $20.00 million: Three-month LIBOR + 3.00%
Class D, $24.00 million: Three-month LIBOR + 4.36%
Class E, $16.00 million: Three-month LIBOR + 7.70%
Subordinated notes, $38.50 million
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Battalion CLO XVI Ltd./Battalion CLO XVI LLC
Class A-R, $252.00 million: AAA (sf)
Class B-R, $52.00 million: AA (sf)
Class C-R (deferrable), $20.00 million: A (sf)
Class D-R (deferrable), $24.00 million: BBB+ (sf)
Class E-R (deferrable), $16.00 million: BB+ (sf)
Ratings Withdrawn
Battalion CLO XVI Ltd./Battalion CLO XVI LLC
Class A: to NR from 'AAA (sf)'
Class AF: 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)'
Class E: to NR from 'BB+ (sf)'
Other Outstanding Class
Battalion CLO XVI Ltd./Battalion CLO XVI LLC
Subordinated notes, $38.50 million: NR
NR--Not rated.
BENCHMARK 2021-B31: Fitch Assigns Final B- Rating on 2 Certs
------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Benchmark 2021-B31 Mortgage Trust commercial mortgage pass-through
certificates, series 2021-B31, as follows:
-- $19,800,000 class A-1 'AAAsf'; Outlook Stable;
-- $138,050,000 class A-2 'AAAsf'; Outlook Stable;
-- $23,220,000 class A-3 'AAAsf'; Outlook Stable;
-- $215,000,000 (a) class A-4 'AAAsf'; Outlook Stable;
-- $575,676,000 (a) class A-5 'AAAsf'; Outlook Stable;
-- $23,526,000 class A-AB 'AAAsf'; Outlook Stable;
-- $1,137,454,000 (b) class X-A 'AAAsf'; Outlook Stable;
-- $142,182,000 class A-S 'AAAsf'; Outlook Stable;
-- $63,981,000 class B 'AA-sf'; Outlook Stable;
-- $60,428,000 class C 'A-sf'; Outlook Stable;
-- $124,409,000 (b, c) class X-B 'A-sf'; Outlook Stable;
-- $63,981,000 (b, c) class X-D; 'BBB-sf'; Outlook Stable;
-- $26,660,000 (b, c) class X-F; 'BB-sf'; Outlook Stable;
-- $14,218,000 (b, c) class X-G; 'B-sf'; Outlook Stable;
-- $37,322,000 (c) class D; 'BBBsf'; Outlook Stable;
-- $26,659,000 (c) class E; 'BBB-sf'; Outlook Stable;
-- $31,991,000 (c) class F; 'BB-sf'; Outlook Stable;
-- $14,218,000 (c) class G; 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $55,095,655 (b, c) class X-H;
-- $55,095,655 (c) class H;
-- $74,832,509 (c, d) VRR Interest.
(a) Since Fitch published its expected ratings on Dec. 3, 2021, the
balances for classes A-4 and A-5 were finalized. At the time the
expected ratings were published, the initial certificate balances
of classes A-4 and A-5 were expected to be $790,696,000 in the
aggregate, subject to a 5% variance. The final class balances for
classes A-4 and A-5 are $215,000,000 and $575,676,000,
respectively. The classes above reflect the final ratings and deal
structure.
(b) Notional amount and interest only (IO).
(c) Privately placed and pursuant to Rule 144A.
(d) Vertical risk retention interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 57 loans secured by 97
commercial properties having an aggregate principal balance of
$1,496,650,164as of the cut-off date. The loans were contributed to
the trust by Citi Real Estate Funding Inc., German American Capital
Corporation, JPMorgan Chase Bank, National Association, and Goldman
Sachs Mortgage Company. The Master Servicer is expected to be
Midland Loan Services, National Association and the Special
Servicer is expected to be Rialto Capital Advisors, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 30.3% of the properties
by balance, cash flow analyses of 79.0% of the pool, and asset
summary reviews on 100% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction's Fitch leverage is in line with
recent U.S. multiborrower transactions rated by Fitch. The pool's
Fitch trust loan-to-value ratio (LTV) of 101.4% is slightly lower
than the 2021 YTD average of 103.0% and above the 2020 average of
99.6%. Additionally, the pool's Fitch trust debt service coverage
ratio (DSCR) of 1.37 is below the 2021 YTD average of 1.38 and
above the 2020 average of 1.32x, respectively. Excluding credit
opinion loans, the pool's weighted average (WA) Fitch DSCR is 1.31x
and WA LTV is 111.5%.
Investment Grade Credit Opinion Loans: The pool includes five
loans, totaling 21.5% of the pool, which received investment grade
credit opinions. This is above the 2021YTD average of 13.7% and
below the 2020 average of 24.5% for other Fitch-rated U.S.
multiborrower transactions. Cambridge Crossing (9.9% of the pool)
received a credit opinion of 'BBB-sf*', One Memorial Drive (4.2%)
received a credit opinion of 'BBB-sf*', The Eddy (2.9%) received a
credit opinion of 'BBB-sf*', and The Colony Cooperative (2.3%) and
Hyde Park Cooperative (2.2%) both received credit opinions of
'AAAsf*'.
High Concentration of Full-term Interest-Only (IO) Loans:
Forty-five loans, representing 81.0% of the pool's cutoff balance,
are interest only for their entire loan terms. This is
significantly greater than the YTD 2021 average of 70.4% and 2020
average of 67.7%. Additionally, there are five loans with a partial
interest only period totaling 7.6% of the pool. This contributes to
the lower-than-average scheduled principal paydown for the
transaction of just 3.15% by maturity. By comparison, the average
scheduled paydown for recent Fitch-rated U.S. multiborrower
transactions is 4.9% for 2021YTD and 5.3% for 2020.
Diverse Pool by Loan Size: The 10 largest loans make up 46.0% of
the pool, significantly lower than the 2021 YTD and 2020 averages
of 51.5% and 56.8%, respectively. This contributes to a loan
concentration index (LCI) of 342, which is lower than the 2021 YTD
and 2020 average LCIs of 378 and 441, respectively for Fitch-rated
multiborrower transactions.
Significant Office Concentration: Office properties represent 45.4%
of the pool, higher than 2021 YTD and 2020 averages of 36.6% and
41.2%, respectively. Retail (20.6%) and Multifamily (19.3%)
represent other material property type concentrations.
RATING SENSITIVITIES
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 to the same one
variable, Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB-sf' / 'B-sf'.
-- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BB+sf' / 'BB-
sf' / 'CCCsf' / 'CCCsf'.
-- 20% NCF Decline: 'BBB+sf' / 'BBB-sf' / 'BBsf' / 'B-sf' /
'CCCsf' / 'CCCsf' / 'CCCsf'.
-- 30% NCF Decline: 'BBB-sf' / 'BB+sf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'/ 'CCCsf'.
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' / 'AA+sf' / 'A+sf' / 'A-
sf' / 'BBBsf' / 'BBB-sf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (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.
BENEFIT STREET XXV: Moody's Assigns Ba3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Benefit Street Partners CLO XXV, Ltd. (the "Issuer"
or "BSP XXV").
Moody's rating action is as follows:
US$305,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$20,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$55,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$27,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned A2 (sf)
US$30,500,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Baa3 (sf)
US$22,000,000 Class E Secured Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
BSP XXV is a managed cash flow CLO. The issued notes will be
collateralized primarily by 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,
and up to 10.0% of the portfolio may consist of second lien loans,
unsecured loans, and bonds. The portfolio is approximately 92%
ramped as of the closing date.
Benefit Street Partners L.L.C. (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 5.08 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 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: 70
Weighted Average Rating Factor (WARF): 2814
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 47.1%
Weighted Average Life (WAL): 9.00 years
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 and available at
https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1242167.
Alternatively, please see the Rating Methodologies page on
www.moodys.com for a copy of this methodology.
Please note that a Request for Comment was published in which
Moody's requested market feedback on potential revisions to one or
more of the methodologies used in determining these Credit Ratings.
If the revised methodologies are implemented as proposed, it is not
currently expected that the Credit Ratings referenced in this press
release will be affected. Request for Comments can be found on the
rating methodologies page on www.moodys.com.
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.
BIRCH GROVE 3: Moody's Rates $21MM Class E Notes 'Ba3'
------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by Birch Grove CLO 3 Ltd. (the "Issuer" or "Birch
Grove 3").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$15,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$33,500,000 Class B-1 Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$20,000,000 Class B-2 Senior Secured Hybrid Fixed/Floating Rate
Notes due 2035, Assigned Aa2 (sf)
US$25,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$21,500,000 Class D-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$12,500,000 Class D-2 Junior Secured Deferrable Floating Rate
Notes due 2035, Assigned Ba1 (sf)
US$21,250,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Birch Grove 3 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, unsecured
loans and bonds. The portfolio is approximately 100% ramped as of
the closing date.
Birch Grove Capital LP (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 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: 70
Weighted Average Rating Factor (WARF): 2883
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.09 years
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.
BLACKROCK BAKER 2021-1: S&P Assigns Prelim 'BB-' Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Blackrock
Baker CLO 2021-1 Ltd./Blackrock Baker CLO 2021-1 LLC's floating-
and fixed-rate debt.
The debt issuance is a CLO securitization backed by primarily
middle-market speculative-grade (rated 'BB+' and lower) senior
secured term loans.
The preliminary ratings are based on information as of Dec. 21,
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.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Blackrock Baker CLO 2021-1 Ltd. /Blackrock Baker CLO 2021-1 LLC
Class X(i), $23.10 million: AAA (sf)
Class A-1, $226.30 million: AAA (sf)
Class A-L, $25.00 million: AAA (sf)
Class A-F, $10.00 million: AAA (sf)
Class B, $46.25 million: AA (sf)
Class C (deferrable), $46.25 million: A- (sf)
Class D (deferrable)(ii), $35.90 million: BBB- (sf)
Class E (deferrable)(ii), $30.60 million: BB- (sf)
Variable dividend notes, $52.00 million: Not rated
(i)The class X notes are expected to be paid down using interest
proceeds during the first 15 payment dates in equal installments of
$1.54 million.
(ii)The class D and E notes can be paid down before other more
senior classes of notes due to a turbo feature that allows for
paydowns with excess spread that would otherwise flow out to the
variable dividend notes. The excess spread used to de-lever the
class D and E notes is made available below the transaction's
coverage tests, as well as uncapped subordinated expenses, in the
payment waterfall.
BLUEMOUNTAIN FUJI II: S&P Affirms BB- (sf) Rating on Class D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1A-R
replacement notes from BlueMountain Fuji US CLO II
Ltd./BlueMountain Fuji US CLO II LLC, a CLO originally issued in
2017 that is managed by BlueMountain Capital Management LLC. At the
same time, S&P withdrew its rating on the class A-1A notes
following payment in full on the Dec. 22, 2021, refinancing date.
S&P affirmed its ratings on the class A-2, B, C, and D notes, which
were not affected by this refinancing (S&P did not rate the class
A-1B notes).
The replacement note was issued via a supplemental indenture, which
outlines the terms of the replacement note. According to the
supplemental indenture, the non-call period was extended to October
2022.
Replacement And Refinanced Note Issuances
Replacement note
Class A-1A-R, $332.75 million: Three-month LIBOR + 1.00%
Refinanced note
Class A-1A, $332.75 million: Three-month LIBOR + 1.20%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
BlueMountain Fuji US CLO II Ltd./BlueMountain Fuji US CLO II LLC
Class A-1A-R, $332.75 million: AAA (sf)
Ratings Withdrawn
BlueMountain Fuji US CLO II Ltd./BlueMountain Fuji US CLO II LLC
Class A-1A to not rated from 'AAA (sf)'
Ratings Affirmed
BlueMountain Fuji US CLO II Ltd./BlueMountain Fuji US CLO II LLC
Class A-2: AA (sf)
Class B: A (sf)
Class C: BBB- (sf)
Class D: BB- (sf)
Other Outstanding Notes
BlueMountain Fuji US CLO II Ltd./BlueMountain Fuji US CLO II LLC
Class A-1B notes: Not rated
Subordinated notes: Not rated
BPR TRUST 2021-NRD: Moody's Assigns B3 Rating to Class F Certs
--------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to six
classes of CMBS securities, issued by BPR Trust 2021-NRD,
Commercial Mortgage Pass-Through Certificates, Series 2021-NRD:
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)
Note: Moody's previously assigned a provisional rating to Class
X-CP of (P) Aaa (sf), described in the prior press release, dated
December 9, 2021. Subsequent to the release of the provisional
ratings for this transaction, the structure was modified. Based on
the current structure, Moody's has withdrawn its provisional rating
for Class X-CP and will not rate this certificate.
RATINGS RATIONALE
The certificates are collateralized by a single, $275.0 million
floating-rate, interest only loan secured by the borrower's fee
interest in Northridge Fashion Center, a regional shopping center
located in Northridge, CA. The collateral for the loan consists of
a 882,117 square foot ("SF") portion of the 1.44 million SF
two-story, enclosed mall. Moody's ratings are based on the credit
quality of the loan and the strength of the securitization
structure.
Moody's approach to rating this transaction involved the
application of both its Large Loan and Single Asset/Single Borrower
CMBS methodology and its IO Rating methodology. The rating approach
for securities backed by a single loan compares the credit risk
inherent in the underlying collateral with the credit protection
offered by the structure. The structure's credit enhancement is
quantified by the maximum deterioration in property value that the
securities are able to withstand under various stress scenarios
without causing an increase in the expected loss for various rating
levels. In assigning single borrower ratings, Moody's also
considers a range of qualitative issues as well as the
transaction's structural and legal aspects.
Northridge Fashion Center is 20 miles northwest of downtown Los
Angeles, in Northridge, CA. The collateral for the loan consists of
a 882,117 SF portion of the 1.44 million SF two-story, enclosed
mall on 47.4 acres of land.
The property's non-collateral anchors include Macy's (189,650 SF),
Macy's Men & Home (185,200 SF), and JCPenney (181,660 SF).
Collateral anchors include Curacao (97,847 SF, 11.1% of total net
rentable area ("NRA"), 3.0% of base rent), AMC (51,000 SF, 5.8% of
NRA, 3.4% of base rent), Dick's Sporting Goods (50,272 SF, 5.7% of
total NRA, 3.3% of base rent), and Gold's Gym (39,202 SF, 4.4% of
total NRA, 2.8% of base rent). The property includes over 100
in-line retailers. Some notable, in-line tenants include Porto's
Bakery Cafe (17,668 SF, 2.0% of total NRA, 2.0% of base rent),
Victoria's Secret (10,180 SF, 1.2% of total NRA, 2.6% of base
rent), and Apple (7,652 SF, 0.9% of total NRA, 1.4% of base rent).
As of September 1, 2021, the collateral component of the mall
reported an occupancy rate of 94.3% (96.5% including non-collateral
anchor tenants). The collateral property has a four-year average
historical occupancy rate of 97.8% (98.9% in 2017; 98.4% in 2018;
98.2% in 2019; and 95.6% in 2020). In terms of in-line space, the
property has a four-year average historical occupancy rate of 93.1%
(96.9% in 2017; 95.3% in 2018; 92.5% in 2019; and 87.8% in 2020).
The coronavirus crisis dramatically reduced sales and occupancy
levels as the property was closed for two 3-month periods in 2020.
Comparable 2020 in-line sales and the corresponding occupancy cost
ratio (excl. Apple, jewelry, food court) averaged $295 PSF and
26.7%, respectively. Including all tenants less than 10,000 SF, the
in-line sales and occupancy cost ratio were $352 PSF and 22.2%,
respectively. Of note, Apple implemented a number of strict social
distancing protocols at its stores nationwide (i.e. reduced
capacity, temperature checks, reduced staff, etc.), which
negatively affected sales.
Occupancy rates at the property also declined to new lows due to
the fallout from the coronavirus pandemic as well as increasing
bankruptcies and store closures throughout the retail industry.
Occupancy (excl. anchors) fell to 87.8% in 2020 from 92.5% in 2019.
The NOI at the property correspondingly decreased to $26.5 million
during 2020 by approximately 31.6% from $32.9 million. For the TTM
ending August 2021, NOI further declined $22.5 million.
Separately, the tenants' negotiating power appears to have
strengthened in recent years as gross lease structures have become
more common. The property's expense recover ratio has steadily
declined over the past four years -- from 114.6% (2017), to 109.5%
(2018), to 101.2% (2019), to 96.4% (2020), to 81.9% (TTM August
2021). However, Brookfield believes that most future leases will be
structured on a net bases as many of the property's gross leases
were executed during the pandemic. The property's low occupancy
cost ratio of 14% also supports rental increase potential.
The property's performance has improved in certain respects since
re-opening in October 2020. For the TTM ended October 2021 ("TTM
October 2021"), comparable in-line sales and occupancy costs
improved to $499 PSF (excl. Apple). The occupancy rate (incl.
non-collateral anchors) also rebounded to 96.4% as of September 1,
2021. Rent collections as a percent of gross rent averaged 93.0%
from April 2020 to September 2021, albeit showing its lowest
collection in September 2021 (91.2% collected).
The property has been expanded and renovated numerous times since
its development in 1971. Most recently, the borrower spent $54
million in an extensive redevelopment, which included the purchase
of a formerly occupied Sears-owned box that closed in January 2020.
The capital investment also included the addition of Dick's
Sporting Goods, Curacao, Blaze Pizza and Gold's Gym. Porto's Bakery
and Café will backfill a former Sears auto space. The
redevelopment of the former department store and auto center
outparcel is nearing completion with both Curacao and Dick's
Sporting Goods having taken possession of their space. All spaces
are expected to be occupied by the end of first quarter of 2022.
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 ("Moody's LTV" or "MLTV"). As described
in the CMBS methodology used to rate this transaction, Moody's
makes various adjustments to the MLTV. Moody's adjusts adjust the
MLTV for each loan using a value that reflects capitalization
("cap") rates that are between its sustainable cap rates and market
cap rates. Moody's also uses an adjusted loan balance that reflects
each loan's amortization profile.
The Moody's first-mortgage DSCR is 2.23x and Moody's first-mortgage
stressed DSCR at a 9.25% constant is 0.94x. Moody's DSCR is based
on its stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance of $275.0 million
is 115.1%. Moody's LTV Ratio is based on its Moody's Value.Moody's
did not adjust Moody's value to reflect the current interest rate
environment as part of its analysis for this transaction.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The property's quality
grade is 3.75.
Notable strengths of the transaction include: the property's
location, the demographics in its trade area, its historical
occupancy, the recent redevelopment and leasing momentum, its
pre-coronavirus in-line sales performance, and its institutional
quality sponsorship with retail experience.
Notable concerns of the transaction include: the effects of the
coronavirus pandemic, recent decline in operating performance,
tenant rollover, lack of asset diversification, floating-rate
mortgage loan profile and certain credit negative legal features.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from its
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of commercial real estate as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors,
including the rollout of vaccines, growing household consumption
and an accommodative central bank policy. However, specific sectors
and individual businesses will remain weakened by extended pandemic
related restrictions.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
BX COMMERCIAL 2021-CIP: Moody's Assigns B3 Rating to Class F Debt
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to seven
classes of CMBS securities, issued by BX Commercial Mortgage Trust
2021-CIP, Commercial Mortgage Pass-Through Certificates, Series
2021-CIP:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. A-1, 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)
RATINGS RATIONALE
The certificates are collateralized by the borrower's fee and
leasehold interests in 101 primarily industrial properties located
across 15 states. Our ratings are based on the credit quality of
the loans and the strength of the securitization structure.
Moody's approach to rating this transaction involved the
application of its Large Loan and Single Asset/Single Borrower CMBS
methodology. The rating approach for securities backed by a single
loan compares the credit risk inherent in the underlying collateral
with the credit protection offered by the structure. The
structure's credit enhancement is quantified by the maximum
deterioration in property value that the securities are able to
withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also considers a range
of qualitative issues as well as the transaction's structural and
legal aspects.
The portfolio contains approximately 15,218,397 SF of aggregate net
rentable area ("NRA") across the following three property subtypes
- warehouse/distribution (93 properties; 97.2% of NRA), R&D/flex (7
properties; 2.7% of NRA), and general industrial (one property;
0.2% of NRA). The portfolio is geographically diverse as the
properties are located across 15 states and 23 markets. The top
five market concentrations by NRA are Chicago (12 properties; 16.7%
of NRA), Columbus (6 properties; 11.0% of NRA), Indianapolis (5
properties; 10.7% of NRA), Atlanta (4 properties; 7.8% of NRA) and
Baltimore (7 properties; 7.0% of NRA). The portfolio properties are
primarily located in global gateway markets and generally situated
within close proximity to major transportation arteries.
Construction dates for properties in the portfolio range between
1969 and 2022, with a weighted average year built of 2007. Property
sizes for assets range between 19,317 SF and 673,920 SF, with an
average size of approximately 150,677 SF. Clear heights for
properties range between 16 feet and 40 feet, with a weighted
average maximum clear height for the portfolio of approximately
29.8 feet. As of December 1, 2021, the portfolio was approximately
96.7% leased to over 180 tenants.
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, we make various adjustments to the MLTV. We adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between our sustainable cap rates and market cap
rates. We also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's first mortgage DSCR is 1.68x and Moody's first mortgage
stressed DSCR at a 9.25% constant is 0.45x. Moody's DSCR is based
on our stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance is 184.7% based on
our Moody's Value. Adjusted Moody's LTV ratio for the first
mortgage balance is 160.5% based on our Moody's Value using a cap
rate adjusted for the current interest rate environment.
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 0.75.
Notable strengths of the transaction include: the proximity to
global gateway markets, infill locations, geographic diversity,
tenant granularity, low percentage of flex industrial and
experienced sponsorship.
Notable concerns of the transaction include: the high Moody's LTV
ratio, tenant rollover, floating-rate/interest-only mortgage loan
profile and certain credit negative legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
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 our
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
CAPITAL FOUR I: Moody's Rates $20.8MM Class E Notes 'Ba3'
---------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Capital Four US CLO I Ltd. (the "Issuer").
Moody's rating action is as follows:
US$256,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$42,000,000 Class B1 Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$6,000,000 Class B2 Senior Secured Fixed Rate Notes due 2035,
Assigned Aa2 (sf)
US$20,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$23,200,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$20,800,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Capital Four US CLO I Ltd. is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans or bonds. The portfolio is approximately 95% ramped
as of the closing date.
Capital Four US Inc. (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 subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2764
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 years
CARLYLE US 2019-2: S&P Assigns BB- (sf) Rating on Class D Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, and D-R replacement notes from Carlyle US CLO 2019-2
Ltd./Carlyle US CLO 2019-2 LLC, a CLO originally issued in 2019
that is managed by Carlyle CLO Management LLC. At the same time,
S&P withdrew its ratings on the class A-1, A-2A, A-2B, B, C, and D
notes following payment in full on the Dec. 21, 2021, refinancing
date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period was extended to Dec. 21, 2022.
-- The new class A-2-R notes refinances the class A-2A and A-2B
notes.
Replacement And Refinanced Note Issuances
Replacement notes
Class A-1-R, $352.0 million: Three-month LIBOR + 1.12%
Class A-2-R, $60.5 million: Three-month LIBOR + 1.65%
Class B-R, $38.5 million: Three-month LIBOR + 2.20%
Class C-R, $33.0 million: Three-month LIBOR + 3.20%
Class D-R, $18.7 million: Three-month LIBOR + 6.50%
Refinanced notes
Class A-1, $352.0 million: Three-month LIBOR + 1.28%
Class A-2A, $40.5 million: Three-month LIBOR + 1.75%
Class A-2B, $20.0 million: 4.00%
Class B, $38.5 million: Three-month LIBOR + 2.30%
Class C, $33.0 million: Three-month LIBOR + 3.70%
Class D, $18.7 million: Three-month LIBOR + 6.60%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Carlyle US CLO 2019-2 Ltd./Carlyle US CLO 2019-2 LLC
Class A-1-R, $352.0 million: AAA (sf)
Class A-2-R, $60.5 million: AA (sf)
Class B-R, $38.5 million: A (sf)
Class C-R, $33.0 million: BBB- (sf)
Class D-R, $18.7 million: BB- (sf)
Ratings Withdrawn
Carlyle US CLO 2019-2 Ltd./Carlyle US CLO 2019-2 LLC
Class A-1 to not rated from 'AAA (sf)'
Class A-2A to not rated from 'AA (sf)'
Class A-2B to not rated from 'AA (sf)'
Class B to not rated from 'A (sf)'
Class C to not rated from 'BBB- (sf)'
Class D to not rated from 'BB- (sf)'
Other Outstanding Classes
Carlyle US CLO 2019-2 Ltd./Carlyle US CLO 2019-2 LLC
Subordinated notes: Not rated
CARLYLE US 2019-3: S&P Assigns BB- (sf) Rating on Class D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, and D-R replacement notes from Carlyle US CLO 2019-3
Ltd./Carlyle US CLO 2019-3 LLC, a CLO originally issued in 2019
that is managed by Carlyle CLO Management LLC. At the same time,
S&P withdrew its ratings on the original class A-1a, A-1b, A-2a,
A-2F, B, C-1, C-2, and D notes following payment in full on the
Dec. 23, 2021, refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period was extended to Dec. 23, 2022.
-- The class A-1a and A-1b notes were combined to make the new
class A-1-R notes, the class A-2a and A-2f notes were combined to
make the new class A-2-R notes, and the C-1 and C-2 notes were
combined to make the new class C-R notes.
-- No additional subordinated notes were issued on the refinancing
date.
-- The transaction adopted benchmark replacement language and made
updates to conform to current rating agency methodology.
Replacement And Original Note Issuances
Replacement notes
Class A-1-R, $384.000 million: Three-month LIBOR + 1.14%
Class A-2-R, $72.000 million: Three-month LIBOR + 1.70%
Class B-R, $36.000 million: Three-month LIBOR + 2.30%
Class C-R, $36.000 million: Three-month LIBOR + 3.20%
Class D-R, $24.000 million: Three-month LIBOR + 6.75%
Original notes
Class A-1a, $372.000 million: Three-month LIBOR + 1.31%
Class A-1b, $12.000 million: Three-month LIBOR + 1.60%
Class A-2a, $33.500 million: Three-month LIBOR + 1.75%
Class A-2F, $38.500 million: 3.251%
Class B, $36.000 million: Three-month LIBOR + 2.50%
Class C-1, $26.000 million: Three-month LIBOR + 3.75%
Class C-2, $10.000 million: Three-month LIBOR + 4.20%
Class D, $24.000 million: Three-month LIBOR + 7.03%
Subordinated notes, $54.325 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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Carlyle US CLO 2019-3 Ltd./Carlyle US CLO 2019-3 LLC
Class A-1-R, $384 million: AAA (sf)
Class A-2-R, $72 million: AA (sf)
Class B-R (deferrable), $36 million: A (sf)
Class C-R (deferrable), $36 million: BBB- (sf)
Class D-R (deferrable), $24 million: BB- (sf)
Ratings Withdrawn
Carlyle US CLO 2019-3 Ltd./Carlyle US CLO 2019-3 LLC
Class A-1a to not rated from 'AAA (sf)'
Class A-1b to not rated from 'AAA (sf)'
Class A-2a to not rated from 'AA (sf)'
Class A-2F to not rated from 'AA (sf)'
Class B to not rated from 'A (sf)'
Class C-1 to not rated from 'BBB+ (sf)'
Class C-2 to not rated from 'BBB- (sf)'
Class D to not rated from 'BB- (sf) '
Other Outstanding Classes
Carlyle US CLO 2019-3 Ltd./Carlyle US CLO 2019-3 LLC
Subordinated notes: Not rated
CARLYLE US 2021-11: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Carlyle US
CLO 2021-11 Ltd./Carlyle US CLO 2021-11 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Carlyle CLO Management LLC, a
subsidiary of the Carlyle Group.
The preliminary ratings are based on information as of Dec. 29,
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 subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Carlyle US CLO 2021-11 Ltd./Carlyle US CLO 2021-11 LLC
Class A, $279.00 mil.: AAA (sf)
Class B, $63.00 mil.: AA (sf)
Class C, $27.00 mil.: A (sf)
Class D (deferrable), $27.00 mil.: BBB- (sf)
Class E (deferrable), $18.00 mil.: BB- (sf)
Subordinated notes, $40.92 mil.: Not rated
CARVAL CLO V-C: Moody's Gives B3 Rating to $6.38MM Class F Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued and one class of loans incurred by CarVal CLO V-C Ltd.
(the "Issuer" or "CarVal V-C").
Moody's rating action is as follows:
US$190,000,000 Class A Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$82,000,000 Class A Loans maturing 2034, Assigned Aaa (sf)
US$30,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$16,750,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Assigned Aa2 (sf)
US$22,312,500 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$26,562,500 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$23,375,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
US$6,375,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned B3 (sf)
The notes and loans listed above are referred to herein,
collectively, as the "Rated Debt."
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.
CarVal V-C is a managed cash flow CLO. The issued debt 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, and
permitted non-loan assets, of which 5% may consist of unsecured
loans and permitted non-loan assets, and 3% may consist of senior
unsecured bonds. The portfolio is approximately 95% ramped as of
the closing date.
CarVal CLO 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 Debt, 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 debt 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: $425,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2845
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 years
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
CARVANA AUTO 2021-P4: S&P Assigns BB+ (sf) Rating on Class N Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Carvana Auto Receivables
Trust 2021-P4's series 2021-P4 asset-backed notes.
The note issuance is an ABS securitization backed by prime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 14.50%, 11.80%, 9.31%, 6.19%
and 5.64% credit support for the class A (collectively, class A-1,
A-2, A-3, and A-4), B, C, D, and N notes, respectively, based on
stressed break-even cash flow scenarios (including excess spread).
These credit support levels provide approximately 5.00x, 4.00x,
3.00x, 2.00x, and 1.73x coverage of S&P's expected net loss range
of 2.50%-3.00% for the class A, B, C, D, and N notes,
respectively.
-- The timely interest and principal payments by the legal final
maturity dates made under stressed cash flow modeling scenarios
that S&P deems appropriate for the assigned ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(2.00x 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 prime pool being
securitized, including a weighted average nonzero FICO score of
approximately 704 and a minimum nonzero FICO score of 582.
-- The loss performance of Carvana LLC's origination static pools
and managed portfolio, its deal-level collateral characteristics,
and a comparison with its prime auto finance company peers.
-- The transaction's credit enhancement in the form of
subordinated notes; a nonamortizing reserve account;
overcollateralization, which builds to a target level of 0.35% of
the initial receivables balance; and excess spread.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage-of-receivables basis) as the pool
amortizes.
-- The transaction's payment and legal structures.
Potential Effects Of Proposed Criteria Changes
S&P said, "Our ratings are based on our applicable criteria,
including "General Methodology And Assumptions For Rating U.S. Auto
Loan Securitizations," published on Jan. 11, 2011. However, these
criteria are currently under review.
"As highlighted in that article, we are soliciting feedback from
market participants on proposed changes to our criteria. We will
evaluate the market feedback, which may result in further changes
to the criteria. As a result of this review, our future Auto ABS
criteria may differ from our current criteria. The criteria change
may affect the ratings in this transaction. Until such time that we
adopt new criteria, we will continue to rate and surveil these
notes using our existing criteria."
Ratings Assigned
Carvana Auto Receivables Trust 2021-P4(i)
Class A-1, $146.60 million: A-1+ (sf)
Class A-2, $341.60 million: AAA (sf)
Class A-3, $341.60 million: AAA (sf)
Class A-4, $143.43 million: AAA (sf)
Class B, $33.24 million: AA (sf)
Class C, $31.12 million: A (sf)
Class D, $17.41 million: BBB (sf)
Class N(ii), $40.00 million: BB+ (sf)
(i)The transaction will issue class XS notes, which are unrated and
may be retained or sold in one or more private placements.
(ii)The class N notes will be paid to the extent funds are
available after the overcollateralization target is achieved. In
addition, the class N notes will not provide any enhancement to the
senior classes.
CATHEDRAL LAKE VIII: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Cathedral Lake VIII
Ltd./Cathedral Lake VIII 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
Cathedral Lake VIII Ltd./Cathedral Lake VIII LLC
Class A-1, $240.00 million: AAA (sf)
Class A-2, $16.00 million: AAA (sf)
Class B, $44.00 million: AA (sf)
Class C (deferrable), $28.00 million: A (sf)
Class D-1 (deferrable), $20.00 million: BBB+ (sf)
Class D-J (deferrable), $8.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $41.75 million: Not rated
CIFC FUNDING 2019-V: Moody's Rates Class D-R Notes 'Ba3'
--------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
CLO refinancing notes (the "Refinancing Notes") issued by CIFC
Funding 2019-V, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$310,000,000 Class A-1R1 Senior Secured Floating Rate Notes Due
2035, Definitive Rating Assigned Aaa (sf)
US$15,000,000 Class A-1RJ Senior Secured Floating Rate Notes Due
2035, Definitive Rating Assigned Aaa (sf)
US$5,000,000 Class A-2RF Senior Secured Fixed Rate Notes Due 2035,
Definitive Rating Assigned Aa2 (sf)
US$50,000,000 Class A-2RS Senior Secured Floating Rate Notes Due
2035, Definitive Rating Assigned Aa2 (sf)
US$27,500,000 Class B-R Mezzanine Secured Deferrable Floating Rate
Notes Due 2035, Definitive Rating Assigned A2 (sf)
US$30,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes Due 2035, Definitive Rating Assigned Baa3 (sf)
US$22,500,000 Class D-R Junior Secured Deferrable Floating Rate
Notes Due 2035, Definitive Rating 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 first lien senior secured loans,
cash, and eligible investments, and up to 10% of the portfolio may
consist of second lien loans and unsecured loans and permitted non
loan assets.
CIFC 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 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: reinstatement and 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:
Portfolio par: $500,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2905
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 9.1 years
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.
COLT 2021-6: Fitch Assigns Final B Rating on B-2 Certs
------------------------------------------------------
Fitch Ratings assigns final ratings to the residential
mortgage-backed certificates to be issued by COLT 2021-6 Mortgage
Loan Trust (COLT 2021-6).
DEBT RATING PRIOR
---- ------ -----
COLT 2021-6
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3A LT NRsf New Rating NR(EXP)sf
B-3B LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 527 loans with a total balance of
approximately $315 million as of the cutoff date. Loans in the pool
were originated by multiple originators and aggregated by Hudson
Americas L.P. A majority of loans are currently, or will be,
serviced by Select Portfolio Servicing, Inc., with a smaller
portion serviced by Northpointe Bank.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 9.7% above a long-term sustainable level (versus
10.5% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.6% yoy nationally as of June 2021.
Non-QM Credit Quality (Negative): The collateral consists of 527
loans, totaling $315 million, seasoned approximately five months in
aggregate (as calculated as the difference between origination date
and cutoff date). The borrowers have a moderate credit profile (737
model FICO and 46% model debt to income ratio [DTI]) and leverage
(77% sustainable loan to value ratio [LTV] and 71% combined LTV).
The pool consists of 51.2% of loans where the borrower maintains a
primary residence, while 48.8% comprise an investor property or
second home. Additionally, 17.8% of the loans were originated
through a retail channel and 54.5% are non-qualified mortgage
(non-QM); for the remainder, the QM rule does not apply.
Loan Documentation (Negative): Approximately 83.9% of the pool were
underwritten to less than full documentation in Fitch's opinion,
and 38% were underwritten to a 12- or 24-month bank statement
program for verifying income, which is not consistent with Appendix
Q standards and Fitch's view of a full documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Finance Protection Beareau's Ability to
Repay Rule (the Rule), which reduces the risk of borrower default
arising from lack of affordability, misrepresentation or other
operational quality risks due to rigor of the Rule's mandates with
respect to the underwriting and documentation of the borrower's
ability to repay. Additionally, 3.7% comprise an asset depletion
product, 1.5% are CPA or PnL products and 39% are a debt service
coverage ratio (DSCR) product.
Sequential Payment Structure (Positive): The transaction's cash
flow is based on a sequential-pay structure whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class with limited advancing.
Limited Advancing (Mixed): 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 limited
advancing reduces loss severities, as there is a lower amount
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure side, as there is limited liquidity in the event
of large and extended delinquencies.
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. 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
percentage) 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 macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default. Furthermore, this approach had the largest
impact on the back-loaded benchmark scenario, which is also the
most probable outcome, as defaults and liquidations are not likely
to be extensive over the next 12- months-18 months given the
ongoing borrower relief and eviction moratoriums.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the 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.
-- 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 41.3% 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.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper MVDs than assumed at the
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.
-- 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'.
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.
SUMMARY OF FINANCIAL ADJUSTMENTS
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 multiple third-party review firms. The third-party due
diligence described in Form 15E focused on a credit, compliance and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment(s)
to its analysis:
-- A 5% credit at the loan level for each loan where satisfactory
due diligence was completed;
-- 47 loans that had an AVM confidence score outside of the
applicable range for the secondary valuation review received
no diligence credit and used a haircut value in determining
the LTV. This adjustment resulted in a reduction of the
'AAAsf' expected loss of 41bps for the diligence credit while
the adjustment on the 47 loans increased expected losses for
'AAsf' rated bonds and below by 25bps.
DATA ADEQUACY
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 data layout format.
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.
COLUMBIA CENT 27: Moody's Rates $2.8MM Class F-R Notes 'B3'
-----------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
CLO refinancing notes (the "Refinancing Notes") issued by Columbia
Cent CLO 27 Limited (the "Issuer").
Moody's rating action is as follows:
US$4,000,000 Class X-R Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$257,600,000 Class A-R Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$12,350,000 Class B-1-R Mezzanine Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$31,150,000 Class B-2-R Mezzanine Fixed Rate Notes due 2035,
Assigned Aa2 (sf)
US$19,500,000 Class C-R Mezzanine Deferrable Floating Rate Notes
due 2035, Assigned A2 (sf)
US$24,500,000 Class D-R Mezzanine Deferrable Floating Rate Notes
due 2035, Assigned Baa3 (sf)
US$22,300,000 Class E-R Mezzanine Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
US$2,800,000 Class F-R Mezzanine Deferrable Floating Rate Notes due
2035, Assigned B3 (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.
Columbia Cent CLO 27 Limited 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
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and bonds.
Columbia Cent CLO Advisers, 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 issuance of the Refinancing 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; 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 Default Probability
Rating" 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $402,500,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2827
Weighted Average Spread (WAS): 3.15%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 8.09 years
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.
CQS US 2021-1: Fitch Assigns BB- Rating on Class E Tranche
----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to CQS US
CLO 2021-1, Ltd.
DEBT RATING PRIOR
---- ------ -----
CQS US CLO 2021-1, Ltd.
A LT AAAsf New Rating AAA(EXP)sf
B LT NRsf New Rating NR(EXP)sf
C LT NRsf New Rating NR(EXP)sf
D-1 LT NRsf New Rating NR(EXP)sf
D-J LT NRsf New Rating NR(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
CQS US CLO 2021-1, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CQS
(US),LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.3 versus a maximum covenant, in accordance with the
initial expected matrix point of 27.0. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the A and E notes benefit from credit enhancement of 37.0%
and 8.0%, respectively, and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.3% first-lien senior secured loans and has a weighted average
recovery assumption (WARR) of 75.42% versus a minimum covenant, in
accordance with the initial expected matrix point of 68.8%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, class A and E notes can
withstand default rates of up to 58.9% and 33.8%, respectively,
assuming portfolio recovery rate of 35.7% in Fitch's 'AAAsf'
scenario and 67.5% in Fitch's 'BB-sf' scenario. The performance of
the class A and E notes at the other matrix points is in line with
expectations for BSL CLO notes.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in
a downgrade. Fitch evaluated the notes' sensitivity to
potential changes in such a metric. The results under these
sensitivity scenarios are between 'BBB+sf' and 'AAAsf' for
class A and between less than 'B-sf' and 'BB+sf' for class E
notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A notes, as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in
recovery rates and decreases in default rates, could result in
an upgrade.
-- Fitch evaluated the class E notes' sensitivity to potential
changes in such metrics. The results under these sensitivity
scenarios are between 'BBB-sf' and BBB+sf' for the class E
notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
CROWN POINT 11: Moody's Gives Ba3 Rating on $19.2MM Class E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Crown Point CLO 11 Ltd. (the "issuer" or "Crown
Point 11")
Moody's rating action is as follows:
US$248,000,000 Class A Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$56,000,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$22,400,000 Class C Secured Deferrable Mezzanine Floating Rate
Notes due 2034, Assigned A2 (sf)
US$22,400,000 Class D Secured Deferrable Mezzanine Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$19,200,000 Class E Secured Deferrable Junior Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed above 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.
Crown Point 11 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 95.0% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
5.0% of the portfolio may consist of collateral obligations that
are second lien loans, unsecured loans or permitted non-loan
assets. The portfolio is fully ramped as of the closing date.
Pretium Credit CLO 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 three 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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2754
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 7.0 years
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.
CSAIL 2016-C5: Fitch Affirms CCC Rating on 2 Certs
--------------------------------------------------
Fitch Ratings has downgraded two classes and affirmed twelve
classes of CSAIL 2016-C5 Commercial Mortgage Trust commercial
mortgage pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
CSAIL 2016-C5
A-4 12636LAX8 LT AAAsf Affirmed AAAsf
A-5 12636LAY6 LT AAAsf Affirmed AAAsf
A-S 12636LBC3 LT AAAsf Affirmed AAAsf
A-SB 12636LAZ3 LT AAAsf Affirmed AAAsf
B 12636LBD1 LT AA-sf Affirmed AA-sf
C 12636LBE9 LT A-sf Affirmed A-sf
D 12636LAG5 LT BBB-sf Affirmed BBB-sf
E 12636LAL4 LT B-sf Downgrade Bsf
F 12636LAN0 LT CCCsf Affirmed CCCsf
X-A 12636LBA7 LT AAAsf Affirmed AAAsf
X-B 12636LBB5 LT AA-sf Affirmed AA-sf
X-D 12636LAJ9 LT BBB-sf Affirmed BBB-sf
X-E 12636LAA8 LT B-sf Downgrade Bsf
X-F 12636LAC4 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Stable Loss Expectations: The affirmations reflect overall stable
loss expectations for the pool since Fitch's last rating action.
The downgrades reflect a greater certainty of loss due to higher
losses on the specially serviced loans. Seventeen loans (26% of the
pool) are considered Fitch Loans of Concern, including four loans
(7.8%) in special servicing.
Fitch's current ratings incorporate a base case loss of 7.90%. The
Negative Outlook reflects losses that could reach 8% after
factoring an additional sensitivity on one hotel loan to account
for ongoing business disruption as a result of the pandemic.
Specially Serviced Loans: The largest increase in loss is the
Frisco Plaza loan (1.7%), which is secured by a 61,453-sf retail
property in Frisco, TX. The loan was transferred to special
servicing in April 2019 for imminent non-monetary default due to
ongoing litigation with the former property manager and a tax
reimbursement dispute with LA Fitness. These issues have since been
resolved and a new property manager was approved. A payment default
occurred in March 2019, but the loan was brought current shortly
thereafter with funds available in cash management.
Property occupancy declined to 16.5% from 89.7% following LA
Fitness vacating its space in 3Q 2021 after its March 2021 lease
expiration; the tenant accounted for 65% of the property's rental
income. Other tenants include Verizon (5.9% of NRA through November
2022) and Great Outdoors (3.3% of NRA; recently extended lease
through May 2024). Per the special servicer, the tenant
Smoothie/Indian Food (2.8%; lease expired in May 2021) has also
vacated. The borrower has made no workout proposal and the special
servicer intends to proceed with foreclosure. Fitch's expected loss
of 62% is based on a 65% haircut to the YE 2018 NOI to reflect the
lower occupancy.
The next largest increase in loss is the REO University Plains
asset (2%), a 540-bed student housing property in Ames, IA, two
miles southwest of Iowa State University, which has a current
enrollment of 30,708 students. The loan was transferred to special
servicing in November 2018 for imminent monetary default.
Performance deteriorated due to new and existing market supply
since issuance. The property also has had below market rents since
issuance. Occupancy declined to 78.5% in June 2019 from 93.3% in
February 2018; however, as of July 2021, the property was 94.5%
pre-leased for the 2021-2022 academic year. Foreclosure occurred in
September 2020 and the asset is being marketed for sale. Fitch's
expected loss of 52% reflects a stressed value per bed of
approximately $21,000.
The Sheraton Lincoln Harbor Hotel loan (2.9%), which is secured by
a 358-key hotel in Weehawken NJ, was transferred to special
servicing in January 2021 due to imminent default. The sponsor was
no longer willing to support the hotel and was cooperating in a
friendly foreclosure process. Consensual foreclosure action was
filed in March 2021 and a receiver was appointed in April 2021. The
receiver and lender's counsel are working with Marriott to
determine capital requirements and brand standards required for the
extension of the flag agreement. The receiver continues to
stabilize property performance. Per the servicer, the property is
operating at 100% on weekends and averaging more than 60% on
weekdays. Fitch's expected loss of 18% factors a discount to the
recent appraisal, reflecting a stressed value per key of
approximately $195,000.
Increased Credit Enhancement: As of the December 2021 distribution
date, the pool's aggregate principal balance has been reduced by
27.1% to $682.7 million from $936.4 million at issuance. Four loans
(4.6%) are fully defeased. Three loans, representing 23.2% of the
pool, are full-term, interest-only loans; 27 loans (48.6%) are
partial interest-only and 21 loans (28.2%) have a balloon payment.
Only one loan (3%) matures in 2022 and the remaining 50 loans
(94.6%) mature in 2025.
Coronavirus Exposure/Alternative Loss Consideration: The largest
property type concentration is multifamily at 29.5%, followed by
hotels at 13.4% and retail at 15.6%. Three of the multifamily loans
(4.0%) are secured by student housing properties, two of which are
currently specially serviced.
Fitch applied an additional stress to the pre-pandemic cash flow
for one hotel loan given significant pandemic-related 2020 NOI
declines; this additional stress contributed to the Negative
Outlooks. The Outlook revisions to Stable from Negative reflect
fewer coronavirus-related stresses being applied since the last
rating action due to better than expected 2020 performance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans. Downgrades
to classes A-4, A-5, A-SB, A-S, B, 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 C, D and X-D may occur should expected
pool losses increase significantly and/or the FLOCs and/or
loans susceptible to the pandemic all suffer losses.
-- Downgrades to classes E and X-E are possible should loss
expectations increase from continued performance decline of
the FLOCs, loans susceptible to the pandemic not stabilize
and/or deteriorate further, additional loans default or
transfer to special servicing and/or higher realized losses
than expected on the specially serviced loans.
-- Downgrades to classes F and X-F would occur as losses are
realized and/or become more certain.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with 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 only occur with significant improvement in
CE, defeasance, and/or performance stabilization of FLOCs and
other properties affected by the pandemic. Classes would not
be upgraded above 'Asf' if there were likelihood of interest
shortfalls.
-- Upgrades to classes D and X-D may occur as the number of FLOCs
are reduced, properties vulnerable to the pandemic return to
pre-pandemic levels and there is sufficient CE to the classes.
-- Upgrades to classes E, F, X-E and X-F are unlikely absent
significant performance improvement on the FLOCs and
substantially higher recoveries than expected on the specially
serviced loans, and there is sufficient CE to the classes.
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.
CSFB HOME 2005-6: Moody's Hikes Class M-5 Debt Rating to Caa2
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of nine bonds
from six US residential mortgage backed transactions (RMBS), backed
by subprime mortgages issued by multiple issuers.
Complete rating actions are as follows:
Issuer: Chase Funding Trust, Series 2002-2
Cl. IA-5, Upgraded to A2 (sf); previously on Sep 5, 2018 Upgraded
to Baa1 (sf)
Cl. IIA-1, Upgraded to Aa2 (sf); previously on Apr 23, 2012
Confirmed at A1 (sf)
Issuer: CSFB Home Equity Asset Trust 2005-6
Cl. M-3, Upgraded to Aaa (sf); previously on May 23, 2018 Upgraded
to Aa1 (sf)
Cl. M-4, Upgraded to A2 (sf); previously on May 23, 2018 Upgraded
to Baa2 (sf)
Cl. M-5, Upgraded to Caa2 (sf); previously on May 23, 2018 Upgraded
to Ca (sf)
Issuer: CSFB Home Equity Pass-Through Certificates, Series 2005-1
Cl. M-5, Upgraded to A1 (sf); previously on Jul 11, 2018 Upgraded
to A3 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF4
Cl. A-3, Upgraded to Aa3 (sf); previously on Oct 16, 2018 Upgraded
to A2 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF9
Cl. I-A, Upgraded to Aa2 (sf); previously on Dec 19, 2019 Upgraded
to A1 (sf)
Issuer: First NLC Trust 2005-4
Cl. A-4, Upgraded to Aa3 (sf); previously on Mar 16, 2018 Upgraded
to A2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of a buildup in credit enhancement
available to the bonds, which has increased by 5% to 16% over the
last year.
Moody's said, "In light of the current macroeconomic environment,
we revised loss expectations based on the extent of performance
deterioration of the underlying mortgage loans, resulting from a
slowdown in economic activity and increased unemployment due to the
coronavirus outbreak. Specifically, we have observed an increase in
delinquencies, payment forbearance, and payment deferrals since the
start of pandemic, which could result in higher realized losses.
"Our analysis considers the current proportion of loans granted
payment relief in each individual transaction. We identified these
loans based on a review of loan level cashflows over the last few
months. Based on our analysis, the proportion of borrowers that are
currently enrolled in payment relief plans varied greatly, ranging
between approximately 2% and 14% among RMBS transactions issued
before 2009. In our analysis, we assume these loans to experience
lifetime default rates that are 50% higher than default rates on
the performing loans.
"In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Our analysis considered
the impact of six months of scheduled principal payments on the
loans enrolled in payment relief programs being passed to the trust
as a loss. The magnitude of this loss will depend on the proportion
of the borrowers in the pool subject to principal deferral and the
number of months of such deferral. The treatment of deferred
principal as a loss is credit negative, which could incur
write-downs on bonds when missed payments are deferred.
"Our rating actions have factored in the buildup in credit
enhancement of the bonds, especially in an environment of elevated
prepayment rates. The increase in credit enhancement, driven by
higher prepayment rates, has helped offset the impact of the
increase in expected losses spurred by the pandemic."
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
CSMC 2019-SPL1: Fitch Assigns B Rating on M-7 Tranche
-----------------------------------------------------
Fitch Ratings has assigned the following ratings to CSMC 2019-SPL1
Trust:
DEBT RATING
---- ------
CSMC 2019-SPL1 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-1A LT AAAsf New Rating
B-1X LT AAAsf New Rating
B-2 LT A-sf 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 AA+sf New Rating
M-2A LT AA+sf New Rating
M-2X LT AA+sf New Rating
M-3 LT Asf New Rating
M-3A LT Asf New Rating
M-3X LT Asf New Rating
M-4 LT A-sf New Rating
M-4A LT A-sf New Rating
M-4X 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-7 LT Bsf New Rating
M-8 LT NRsf New Rating
PT LT NRsf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
CSMC 2019-SPL1 is supported by a pool of seasoned performing
mortgage loans (SPL). The transaction was originally issued in the
first half of 2019 and was not rated at deal close. In tandem with
this rating assignment, the transaction is being modified to 1)
allow principal collection to be redirected to cover any potential
interest shortfalls on the senior outstanding bonds, 2) using
interest payment otherwise allocable to the subordinate bonds to
fund an account that may be used for potential repurchases, 3)
adding additional exchangeable classes and 4) adding certain
constraints on which institutions can act as an 'Eligible
Account'.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, home price values for this pool
are viewed as 10.5% above a long-term sustainable level (in line
with the 10.5% on a national level). Underlying fundamentals are
not keeping pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.6% yoy nationally as of June 2021.
SPL Credit Quality (Positive): The collateral consists of 5,789
seasoned performing and re-performing first lien loans, totaling
$1,053 million and seasoned approximately 188 months in aggregate.
The pool is 94.1% current and 5.9% delinquent. Over the last two
years, 74.4% of loans have been clean current. Additionally, 1.2%
of loans have had a modification since closing and close to 7% had
a modification prior to the closing date. The borrowers have a
moderate credit profile (687 FICO and 45% DTI) and very low
leverage (51% sLTV). The pool consists of 86.1% of loans where the
borrower maintains a primary residence, while 13.9% are investment
properties or second home.
Geographic Concentration (Neutral): Approximately 58.2% of the pool
is concentrated in California. The largest MSA concentration is in
the Los Angeles-Long Beach-Santa Ana, CA MSA (15.9%), followed by
the San Francisco-Oakland-Fremont, CA MSA (13.6%) and the New
York-Northern New Jersey-Long Island, NY-NJ-PA MSA (5.6%). The top
three MSAs account for 35.1% of the pool. As a result, there was a
1.03x PD penalty for geographic concentration.
No 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.
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 92% of the transaction pool in 1st
lien position, while the remaining loans 8% 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
225 bps to reflect this lien treatment.
Representation and Warranty Framework (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 139 bps at the 'AAAsf'
rating category to reflect the limitations of the R&W framework as
well as the non-investment-grade counterparty risk of the provider
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- 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.
-- 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 41.8% 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 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. The FICOs
were updated at the time of the transaction close which is more
than the 6 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 borrowers 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. Fitch
considered this information in its analysis and, as a result, Fitch
made the following adjustment(s) to its analysis:
Less than 1% 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 25 bps in aggregate to account for this added
risk.
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 2021-NQM8: S&P Assigns B (sf) Rating on Class B-2 Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to CSMC 2021-NQM8 Trust's
mortgage pass-through notes.
The note issuance is an RMBS transaction backed by first-lien,
fixed-rate, fixed-rate interest-only, adjustable-rate, and
adjustable-rate interest-only fully amortizing residential mortgage
loans to both prime and nonprime borrowers (some with interest-only
periods). The loans are secured by single-family residential
properties, planned-unit developments, co-ops, condotel,
condominiums, and two- to four-family residential properties.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage aggregator, DLJ Mortgage Capital Inc., as well as
S&P Global Ratings-reviewed originators; 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.
Ratings Assigned
CSMC 2021-NQM8 Trust
Class A-1, $295,586,000: AAA (sf)
Class A-2, $28,934,000: AA (sf)
Class A-3, $45,587,000: A (sf)
Class M-1, $17,902,000: BBB (sf)
Class B-1, $12,282,000: BB (sf)
Class B-2, $8,534,000: B (sf)
Class B-3, $7,494,324: Not rated
Class A-IO-S, notional(i): Not rated
Class XS, notional(ii): Not rated
Class PT(iii), $416,319,324: Not rated
Class R: Not rated
(i)The notional amount will equal the aggregate interest-bearing
principal balance of the mortgage loans as of the first day of the
related due period and is initially $415,934,510.
(ii)The notional amount will equal the aggregate principal balance
of the mortgage loans as of the first day of the related due period
and is initially $416,319,324.
(iii)Certain initial exchangeable notes are exchangeable for the
exchangeable notes and vice versa.
DIAMETER CREDIT IV: Moody's Rates $11.2MM Class E Notes 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Diameter Credit Funding IV, LTD. (the "Issuer" or
"Diameter Credit Funding IV").
Moody's rating action is as follows:
US$190,600,000 Class A Senior Secured Fixed Rate Notes due 2040,
Assigned Aaa (sf)
US$58,000,000 Class B Senior Secured Fixed Rate Notes due 2040,
Assigned Aa3 (sf)
US$17,600,000 Class C Mezzanine Secured Deferrable Fixed Rate Notes
due 2040, Assigned A3 (sf)
US$23,600,000 Class D Mezzanine Secured Deferrable Fixed Rate Notes
due 2040, Assigned Baa3 (sf)
US$11,200,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2040, Assigned Ba2 (sf)
The notes listed above 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.
Diameter Credit Funding IV 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, senior secured notes, and eligible investments, and up to
20% of the portfolio may consist of second lien loans. The
portfolio is approximately 64% ramped as of the closing date.
Diameter Capital Partners LP (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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 40
Weighted Average Rating Factor (WARF): 3369
Weighted Average Coupon (WAC): 5.75%
Weighted Average Recovery Rate (WARR): 34.5%
Weighted Average Life (WAL): 10 years
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.
ECAF I LTD: S&P Lowers Rating on Class B-1 Notes to 'CCC+ (sf)'
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on ECAF I Ltd.'s class A-1,
A-2, and B-1 notes. ECAF I Ltd. is an ABS transaction backed by the
lease revenues and sales proceeds from a portfolio of 27 commercial
aircraft.
Rationale
The downgrades primarily reflect the deterioration in the
portfolio's performance with almost half the portfolio currently
off-lease and the resulting decline in collections; the notes'
insufficient credit enhancement at their respective previous rating
levels, based on our assumptions; and the continued pressure on
lease collections in the aftermath of the COVID-19 pandemic.
S&P considered the continued deterioration in performance and the
following factors since our last full review in August 2020:
-- The COVID-19 pandemic's prolonged negative impact on world
travel and the resulting stress on airlines' liquidity and their
ability to make timely lease payments;
-- The declining debt service coverage ratio due to lower
collections, which are driven primarily by the number of off-lease
aircraft (13 out of 27), declining credit quality of lessees
currently operating the aircraft in the portfolio, and the delay in
repayment of scheduled principal payment amount on the class A-1
notes;
-- Limited demand on the part of aircraft operators, as indicated
by the high number of off-lease aircraft, and the pricing achieved
for both lease transactions (with lease rates for
renewals/extensions generally lower than existing leases) and
sales/part-outs (with proceeds generally lower than depreciated
base values);
-- Accumulation of unpaid scheduled principal payment amounts on
the class A-1 and B-1 notes;
-- The rapid amortization event in June 2022, after which point
all available collections will be distributed on a pro-rata basis
between class A-1 and A-2 notes (together, the class A notes), and
the class B-1 notes will be fully subordinated to the class A
notes; and
-- The potential challenges to sell, re-market or re-lease the
aircraft, especially the older aircraft, which may need to be
sold/parted-out in the near term when values are under significant
pressure from the impact of the pandemic.
Based on the transaction documents, the class A-1 notes are
scheduled to amortize to zero over the first seven years after
closing (ending in June 2022), and the class A-2 notes do not
amortize during that time, unless there is an early amortization
event (DSCR falls below 1.15x or utilization is less than 75%) or
an asset disposition, in which case they are paid pro rata. After
the seventh anniversary from closing, the class A-1 and A-2 notes
will always be paid pro rata. The class B-1 notes will receive
scheduled principal only when an early amortization event has not
occurred or upon an asset disposition.
As per the payment structure, even during an early amortization
event, the class A-1 notes' scheduled principal is paid first, and
then, if any amounts remain, they are used to pay the class A notes
on a pro rata basis. S&P said, "Therefore, at the time of our last
review in August 2020, our rating on the class A-1 notes ('BB-
(sf)') was higher than the class A-2 notes ('B+ (sf)'), as the
payment structure allowed the class A-1 notes to receive
accelerated principal payments."
S&P said, "With almost half the portfolio (by number of aircraft)
currently off-lease, the resulting decline in collections, and the
fact that all sales proceeds will be distributed pro-rata between
the class A notes, we believe it is unlikely that the class A-1
notes will be repaid in full by June 2022. Therefore, we downgraded
our ratings on the class A-1 and A-2 notes to the same rating
level. Failure to repay the class A-1 notes by June 2022 is not an
event of default under the transaction documents. Our rating on the
class A notes addresses likelihood of payment of timely interest
and ultimate principal by the legal final maturity date in June
2040.
"None of the classes passed the 'B-' rating level under our cash
flow runs (the lowest stress level for cash flow modeling purpose).
For the class A notes, we considered its priority in the payment
structure and the availability of a liquidity facility that covers
nine months' interest on the class A and B notes.
For the class B-1 notes, interest is deferrable while class A notes
are outstanding, and it also benefits from the liquidity facility.
However, the calculated loan-to-value ratio is more than 100%, and
the notes have received minimal principal repayments since our last
review. Also, after the rapid amortization event, the class B-1
notes will be subordinated to the class A notes. S&P siad, "We
believe that while the class B-1 notes are currently vulnerable, a
default is unlikely in the near term. We applied our "Criteria For
Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published Oct.
1, 2012, to arrive at the 'CCC+ (sf)' rating for the class B-1
notes."
Assumptions For The Review
Similar to S&P's last review in August 2020, its analysis included
additional stresses on time-to-re-lease and retirement age due to
the impact of the COVID-19 pandemic.
Collateral value
S&P said, "We typically use the lower of the mean and median value
(LMM value) of the half-life base and market values from three
appraisers as the starting value in our analysis. We use this
value, together with other assumptions, to determine future lease
rates and sale values. For this review, in addition to depreciating
the aircraft value from the date of the last appraisal to the first
payment date, we applied an additional haircut to the starting
values. More specifically, we haircut the starting value by 50% of
our 'B' lease rate decline stress plus the aircraft-specific
depreciation assumption. We believe this to be appropriate, as our
lease rate decline stress considers the type and age of the
aircraft, as well as the strength of the servicer."
Aircraft-on-ground (AOG) times
S&P made a criteria exception, extending the AOG downtime during
the first modeled recession and differentiating the downtime for
wide-bodies and narrow-bodies because it believes that wide-bodies
will be more vulnerable to lower demand.
Table 1
Aircraft On Ground
IN MONTHS
BEFORE APPLICATION AFTER APPLICATION
OF CRITERIA EXCEPTION OF CRITERIA EXCEPTION
STRESS ALL AOG RECESSION 1 NB AOG RECESSION 1 WB
AOG RECESSIONS 2 AND 3 ALL AOG
A 10 12 15 10
BBB 9 11 14 9
BB 8 10 13 8
B 7 9 12 7
AOG--Aircraft on ground.
NB--Narrow-body.
WB--Wide-body.
Default pattern
S&P said, "During our prior review in August 2020, we applied a
front-loaded default pattern (55%/45%) for our first modeled
recession. For this review, we applied defaults evenly over a
four-year period during the first recession in recognition of the
financial support many governments provided to airlines and efforts
to rollout the vaccine, which have helped stem airline defaults. In
the second recession, we assume defaults to occur over a
30%/40%/20%/10% pattern."
Useful life
S&P assumed a 22-year useful life for most aircraft in the
portfolios given the continued uncertainty around fleet plans. For
some of the older aircraft, it assumed they will be sold at the end
of their current contractual lease.
Transaction Profile
S&P reviewed the November 2021 payment date report to run its cash
flow analysis for this review and for reporting the key portfolio
and liability statistics below.
Portfolio
The appraisers for the portfolio are Aviation Specialists Group
Inc., Ascend Flight Global Consultancy, and AVITAS Inc. The values
we use for our analysis and cash flow modeling purposes is the
lower of mean and median (LMM) of the half-life base values
provided as of June 2021. The LMM value is further depreciated
using our aircraft-specific depreciation assumptions and 50% of
S&P's 'B' lease rate decline stress, from the appraisal date to the
current month.
The portfolio contains 27 aircraft manufactured between 1998 and
2015, with a weighted average age (by LMM) of approximately 11
years. Eight of the 13 off-lease aircraft are 15 years or older.
Three of the current off-lease aircraft are A330 widebodies.
Although these are younger aircraft, it may still be challenging to
re-lease them under the current environment, as the long-haul
segment is still under stress. The weighted average remaining term
of the aircraft on lease is approximately four years. The servicer
indicated that they are actively working on executing a suitable
plan (part-out or remarketing) based on the type and age of each of
the off-lease aircraft. The pace and economics of the execution may
vary under the current market conditions, which puts additional
stress on the liabilities.
Table 2
Portfolio
ECAF I LTD.
DEC. 2021 AUG. 2020
No. of aircraft 27 28
Current off-lease (no.) 13 5
No. of lessees 12 20
Narrow-bodies/wide-bodies 59.6/40.41 58.1/41.9
LMM at appraisal (mil. $) 595.31 (i) 685.68 (ii)
LMM as modeled (mil. $) 533.15 (iii) 685.68 (ii)
Utilization (%) 55.29 97.37
DSCR (x) 0.29 0.94
(i)Lower of mean and median of half-life base values as of June
2021.
(ii)Lower of mean and median of half-life base values as of June
2020.
(iii)In Dec. 2021, values were calculated as depreciated LMM minus
S&P Global Ratings' starting value haircut (depreciation + 50% of
'B' lease rate decline stress).
LMM--Lower of mean and median.
DSCR--Debt service coverage ratio.
Liabilities
All the notes are current on their interest payments. The notes
benefit from a liquidity facility, which covers nine months'
interest on the class A and B-1 notes. Currently, there has been no
drawings under the facility. While the notes have received
substantial paydowns since August 2020, they remain significantly
behind on their targeted scheduled principal amount.
Table 3
Liabilities
ECAF I LTD.
A-1 A-2 B-1
Aug. 2020 balance (mil. $) 103.945 463.457 88.204
Dec. 2021 balance (mil. 61.189 447.696 85.204
Paydowns (mil. $) 42.756 15.761 3.000
Aug. 2020 LTV (%)(i) 83.51 83.51 96.49
Dec. 2021 LTV (%)(ii) 95.00 95.00 102.22
Unpaid scheduled
principal amount (mil. $) 32.77 N/A 14.55
(i)Used June 2020 LMM as starting value and depreciated it further
based on our assumptions through August 2020.
(ii)Dec. 2021 values were calculated as depreciated LMM minus S&P
Global Ratings' starting value haircut (depreciation + 50% of 'B'
lease rate decline stress).
LTV--Loan-to-value.
LMM--Lower of mean and median.
Environmental, Social, And Governance (ESG) Considerations
ESG factor relevant to the rating action:
-- Health and safety
In S&P's view, the transaction has material exposure to
environmental and social credit factors.
S&P said, "Under the environmental credit factors, we consider the
additional costs airlines who lease the aircraft may face, or
reduced aircraft values and lease rates, due to increasing
regulation of greenhouse gas emissions. Although aviation produces
a small portion (less than 3% currently) of global transport
emissions, they are increasing and are difficult to reduce.
"Under the social credit factors, we believe that planes are a high
profile target for terrorism and international routes can be
disrupted by war. Health concerns, such as the COVID-19 pandemic,
has dramatically reduced air traffic, revenue, and earnings.
Airlines carry insurance for potential liabilities, though
particularly catastrophic attacks may exhaust their coverage and
require a government backstop. Human capital management represents
another exposure because many airlines are heavily unionized and
strikes can be very costly and disruptive. Safety is also a risk
because airplane accidents are highly visible and deadly (albeit
rare statistically, and aircraft value is typically covered by
insurance).
"We have generally accounted for this risk by applying stresses to
the re-lease rates and residual values upon sale of the aircraft.
We assign aircraft-specific depreciation rates along with
aircraft-specific technological and liquidity scores that determine
the stress to re-lease rates and residual values. Our modelled
recessionary periods and the default rates applied during such
periods generally capture the impact on an airline's credit
quality.
"The structural features such as the deleveraging of notes under
events of stress determined through trigger events, and the
availability of a liquidity facility that covers nine months'
interest on the notes, could generally protect the notes from an
unexpected reduction in lease income and liquidation value due to
the environmental and social credit factors.
S&P Global Ratings believes the omicron variant is a stark reminder
that the COVID-19 pandemic is far from over. Uncertainty still
surrounds its transmissibility, severity, and the effectiveness of
existing vaccines against it. S&P said, "Early evidence points
toward faster transmissibility, which has led many countries to
reimpose social distancing measures and international travel
restrictions. Over coming weeks, we expect additional evidence and
testing will show the extent of the danger it poses to enable us to
make a more informed assessment of the risks to credit. In our
view, the emergence of the omicron variant shows once again that
more coordinated and decisive efforts are needed to vaccinate the
world's population to prevent the emergence of new, more dangerous
variants."
S&P will continue to review whether the ratings assigned are
consistent with the credit enhancement available to support the
notes.
Ratings Lowered
ECAF I Ltd.
Class A-1: to 'B- (sf)' from 'BB- (sf)'
Class A-2: to 'B- (sf)' from 'B+ (sf)'
Class B-1: to 'CCC+ (sf)' from 'B- (sf)'
ELEVATION CLO 2021-15: Moody's Rates $20MM Class E-R Notes 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Elevation CLO 2021-15, Ltd. (the "Issuer" or
"Elevation CLO 2021-15").
Moody's rating action is as follows:
US$4,000,000 Class X-R Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$240,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$20,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$42,600,000 Class B-R Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$20,000,000 Class C-R Secured Deferrable Floating Rate Notes due
2035, Assigned A2 (sf)
US$25,400,000 Class D-R Secured Deferrable Floating Rate Notes due
2035, Assigned Baa3 (sf)
US$20,000,000 Class E-R Secured Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above 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.
Elevation CLO 2021-15 is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second-lien loans, unsecured
loans, first-lien last-out loans and permitted non-loan assets. The
portfolio is approximately 90% ramped as of the closing date.
ArrowMark Colorado Holdings 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 one class 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2928
Weighted Average Spread (WAS): 3.60%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.09 years
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.
FANNIE MAE 2021-R03: S&P Assigns BB (sf) Rating on Cl. 1B-1 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fannie Mae Connecticut
Avenue Securities Trust 2021-R03's (CAS 2021-R03) notes.
The note issuance is an RMBS transaction in which the payments are
determined by a reference pool of residential mortgage loans, deeds
of trust, or similar security instruments encumbering mortgaged
properties acquired by Fannie Mae.
The ratings assigned to Fannie Mae CAS 2021-R03's notes reflect
S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The REMIC structure, which reduces the counterparty exposure to
Fannie Mae for periodic principal and interest payments, but also
pledges the support of Fannie Mae (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 (QC)
processes Fannie Mae uses in conjunction with the underlying
representations and warranties (R&Ws) framework; and
-- The further 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.
Ratings Assigned
Fannie Mae Connecticut Avenue Securities Trust 2021-R03
CLASS RATING AMOUNT ($)
1A-H(i) NR 33,739,271,715
1M-1 A (sf) 264,348,000
1M-1H(i) NR 13,914,034
1M-2A(ii) BBB+ (sf) 104,638,000
1M-AH(i) NR 5,507,389
1M-2B(ii) BBB+ (sf) 104,638,000
1M-BH(i) NR 5,507,389
1M-2C(ii) BBB (sf) 104,638,000
1M-CH(i) NR 5,507,389
1M-2(ii) BBB (sf) 313,914,000
1B-1A(ii) BB+ (sf) 74,348,000
1B-AH(i) NR 3,913,197
1B-1B(ii) BB (sf) 74,348,000
1B-BH(i) NR 3,913,197
1B-1(ii) BB (sf) 148,696,000
1B-2 NR 181,739,000
1B-2H(i) NR 9,566,149
1B-3H(i)(iii) NR 86,956,886
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The holders of the class 1M-2 notes may exchange all or part of
that class for proportionate interests in the class 1M-2A, class
1M-2B, and class 1M-2C notes, and vice versa. The holders of the
class 1B-1 notes may exchange all or part of that class for
proportionate interests in the class 1B-1A and class 1B-1B notes,
and vice versa.
(iii)For the purposes of calculating modification gain or
modification loss amounts, class 1B-3H is deemed to bear interest
at SOFR plus 15%.
NR--Not rated.
RCR Exchangeable Classes(i)
Fannie Mae Connecticut Avenue Securities Trust 2021-R03
RCR NOTE RATING INTEREST TYPE AMOUNT (MIL. $)
1M-2 BBB (sf) Floating 313.914
1E-A1 BBB+ (sf) Floating 104.638
1A-I1 BBB+ (sf) Fixed/IO 104.638
1E-A2 BBB+ (sf) Floating 104.638
1A-I2 BBB+ (sf) Fixed/IO 104.638
1E-A3 BBB+ (sf) Floating 104.638
1A-I3 BBB+ (sf) Fixed/IO 104.638
1E-A4 BBB+ (sf) Floating 104.638
1A-I4 BBB+ (sf) Fixed/IO 104.638
1E-B1 BBB+ (sf) Floating 104.638
1B-I1 BBB+ (sf) Fixed/IO 104.638
1E-B2 BBB+ (sf) Floating 104.638
1B-I2 BBB+ (sf) Fixed/IO 104.638
1E-B3 BBB+ (sf) Floating 104.638
1B-I3 BBB+ (sf) Fixed/IO 104.638
1E-B4 BBB+ (sf) Floating 104.638
1B-I4 BBB+ (sf) Fixed/IO 104.638
1E-C1 BBB+ (sf) Floating 104.638
1C-I1 BBB (sf) Fixed/IO 104.638
1E-C2 BBB (sf) Floating 104.638
1C-I2 BBB (sf) Fixed/IO 104.638
1E-C3 BBB (sf) Floating 104.638
1C-I3 BBB (sf) Fixed/IO 104.638
1E-C4 BBB (sf) Floating 104.638
1C-I4 BBB (sf) Fixed/IO 104.638
1E-D1 BBB+ (sf) Floating 209.276
1E-D2 BBB+ (sf) Floating 209.276
1E-D3 BBB+ (sf) Floating 209.276
1E-D4 BBB+ (sf) Floating 209.276
1E-D5 BBB+ (sf) Floating 209.276
1E-F1 BBB (sf) Floating 209.276
1E-F2 BBB (sf) Floating 209.276
1E-F3 BBB (sf) Floating 209.276
1E-F4 BBB (sf) Floating 209.276
1E-F5 BBB (sf) Floating 209.276
1-X1 BBB+ (sf) Fixed/IO 209.276
1-X2 BBB+ (sf) Fixed/IO 209.276
1-X3 BBB+ (sf) Fixed/IO 209.276
1-X4 BBB+ (sf) Fixed/IO 209.276
1-Y1 BBB (sf) Fixed/IO 209.276
1-Y2 BBB (sf) Fixed/IO 209.276
1-Y3 BBB (sf) Fixed/IO 209.276
1-Y4 BBB (sf) Fixed/IO 209.276
1-J1 BBB (sf) Floating 104.638
1-J2 BBB (sf) Floating 104.638
1-J3 BBB (sf) Floating 104.638
1-J4 BBB (sf) Floating 104.638
1-K1 BBB (sf) Floating 209.276
1-K2 BBB (sf) Floating 209.276
1-K3 BBB (sf) Floating 209.276
1-K4 BBB (sf) Floating 209.276
1M-2Y BBB (sf) Floating 313.914
1M-2X BBB (sf) Fixed/IO 313.914
1B-1 BB (sf) Floating 148.696
1B-1Y BB (sf) Floating 148.696
1B-1X BB (sf) Fixed/IO 148.696
1B-2Y NR Floating 181.739
1B-2X NR Fixed/IO 181.739
(i)Refer to the offering documents for more detail on possible
combinations.
RCR--Related combinable and recombinable notes.
NR--Not rated.
GCAT 2021-NQM7: S&P Assigns B (sf) Rating on Class B-2 Certs
------------------------------------------------------------
S&P Global Ratings assigned its ratings to GCAT 2021-NQM7 Trust's
mortgage pass-through certificates.
The certificate issuance is an RMBS transaction backed by
first-lien, fixed- and adjustable-rate, fully amortizing, and
interest-only residential mortgage loans primarily secured by
single-family residential properties, planned-unit developments,
condominiums, two- to four-family residential properties,
townhouses, and cooperatives to both prime and nonprime borrowers.
The pool has 632 loans, which are either nonqualified or ATR-exempt
mortgage loans.
S&P said, "Since we assigned preliminary ratings and published our
presale report on Dec. 6, 2021, the issuer removed 22 loans from
the pool and S&P Global Ratings provided updated loss coverage
feedback. As a result, we analyzed an updated structure on the
pool, and the credit support remained sufficient on all classes for
us to assign final ratings that are unchanged from preliminary
ratings. In addition, because of the dropped loans, only one
seller, MAT II LLC, remains in this transaction."
The ratings reflect S&P's view of:
-- The asset pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty framework;
-- The mortgage aggregator, Blue River Mortgage II LLC; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and the liquidity
available in the transaction.
Ratings Assigned(i)
GCAT 2021-NQM7 Trust
Class A-1, $213,216,000: AAA (sf)
Class A-1IO, $213,216,000(ii): AAA (sf)
Class A-1B, $213,216,000: AAA (sf)
Class A-1X, $213,216,000(iii): AAA (sf)
Class A-2, $12,558,000: AA (sf)
Class A-3, $14,672,000: A (sf)
Class M-1, $9,121,000: BBB (sf)
Class B-1, $6,874,000; BB (sf)
Class B-2, $4,230,000: B (sf)
Class B-3, $3,701,474: Not rated
Class A-IO-S, Notional(iv): Not rated
Class X, Notional(iv): Not rated
Class R, Not applicable: Not rated
(i)The ratings address the ultimate payment of interest and
principal.
(ii)Class A-1IO will have a notional balance amount equal to the
balance of class A-1.
(iii)Class A-1X will have a notional amount equal to the lesser of
the balance of class A-1 immediately before that distribution date
and the notional amount set forth on a schedule for the related
accrual period. After the 38th distribution date, the notional
amount of the A-1X certificates will be zero.
(iv)The notional amount equals the aggregate principal balance of
the loans.
GENERATE CLO 6: Moody's Rates $21.6MM Class E-R Notes 'Ba3'
-----------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
CLO refinancing notes (the "Refinancing Notes") issued by Generate
CLO 6 Ltd. (the "Issuer").
Moody's rating action is as follows:
US248,000,000 Class A-1-R Floating Rate Notes Due 2035, Assigned
Aaa (sf)
US12,000,000 Class A-2-R Floating Rate Notes Due 2035, Assigned Aaa
(sf)
US44,000,000 Class B-R Floating Rate Notes Due 2035, Assigned Aa2
(sf)
US$18,400,000 Class C-R Deferrable Floating Rate Notes Due 2035,
Assigned A2 (sf)
US$24,000,000 Class D-R Deferrable Floating Rate Notes Due 2035,
Assigned Baa3 (sf)
US$21,600,000 Class E-R Deferrable Floating Rate Notes Due 2035,
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, cash, and
eligible investments, and up to 10% of the portfolio may consist of
not senior secured loans.
Generate Advisors, 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 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; 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 2021.
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:
Portfolio par: $400,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2963
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.8%
Weighted Average Life (WAL): 8.08 years
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.
GOLUB CAPITAL 58(B): Moody's Rates Class E Notes 'Ba3'
------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued and one class of loans incurred by Golub Capital
Partners CLO 58(B), Ltd. (the "Issuer" or "Golub 58(B)").
Moody's rating action is as follows:
US$179,000,000 Class A-1 Loans due 2035, Assigned Aaa (sf)
Up to U.S.$246,000,000 Class A-1 Senior Secured Floating Rate
Notes due 2035 (the "Class A-1 Notes"), Assigned Aaa (sf)
US$17,000,000 Class E Secured Deferrable Floating Rate Notes due
2035 (the "Class E Notes"), Assigned Ba3 (sf)
The Class A-1 Loans, the Class A-1 Notes, and the Class E Notes are
referred to herein, collectively, as the "Rated Debt."
On the closing date, the Class A-1 Loans and the Class A-1 Notes
have a principal balance of $179,000,000 and $67,000,000,
respectively. At any time, the Class A-1 Loans may be converted in
whole or in part to Class A-1 Notes, thereby decreasing the
principal balance of the Class A-1 Loans and increasing, by the
corresponding amount, the principal balance of the Class A-1 Notes.
The aggregate principal balance of the Class A-1 Loans and Class
A-1 Notes will not exceed $246,000,000, less the amount of any
principal repayments.
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.
Golub 58(B) is a managed cash flow CLO. The issued debt will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10% of the portfolio may consist of second lien loans and senior
unsecured loans. The portfolio is required to be at least 90%
ramped as of the closing date.
OPAL BSL 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 Debt, the Issuer issued four other classes
of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes and loans in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3190
Weighted Average Spread (WAS): 3.4%
Weighted Average Coupon (WAC): 5.0%
Weighted Average Recovery Rate (WARR): 48%
Weighted Average Life (WAL): 9.1 years
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
GS MORTGAGE 2013-GC13: Moody's Cuts Class C Debt Rating to B1
-------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
and downgraded the ratings on five classes in GS Mortgage
Securities Trust 2013-GC13 ("GSMS 2013-GC13"), Commercial Mortgage
Pass-Through Certificates, Series 2013-GC13 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Mar 9, 2021 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Mar 9, 2021 Affirmed Aaa
(sf)
Cl. A-5, Affirmed Aaa (sf); previously on Mar 9, 2021 Affirmed Aaa
(sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Mar 9, 2021 Affirmed Aaa
(sf)
Cl. A-S, Downgraded to Aa2 (sf); previously on Mar 9, 2021 Affirmed
Aaa (sf)
Cl. B, Downgraded to Baa3 (sf); previously on Mar 9, 2021
Downgraded to Baa1 (sf)
Cl. C, Downgraded to B1 (sf); previously on Mar 9, 2021 Downgraded
to Ba2 (sf)
Cl. PEZ**, Downgraded to Ba1 (sf); previously on Mar 9, 2021
Downgraded to Baa2 (sf)
Cl. X-A*, Downgraded to Aa1 (sf); previously on Mar 9, 2021
Affirmed Aaa (sf)
*Reflects Interest-Only Class
*Reflects Exchangable Class
RATINGS RATIONALE
The ratings on four P&I classes were affirmed because of the credit
support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on three P&I classes were downgraded due to higher
realized and anticipated losses from specially serviced and
troubled loans. The two largest specially serviced loans, Mall St.
Matthews (11.7% of the pool) and Crossroads Center (7.9% of the
pool), are secured by regional mall loans that have experienced
declining net operating income (NOI) in 2020 and were impacted by
the coronavirus pandemic. The third largest specially serviced
loan, the Holiday Inn -- 6th Avenue (6.4% of the pool), is secured
by a limited service hotel in Manhattan in which the property did
not generate enough cash flow to cover operating expenses for much
of 2020.
The rating on one IO class was downgraded based on the credit
quality of the referenced classes.
The rating on class PEZ was downgraded due to the credit quality of
the referenced exchangeable classes.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of commercial real estate as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors,
including the rollout of vaccines, growing household consumption
and an accommodative central bank policy. However, specific sectors
and individual businesses will remain weakened by extended pandemic
related restrictions. Stress on commercial real estate properties
will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and
declines in foot traffic and sales at certain retail properties.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 15.2% of the
current pooled balance, compared to 12.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 12.1% of the
original pooled balance, compared to 10.3% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the December 15, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to $1.09 billion
from $1.33 billion at securitization. The certificates are
collateralized by 62 mortgage loans ranging in size from less than
1% to 14% of the pool, with the top ten loans (excluding
defeasance) constituting 58% of the pool. Twenty-two loans,
constituting 22.6% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 11, compared to a Herf of 13 at Moody's last
review.
Five loans, constituting 10.4% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Four loans, constituting 28% of the pool, are currently in special
servicing. All four of the specially serviced loans have
transferred to special servicing since March 2020.
The largest specially serviced loan is the Mall St. Matthews Loan
($128.4 million -- 11.7% of the pool), which represents a
pari-passu portion of a $163.2 million mortgage loan. The loan is
secured by a 670,376 square foot (SF) portion of a 1.02 million SF
super-regional mall located in Louisville, Kentucky. The property
is anchored by Dillard's, Dillard's Men & Home, and J.C. Penney,
with J.C. Penney included as part of the collateral. The property
is also anchored by a Dave & Busters that replaced a former Forever
21. The Oxmoor Center is the closest competition and targets a
slightly more affluent demographic. The collateral was 91% leased
as of September 2021, compared to 97% leased as of December 2018.
The loan transferred to special servicing in June 2020 as the
borrower was unable to refinance the loan prior to the loan
maturity date in June 2020. The appraised value as of August 2021
was $83 million, a 70% decline from the securitization appraised
value of $280 million. The loan has recognized an appraisal
reduction of 54%.
The second largest specially serviced loan is the Crossroads Center
Loan ($86.6 million -- 7.9% of the pool), which is secured by a
766,213 SF component of an 895,488 SF super-regional mall located
in Saint Cloud, Minnesota. The mall is anchored by JCPenney,
Macy's, Target, H&M, and Scheels All Sports. A former Sears space
was replaced by HomeGoods and DSW Shoes. The collateral was 87%
leased as of June 2020, compared to 81% as of December 2018 and 98%
as of December 2017. The loan transferred to special servicing due
to imminent default in relation to the coronavirus outbreak. The
loan is 30+ days delinquent, and the borrower is unwilling to
inject additional funds into the loan but is willing to manage the
property. The property was appraised at $52.7 million in November
2020 compared to $165 million at securitization. The loan has
recognized an appraisal reduction of 46%. A cash lock box is being
implemented. The borrower is remitting all excess property level
cash flow.
The third largest specially serviced loan is the Holiday Inn -- 6th
Avenue Loan ($70.8 million -- 6.5% of the pool), which is secured
by a 226 room hotel located on West 26th Street between 6th and 7th
avenues in New York, New York. The average room size is 250 SF and
the hotel features a business center, fitness center, and food and
beverage services. Property performance declined in 2019 with
year-end NOI 23% lower than in 2018. In 2019, the debt service
coverage ratio (DSCR) had declined to 1.13X from 1.78X. The
property did not generate enough cash flow to cover operating
expenses for 2020. The loan transferred to special servicing in
January 2021 due to payment default and the loan is now 90+ days
delinquent.
Moody's has also assumed a high default probability for one poorly
performing loans, constituting less than 1% of the pool. Moody's
has estimated an aggregate loss of $135.6 million for the specially
serviced and troubled loans (a 44% expected loss on average).
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,
we make various adjustments to the MLTV. We adjust the MLTV for
each loan using a value that reflects capitalization (cap) rates
that are between our sustainable cap rates and market cap rates. We
also use an adjusted loan balance that reflects each loan's
amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 98% of the
pool, and full or partial year 2021 operating results for 88% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 98%, the same as at Moody's last
review. Moody's conduit component excludes loans with structured
credit assessments, defeased and CTL loans, and specially serviced
and troubled loans. Moody's net cash flow (NCF) reflects a weighted
average haircut of 11% to the most recently available net operating
income (NOI), excluding hotel properties that had significantly
depressed NOI in 2020. Moody's value reflects a weighted average
capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.75X and 1.13X,
respectively, compared to 1.72X and 1.11X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 24% of the pool balance. The
largest loan is the 11 West 42nd Street Loan ($150.0 million --
13.7% of the pool), which represents a pari-passu portion of a
$300.0 million mortgage loan. The loan is secured by a 33-story
office building located in the Grand Central submarket of
Manhattan, New York. The largest tenant, Michael Kors, has more
than doubled its presence at the property since securitization and
accounts for 28% of the net rentable area (NRA) with a lease
expiration in March 2025. The second largest tenant, CIT Group (22%
of NRA), renewed the majority of its space through May 2034. As of
June 2021, the property was 88% occupied compared to 90% in March
2019 and 91% in December 2017. The loan is interest-only through
its entire term. Moody's LTV and stressed DSCR are 96% and 0.95X,
respectively, the same as at the last review.
The second largest loan is the Plaza America Towers III & IV Loan
($86.9 million -- 7.9% of the pool), which is secured by two office
towers located in Reston, Virginia approximately 20 miles west of
Washington, DC. The property was 85% leased as of September 2021,
compared to 95% at securitization. Moody's LTV and stressed DSCR
are 124% and 0.89X, respectively, compared to 127% and 0.88X at the
last review.
The third largest loan is the Pinnacle in Kierland Phase IV Loan
($30.0 million -- 2.7% of the pool), which is secured by a
six-story class A office building located in Scottsdale, Arizona.
The property was 97% leased as of June 2021, compared to 93% at
securitization. Two of the top three tenants have lease expirations
in 2022. Moody's LTV and stressed DSCR are 122% and 0.86X,
respectively, compared to 87% and 1.21X at the last review.
GS MORTGAGE 2021-PJ11: Moody's Rates Class B-5 Debt 'B3'
--------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 38
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust 2021-PJ11. The ratings range
from Aaa (sf) to B3 (sf).
GS Mortgage-Backed Securities Trust 2021-PJ11 (GSMBS 2021-PJ11) is
the eleventh prime jumbo transaction in 2021 issued by Goldman
Sachs Mortgage Company (GSMC), the sponsor and the primary mortgage
loan seller. Overall, pool strengths include the high credit
quality of the underlying borrowers, indicated by high FICO scores,
strong reserves for prime jumbo borrowers, mortgage loans with
fixed interest rates and no interest-only loans. As of the cut-off
date, none of the mortgage loans are subject to a COVID-19 related
forbearance plan.
GSMC is a wholly owned subsidiary of Goldman Sachs Bank USA and
Goldman Sachs. The mortgage loans for this transaction were
acquired by GSMC, the sponsor and the primary mortgage loan seller
(approximately 94.6% by UPB), and MCLP Asset Company, Inc. (MCLP)
(approximately 5.4% by UPB), the mortgage loan sellers, from
certain of the originators or the aggregator, MAXEX Clearing LLC
(which aggregated 3.5% of the mortgage loans by UPB).
NewRez LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint) will
service 91.6% (by loan balance) and United Wholesale Mortgage, LLC
(UWM) will service 8.4% (by loan balance) of the mortgage loans on
behalf of the issuing entity which will be subserviced by Cenlar
FSB (Cenlar), as subservicer. Computershare Trust Company, N.A.
(Computershare) will be the master servicer for this transaction.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. In addition, Moody's
adjusted itslosses based on qualitative attributes, including
origination quality, the strength of the R&W framework and
third-party review (TPR) results.
Distributions of principal and interest and loss allocations are
based on a typical shifting interest structure with a five-year
lockout period that benefits from a senior and subordination floor.
Moody's coded the cash flow to each of the certificate classes
using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2021-PJ11
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Definitive Rating Assigned Aa1 (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-15-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-17-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-18-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-3*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-5*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-9*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-13*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating 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
0.51%, in a baseline scenario-median is 0.32% and reaches 4.05% at
stress level consistent with its Aaa rating.
Moody's said, "We base our ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, our assessments of the origination quality and
servicing arrangement, strength of the TPR and the R&W framework of
the transaction."
Collateral Description
As of the November 1, 2021 cut-off date, the aggregate collateral
pool comprises 493 (99.9% by UPB) prime jumbo (non-conforming) and
two (0.1% by UPB) conforming, 30-year loan-term, fully-amortizing
fixed-rate mortgage loans, none of which have the benefit of
primary mortgage guaranty insurance, with an aggregate stated
principal balance (UPB) $535,258,290 and a weighted average (WA)
mortgage rate of 3.1%. The WA current FICO score of the borrowers
in the pool is 772. The WA Original LTV ratio of the mortgage pool
is 71.2%, which is in line with GSMBS 2021-PJ10 and also with other
prime jumbo transactions. Top 10 MSAs comprise 61.5% of the pool,
by UPB. The high geographic concentration in high cost MSAs is
reflected in the high average balance of the pool ($1,081,330).
All the mortgage loans in the aggregate pool are QM, with the prime
jumbo non-conforming mortgage loans meeting the requirements of the
QM-Safe Harbor rule (Appendix Q) or the new General QM rule (see
below), and the GSE eligible mortgage loans meeting the temporary
QM criteria applicable to loans underwritten in accordance with GSE
guidelines. The other characteristics of the mortgage loans in the
pool are generally comparable to that of GSMBS 2021-PJ9 and recent
prime jumbo transactions.
"A portion of the loans purchased from various sellers into the
pool were originated pursuant to the new general QM rule (82.9% of
the pool by loan balance). The majority of these loans are UWM
loans underwritten to GS AUS underwriting guidelines. The
third-party reviewer verified that the loans' APRs met the QM
rule's thresholds. Furthermore, these loans were underwritten and
documented pursuant to the QM rule's verification safe harbor via a
mix of the Fannie Mae Single Family Selling Guide, the Freddie Mac
Single-Family Seller/Servicer Guide, and applicable program
overlays. As part of the origination quality review and in
consideration of the detailed loan-level third-party diligence
reports, which included supplemental information with the specific
documentation received for each loan, we concluded that these loans
were fully documented loans, and that the underwriting of the loans
is acceptable. Therefore, we ran these loans as "full
documentation" loans in our MILAN model, but increased our Aaa and
expected loss assumptions due to the lack of performance, track
records and substantial overlays of the AUS-underwritten loans.
Moody's said.
Aggregator/Origination Quality
GSMC is the loan aggregator and the primary mortgage seller for the
transaction. GSMC's general partner is Goldman Sachs Real Estate
Funding Corp. and its limited partner is Goldman Sachs Bank USA.
Goldman Sachs Real Estate Funding Corp. is a wholly owned
subsidiary of Goldman Sachs Bank USA. GSMC is an affiliate of
Goldman Sachs & Co. LLC. GSMC is overseen by the mortgage capital
markets group within Goldman Sachs. Senior management averages 16
years of mortgage experience and 15 years of Goldman Sachs tenure.
The mortgage loans for this transaction were acquired by GSMC, the
sponsor and the primary mortgage loan seller (94.6% by UPB), and
MCLP Asset Company, Inc. (MCLP) (5.4% by UPB), the mortgage loan
sellers, from certain of the originators or the aggregator, MAXEX
Clearing LLC (which aggregated 3.5% of the mortgage loans by UPB).
The mortgage loans in the pool are underwritten to either GSMC's
underwriting guidelines, or seller's applicable guidelines. The
mortgage loan sellers do not originate any mortgage loans,
including the mortgage loans included in the mortgage pool.
Instead, the mortgage loan sellers acquired the mortgage loans
pursuant to contracts with the originators or the aggregator.
Moody's said, "Overall, we consider GSMC's aggregation platform to
be comparable to that of peer aggregators and therefore did not
apply a separate loss-level adjustment for aggregation quality. In
addition to reviewing GSMC's aggregation quality, we have also
reviewed the origination quality of each of the originators which
contributed at least approximately 10% of the mortgage loans (by
UPB) to the transaction. For these originators, we reviewed their
underwriting guidelines, performance history, and quality control
and audit processes and procedures (to the extent available,
respectively). Approximately 41.4% and 11.2% of the mortgage loans,
by a UPB as of the cut-off date, were originated by UWM and
Guaranteed Rate affiliates (including Guaranteed Rate, Inc. (GRI)
and Guaranteed Rate Affinity, LLC (GRA)) respectively. No other
originator or group of affiliated originators originated more than
approximately 10% of the mortgage loans in the aggregate. We made
an adjustment to our losses for loans originated by UWM primarily
due to the fact that underwriting prime jumbo loans mainly through
DU is fairly new and no performance history has been provided to
Moody's on these types of loans. More time is needed to assess
UWM's ability to consistently produce high-quality prime jumbo
residential mortgage loans under this program."
Servicing Arrangement
Moody's added, "We consider the overall servicing arrangement for
this pool to be adequate, and as a result we did not make any
adjustments to our base case and Aaa stress loss assumptions based
on the servicing arrangement."
Shellpoint and UWM will act as the servicer's for this transaction.
Shellpoint will service 91.6% of the pool by balance and UWM will
service 8.4% of the pool by balance. Shellpoint is an approved
servicer in good standing with Ginnie Mae, Fannie Mae and Freddie
Mac. Shellpoint's primary servicing location is located in
Greenville, South Carolina. Shellpoint services residential
mortgage assets for investors that include banks, financial
services companies, GSEs and government agencies. Furthermore,
Computershare as master servicer.
Computershare is a national banking association and a wholly-owned
subsidiary of Computershare Ltd. (Baa2, long term rating), an
Australian financial services company with over $5 billion (USD) in
assets as of June 30, 2021. Computershare Ltd. and its affiliates
have been engaging in financial service activities, including stock
transfer related services since 1997, and corporate trust related
services since 2000.
Third-party Review
The transaction benefits from TPR on 100% of the mortgage 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.
Similar to GSMBS 2021-PJ10, a relatively high number of the B
graded exceptions were related to title insurance, compared to
those in prime transactions Moody's recently rated. While many of
these may be rectified in the future by the servicer or by
subsequent documentation, there is a risk that these exceptions
could impair the deal's insurance coverage if not rectified and
because the R&Ws specifically exclude these exceptions. Moody's
have considered this risk in itsanalysis.
Representations & Warranties
GSMBS 2021-PJ11's R&W framework is in line with that of prior GSMBS
transactions Moody's has rated where an independent reviewer is
named at closing, and costs and manner of review are clearly
outlined at issuance. 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 the R&W enforcement
mechanism. The loan-level R&Ws meet or exceed the baseline set of
credit-neutral R&Ws Moody's has 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 mortgage loans that become 120 days delinquent and those
that liquidate at a loss to determine if any of the R&Ws are
breached. There is a provision for binding arbitration in the event
of a dispute between the trust and the R&W provider concerning R&W
breaches.
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.
An investment-grade rated R&W provider lends substantial strength
to its R&Ws. Moody's analyzes the impact of less creditworthy R&W
providers case by case, in conjunction with other aspects of the
transaction. Here, because most of the R&W providers are unrated
and/or exhibit limited financial flexibility, Moody's applied an
adjustment to the mortgage loans for which these entities provided
R&Ws. In addition, a R&W breach will be deemed not to have occurred
if it arose as a result of a TPR exception disclosed in Appendix I
of the Private Placement Memorandum. There were a relatively high
number of B-grade exceptions in the TPR review, the disclosure of
which weakens the R&W framework.
Tail Risk and Locked Out Percentage
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 1.40% of the cut-off date pool
balance, and as subordination lock-out amount of 1.40% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to its
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.
HALSEYPOINT CLO 5: Moody's Rates $24.5MM Class E Notes 'Ba3'
------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by HalseyPoint CLO 5, Ltd. (the "Issuer" or
"HalseyPoint 5").
Moody's rating action is as follows:
US$305,000,000 Class A-1-A Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$5,000,000 Class A-1-B Senior Secured Fixed Rate Notes due 2035,
Assigned Aaa (sf)
US$15,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$55,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$21,000,000 Class C-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$3,500,000 Class C-2 Mezzanine Secured Deferrable Fixed Rate
Notes due 2035, Assigned A2 (sf)
US$31,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$24,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
HalseyPoint 5 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is approximately 100% ramped as of
the closing date.
HalseyPoint Asset 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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2922
Weighted Average Spread (WAS): 3.5%
Weighted Average Coupon (WAC): 5.0%
Weighted Average Recovery Rate (WARR): 47%
Weighted Average Life (WAL): 8.1 years
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.
HPS LOAN 2021-16: Moody's Rates $22MM Class E Notes 'Ba3'
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Moody's Investors Service has assigned ratings to six classes of
notes issued by HPS Loan Management 2021-16, Ltd. (the "Issuer" or
"HPS Loan Management 2021-16").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$5,000,000 Class A-2 Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$65,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$26,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$31,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$22,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
HPS Loan Management 2021-16 is a managed cash flow CLO. The issued
notes will be collateralized primarily by 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, and up to 10.0% of the portfolio may consist of
second-lien loans, first lien last out loans, unsecured loans, and
permitted non-loan assets. The portfolio is approximately 90%
ramped as of the closing date.
HPS Investment Partners, 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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2885
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.08 years
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.
JAMESTOWN CLO XVII: Moody's Gives Ba3 Rating to $19MM Class E Notes
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Moody's Investors Service has assigned ratings to six classes of
notes issued by Jamestown CLO XVII Ltd. (the "Issuer" or "Jamestown
XVII").
Moody's rating action is as follows:
US$224,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$34,000,000 Class B-1 Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$8,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2035,
Assigned Aa2 (sf)
US$17,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned A2 (sf)
US$19,950,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Baa3 (sf)
US$19,100,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Jamestown XVII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is approximately 92% ramped as of
the closing date.
Investcorp Credit Management US 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 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: 75
Weighted Average Rating Factor (WARF): 2879
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 9 years
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.
JP MORGAN 2021-15: Moody's Assigns (P)B3 Rating to Class B-5 Debt
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Moody's Investors Service has assigned provisional ratings to 60
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust (JPMMT) 2021-15. The ratings range from
(P)Aaa (sf) to (P)B3 (sf).
JPMMT 2021-15 is the fifteenth prime jumbo transaction in 2021
issued by J.P. Morgan Mortgage Acquisition Corporation (JPMMAC).
"The credit characteristics of the mortgage loans backing this
transaction are similar to both recent JPMMT transactions and other
prime jumbo issuers that we have rated. We consider the overall
servicing framework for this pool to be adequate given the
servicing arrangement of the servicers, as well as the presence of
an experienced master servicer," Moody's said.
JPMMT 2021-15 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. "We coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool. In
coding the cash flow, we took into account the step-up incentive
servicing fee structure.
In this transaction, the Class A-11, A-11-A and A-11-B 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 bases its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
its review 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 2021-15
Cl.A-1, Assigned (P)Aaa (sf)
Cl.A-1-A, Assigned (P)Aaa (sf)
Cl.A-2, Assigned (P)Aaa (sf)
Cl.A-2-A, Assigned (P)Aaa (sf)
Cl.A-3, Assigned (P)Aaa (sf)
Cl.A-3-A, Assigned (P)Aaa (sf)
Cl.A-3-X*, Assigned (P)Aaa (sf)
Cl.A-4, Assigned (P)Aaa (sf)
Cl.A-4-A, Assigned (P)Aaa (sf)
Cl.A-4-X*, Assigned (P)Aaa (sf)
Cl.A-5, Assigned (P)Aaa (sf)
Cl.A-5-A, Assigned (P)Aaa (sf)
Cl.A-5-B, Assigned (P)Aaa (sf)
Cl.A-5-X*, Assigned (P)Aaa (sf)
Cl.A-6, Assigned (P)Aaa (sf)
Cl.A-6-A, Assigned (P)Aaa (sf)
Cl.A-6-X*, Assigned (P)Aaa (sf)
Cl.A-7, Assigned (P)Aaa (sf)
Cl.A-7-A, Assigned (P)Aaa (sf)
Cl.A-7-B, Assigned (P)Aaa (sf)
Cl.A-7-X*, Assigned (P)Aaa (sf)
Cl.A-8, Assigned (P)Aaa (sf)
Cl.A-8-A, Assigned (P)Aaa (sf)
Cl.A-8-X*, Assigned (P)Aaa (sf)
Cl.A-9, Assigned (P)Aaa (sf)
Cl.A-9-A, Assigned (P)Aaa (sf)
Cl.A-9-X*, Assigned (P)Aaa (sf)
Cl.A-10, Assigned (P)Aaa (sf)
Cl.A-10-A, Assigned (P)Aaa (sf)
Cl.A-10-X*, Assigned (P)Aaa (sf)
Cl.A-11, Assigned (P)Aaa (sf)
Cl.A-11-X*, Assigned (P)Aaa (sf)
Cl.A-11-A, Assigned (P)Aaa (sf)
Cl.A-11-AI*, Assigned (P)Aaa (sf)
Cl.A-11-B, Assigned (P)Aaa (sf)
Cl.A-11-BI*, Assigned (P)Aaa (sf)
Cl.A-12, Assigned (P)Aaa (sf)
Cl.A-13, Assigned (P)Aaa (sf)
Cl.A-13-A, Assigned (P)Aaa (sf)
Cl.A-14, Assigned (P)Aa1 (sf)
Cl.A-15, Assigned (P)Aa1 (sf)
Cl.A-15-A, Assigned (P)Aa1 (sf)
Cl.A-15-B, Assigned (P)Aa1 (sf)
Cl.A-15-C, Assigned (P)Aa1 (sf)
Cl.A-16, Assigned (P)Aaa (sf)
Cl.A-17, Assigned (P)Aaa (sf)
Cl.A-X-1*, Assigned (P)Aaa (sf)
Cl.A-X-2*, Assigned (P)Aaa (sf)
Cl.A-X-3*, Assigned (P)Aaa (sf)
Cl.A-X-3A*, Assigned (P)Aaa (sf)
Cl.A-X-4*, Assigned (P)Aa1 (sf)
Cl.B-1, Assigned (P)Aa3 (sf)
Cl.B-1-A, Assigned (P)Aa3 (sf)
Cl.B-1-X*, Assigned (P)Aa3 (sf)
Cl.B-2, Assigned (P)A3 (sf)
Cl.B-2-A, Assigned (P)A3 (sf)
Cl.B-2-X*, Assigned (P)A3 (sf)
Cl.B-3, Assigned (P)Baa3 (sf)
Cl.B-4, Assigned (P)Ba3 (sf)
Cl.B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Moody's expected loss for this pool in a baseline scenario-mean is
0.67%, in a baseline scenario-median is 0.46% and reaches 4.82% at
a stress level consistent with our Aaa ratings.
Collateral Description
We assessed the collateral pool as of December 1, 2021, the cut-off
date. The deal will be backed by 1,005 fully amortizing fixed-rate
mortgage loans with an aggregate unpaid principal balance (UPB) of
$1,067,671,101 and an original term to maturity of up to 30 years.
The pool consists of prime jumbo non-conforming (approximately
97.2% by UPB) and GSE-eligible (conforming) (approximately 2.8% by
UPB) mortgage loans. The GSE-eligible loans were underwritten
pursuant to GSE guidelines and were approved by Fannie Mae's
Desktop Underwriter Program or Freddie Mac's Loan Product Advisor
Program.
All of the mortgage loans were underwritten to the Qualified
Mortgages (QM) standard. Approximately 3.9% of the mortgage loans
by UPB are designated as safe harbor QM and meet Appendix Q to the
QM rules, approximately 2.4% of the mortgage loans by UPB are
designated as Agency Safe Harbor loans, and 93.7% of the mortgage
loans by UPB are designated as Safe Harbor APOR loans, for which
mortgage loans are not underwritten to meet Appendix Q but satisfy
AUS with additional overlays of originators. As part of the
origination quality review and based on the documentation
information we received in the ASF tape, we concluded that all
loans were fully documented and therefore, we ran these loans as
"full documentation" loans in our MILAN model.
Similar to recently rated JPMMT transactions, the collateral pool
is of strong credit quality and includes borrowers with a weighted
average (WA) primary borrower FICO of 767, low loan-to-value ratios
(WA LTV 70.6%), high borrower monthly incomes (about $37,872) and
substantial liquid cash reserves (approximately $333,266), on a WA
basis, respectively. Approximately 49.2% of the mortgage loans (by
UPB) were originated in California which includes metropolitan
statistical areas (MSAs) Los Angeles (18.0% by UPB) and San
Francisco (9.1% by UPB). The high geographic concentration in
high-cost MSAs is reflected in the high average balance of the pool
($1,062,359). As of the cut-off date, none of the borrowers of the
mortgage loans have inquired about or requested forbearance plans
with the related servicer or have previously entered into a
COVID-19 related forbearance plan with the related servicer.
Aggregation/Origination Quality
We consider JPMMAC's aggregation platform to be adequate, and
therefore, we did not apply a separate loss-level adjustment for
aggregation quality. In addition to reviewing JPMMAC aggregation
quality, we have also reviewed the origination quality of
originator(s) contributing a significant percentage of the
collateral pool (above 10% by UPB).
United Wholesale Mortgage, LLC (UWM) and loanDepot.com,
LLC(loanDepot) originated approximately 70.4% and 18.0% of the
mortgage loans (by UPB) in the pool. The remaining originators each
account for less than 3.0% (by UPB) in the pool (11.6% by UPB in
the aggregate). Approximately 2.95% and 0.28% of the mortgage loans
(by UPB) were acquired by the JPMMAC from MAXEX Clearing LLC and
Verus Mortgage Trust 1A, 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.
We did not make an adjustment for GSE-eligible loans, since those
loans were underwritten in accordance with GSE guidelines. However,
we have increased our base case and Aaa loss expectations for
certain originators of non-conforming loans where we either (a) do
not have clear insight into the underwriting practices, quality
control and credit risk management or (b) concluded, post
origination review, that such originators' origination quality is
weaker than that of its peers.
Servicing Arrangement
We consider the overall servicing framework for this pool to be
adequate given the servicing arrangement of the servicers, as well
as the presence of an experienced master servicer, Nationstar
Mortgage LLC (Nationstar) (Nationstar Mortgage Holdings Inc.
corporate family rating B2).
United Shore Financial Services (subserviced by Cenlar FSB),
JPMorgan Chase Bank, National Association (JPMCB), loanDepot.com,
LLC (subserviced by Cenlar FSB), A&D Mortgage LLC and First
National Bank of Pennsylvania are the principal servicers in this
transaction and will service approximately 70.4%, 10.6%, 18.0%,
0.7% and 0.2% of loans (by UPB of the mortgage), respectively.
NewRez LLC f/k/a New Penn Financial, LLC d/b/a Shellpoint Mortgage
Servicing will act as interim servicer for the mortgage loans
serviced by JPMCB from the closing date until the servicing
transfer date, which is expected to occur on or about February 1,
2022 (but which may occur after such date).
The servicers are required to advance principal and interest (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. Similar to recent JPMMT transitions, the servicing fee
will be predominantly 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 (fixed fee framework servicers, which
will be paid a monthly flat servicing fee equal to one-twelfth of
0.25% of the remaining principal balance of the mortgage loans,
account for less than 1.00% of UPB).
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit, property valuation and data
integrity. 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.
R&W Framework
Our 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 2021-15's R&W
framework is in line with that of other JPMMT transactions we have
rated where an independent reviewer is named at closing, and costs
and manner of review are clearly outlined at issuance. Per our
principal methodology, the loan-level R&Ws meet or exceed the
baseline set of credit-neutral R&Ws we 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 make 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. In this
transaction, we've made adjustments to our base case and Aaa loss
expectations for 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. 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 credit support depletion
date (when 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.
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 0.75% of the cut-off date pool
balance, and as subordination lockout amount of 0.75% of the
cut-off date pool balance. We calculate the credit neutral floors
as shown in our principal 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 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.
JP MORGAN 2021-INV8: Moody's Gives (P)B3 Rating to Class B-5 Debt
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Moody's Investors Service has assigned provisional ratings to 21
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust (JPMMT) 2021-INV8. The ratings range
from (P)Aaa (sf) to (P)B3 (sf).
JPMMT 2021-INV8 is the eighth JPMMT transaction in 2021 backed by
100% investment property loans acquired by J.P. Morgan Mortgage
Acquisition Corporation (JPMMAC). JPMMT 2021-INV8 is a
securitization backed by 1,324 fixed rate, non-owner occupied
mortgage loans (designated for investment purposes by the
borrower), with an aggregate unpaid principal balance (UPB) of
approximately $510,419,662.
Four third-party review (TPR) firms verified the accuracy of the
loan level information. These firms conducted detailed credit,
property valuation, data accuracy and compliance reviews on 100.0%
of the mortgage loans in the collateral pool.
Moody's considers the overall servicing framework for this pool to
be adequate given the servicing arrangement which includes, among
other factors, the presence of a master servicer. Nationstar
Mortgage LLC (Nationstar) (Nationstar Mortgage Holdings Inc.
corporate family rating B2) will act as the master servicer.
Pentalpha Surveillance, LLC will be the representations and
warranties (R&W) breach reviewer.
JPMMT 2021-INV8 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. "We coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool. In
coding the cash flow, we took into account the step-up incentive
servicing fee structure," Moody's said.
Moody's bases its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
its 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-INV8
Cl.A-1, Assigned (P)Aaa (sf)
Cl.A-1-A, Assigned (P)Aaa (sf)
Cl.A-1-X*, Assigned (P)Aaa (sf)
Cl.A-2, Assigned (P)Aaa (sf)
Cl.A-2-A, Assigned (P)Aaa (sf)
Cl.A-2-X*, Assigned (P)Aaa (sf)
Cl.A-3, Assigned (P)Aaa (sf)
Cl.A-3-A, Assigned (P)Aaa (sf)
Cl.A-3-X*, Assigned (P)Aaa (sf)
Cl.A-4, Assigned (P)Aaa (sf)
Cl.A-4-A, Assigned (P)Aaa (sf)
Cl.A-4-X*, Assigned (P)Aaa (sf)
Cl.A-5, Assigned (P)Aa1 (sf)
Cl.A-5-A, Assigned (P)Aa1 (sf)
Cl.A-5-X*, Assigned (P)Aa1 (sf)
Cl.A-X-1*, Assigned (P)Aaa (sf)
Cl.B-1, Assigned (P)Aa3 (sf)
Cl.B-2, Assigned (P)A3 (sf)
Cl.B-3, Assigned (P)Baa3 (sf)
Cl.B-4, Assigned (P)Ba3 (sf)
Cl.B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's expected loss for
this pool in a baseline scenario-mean is 0.95%, in a baseline
scenario-median is 0.70%, and reaches 5.93% at a stress level
consistent with its Aaa ratings.
Collateral Description
Moody's assessed the collateral pool as of December 1, 2021, the
cut-off date. The deal will be backed by 1,324 fully amortizing
fixed-rate mortgage loans with an aggregate unpaid principal
balance of approximately $510,419,662 and an original term to
maturity of up to 30 years. The pool consists of approximately
75.9% (by UPB) conforming mortgage loans and approximately 24.1%
(by UPB) non-conforming mortgage loans. The GSE-eligible loans were
underwritten pursuant to GSE guidelines and were approved by
DU/LP.
Overall, the pool is of strong credit quality and includes
borrowers with high FICO scores (weighted average primary borrower
FICO of 770) and low loan-to-value ratios (WA CLTV 63.8%). The
weighted average borrower total monthly income is $23,734 with an
weighted average of $357,419 cash reserves. Approximately 49.5% of
the mortgage loans (by UPB) were originated in California followed
by Florida (5.9% by UPB) and New York (4.5% by UPB). The high
geographic concentration in the high-cost state of California is
reflected in the high average balance of the pool ($385,513).
Approximately 20.1% (by UPB) of the mortgage loans are designated
as safe harbor Qualified Mortgages (QM) and meet Appendix Q to the
QM rules with 5.7% (by UPB) of mortgages loans originated under the
new QM APOR framework, and the remaining 79.9% (by UPB) of the
mortgage loans are an extension of credit primarily for a business
or commercial purpose and are not a covered transaction as defined
in Section 1026.43(b)(1) of Regulation Z.
Aggregation/Origination Quality
Moody's considers JPMMAC's aggregation platform to be adequate and
it did not apply a separate loss-level adjustment for aggregation
quality. "In addition to reviewing JPMMAC aggregation quality, we
have also reviewed the origination quality of UWM who originated
and sold approximately 65.7% of the mortgage loans in the pool.
Other originators originated less than 10.0% of the mortgage loans
by UPB. We did not make an adjustment for GSE-eligible loans (75.9%
by UPB) since those loans were underwritten in accordance with GSE
guidelines," Moody's said.
Loans originated under UWM's prime jumbo program (24.1% by UPB) are
processed using the Desktop Underwriter (DU) automated underwriting
system, and are therefore predominantly underwritten to Fannie Mae
guidelines. The loans receive a DU Approve Ineligible feedback due
to the 1) loan amount or 2) LTV for non-released prime jumbo
cash-out refinances is over 80%; none of the loans under number 2)
are included in this pool. Moody's has increased its loss
expectations for UWM prime jumbo loans due to the fact that
underwriting prime jumbo loans mainly through DU is fairly new and
no performance history has been provided to Moody's on these types
of loans. More time is needed to assess UWM's ability to
consistently produce high-quality prime jumbo residential mortgage
loans under this program.
Servicing Arrangement
Moody's considers the overall servicing framework for this pool to
be adequate given the servicing arrangement of the servicer, as
well as the presence of an experienced master servicer. Nationstar
will act as the master servicer.
United Wholesale Mortgage, LLC (UWM) will service approximately
65.7% of the mortgage loans, JPMorgan Chase Bank, N.A. (JPMCB) will
servicer 24.7% of mortgage loans, Nationstar will service 4.6% of
the mortgage loans, loanDepot.com, LLC (loanDepot) will service
4.3% of mortgage loans and A&D Mortgage LLC will service 0.6% of
the mortgage loans. Cenlar FSB (Cenlar) will act as sub-servicer
for UWM and loanDepot, Specialized Loan Servicing LLC will act as
sub-servicer for A&D Mortgage LLC. Shellpoint Mortgage Servicing
(Shellpoint) will act as interim servicer for 23.6% of mortgage
loans serviced by JPMMAC.
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 is based on a step-up incentive fee
structure with a monthly base fee of (i) $40 per loan for 15.7% of
mortgage loans and (ii) $25 per loan for 79.1% of mortgage loans
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 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. It should be noted that while the TPR secondary
valuations generally substantiated the original property values,
certain non-conforming loans had secondary valuations which were
performed using only a credit risk score and/or an automatic
valuation model. Moody's took this framework into consideration and
applied a loan level adjustment to the loss for such loans, since
Moody's considers the use of such products, particularly for
non-conforming loans, to be less accurate than desk reviews and
field reviews.
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-INV8's R&W framework is in line with that of other JPMMT
transactions Moody's hasrated 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 has 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. In this
transaction, we've made adjustments to our base case and Aaa loss
expectations for R&W providers that are unrated and/or financially
weaker entities, Moody's said.
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.
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 1.00% of the cut-off date pool
balance, and as subordination lockout amount of 1.00% of the
cut-off date pool balance. Moody's calculates the credit neutral
floors as shown in its principal 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 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.
JP MORGAN 2021-LTV2: Moody's Gives (P)B2 Rating to Class B-2 Debt
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to seven
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust (JPMMT) 2021-LTV2. The ratings range
from (P)Aaa (sf) to (P)B2 (sf).
JPMMT 2021-LTV2 is the seventeenth prime jumbo transaction in 2021
issued by J.P. Morgan Mortgage Acquisition Corporation (JPMMAC),
the sponsor and mortgage loan seller, with the underlying loans
originated by various originators. The weighted average (WA)
loan-to-value (LTV) ratio of the mortgage pool is approximately
86.6%, which is in line with those of the other JPMMT LTV
transactions, but higher than other prior JPMMT transactions with
WA LTVs of about 70% on average. Otherwise, the credit
characteristic of the mortgage loans backing this transaction is
similar to recent JPMMT transactions that we have rated. We
consider the overall servicing framework for this pool to be
adequate given the servicing arrangement of the servicers, as well
as the presence of an experienced master servicer to oversee the
servicers.
JPMMT 2021-LTV2 has a sequential payment structure, albeit
principal is paid pro-rata amongst the senior bonds until a trigger
event has occurred, which is more beneficial to senior bondholders
than the shifting interest structure that is typical of prime jumbo
transactions. We coded the cash flow to each of the certificate
classes using Moody's proprietary cash flow tool. In coding the
cash flow, we took into account the step-up incentive servicing fee
structure.
Moody's bases its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
its 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-LTV2
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aa2 (sf)
Cl. A-3, Assigned (P)A1 (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. M-1, Assigned (P)Baa3 (sf)
Cl. B-1, Assigned (P)Ba2 (sf)
Cl. B-2, Assigned (P)B2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Moody's expected loss for this pool in a baseline scenario-mean is
1.88%, in a baseline scenario-median is 1.47% and reaches 10.91% at
a stress level consistent with its Aaa ratings.
Collateral Description
Moody's assessed the collateral pool as of December 1, 2021, the
cut-off date. The deal will be backed by 518 fully amortizing
fixed-rate prime jumbo non-conforming mortgage loans with an
aggregate unpaid principal balance (UPB) of approximately
$491,761,078 and an original term to maturity of up to 30 years.
All the loans with the exception of 95 loans were underwritten
pursuant to the new general QM rule. The other loans in the pool
either meet Appendix Q to the QM rules or are identified as
QM-Rebuttable Presumption.
There are 423 loans originated pursuant to the new general QM rule
in this pool. The third-party review verified that the loans' APRs
met the QM rule's thresholds (APOR + 1.5%). Furthermore, these
loans are typically underwritten and documented pursuant to the QM
rule's verification safe harbor via a mix of the Fannie Mae Single
Family Selling Guide, the Freddie Mac Single-Family Seller/Servicer
Guide, and the applicable program overlays. As part of the
origination quality review and based on the documentation
information we received in the ASF tape, Moody's concluded that
these loans were fully documented and therefore, Moody's ran these
loans as "full documentation" loans in our MILAN model.
The WA LTV ratio of the mortgage pool is approximately 86.6%, which
is in line with those of the other JPMMT LTV transactions, but
higher than other prior JPMMT transactions with WA LTVs of about
70% on average. Otherwise, the credit characteristic of the
mortgage loans backing this transaction is similar to recent JPMMT
transactions that we have rated. The WA primary borrower FICO is
755. The borrowers have high monthly incomes (averaging about
$25,963) and substantial liquid cash reserves (averaging about
$161,827) which have been verified as part of the underwriting
process and reviewed by the TPR firms. Approximately 38.1% of the
mortgage loans (by UPB) were originated in California which
includes metropolitan statistical areas (MSAs) Los Angeles (12.0%
by UPB) and San Francisco (7.1% by UPB). The high geographic
concentration in high-cost MSAs is reflected in the high average
balance of the pool ($949,346). Approximately 17.7% of the mortgage
loans by balance are designated as safe harbor Qualified Mortgages
(QM) and meet Appendix Q to the QM rules, 0.2% of the mortgage
loans by balance are designated as QM-rebuttal presumption, and
82.0% of the mortgage loans by balance are designated as Safe
Harbor APOR loans, for which mortgage loans are not underwritten to
meet Appendix Q but satisfy AUS with additional overlays of
originators.
As of the cut-off date, none of the borrowers of the mortgage loans
have inquired about or requested forbearance plans with the related
servicer or have previously entered into a COVID-19 related
forbearance plan with the related servicer. Certain borrowers may
become subject to forbearance plans or other payment relief plans
following the cutoff date. In the event a borrower requests or
enters into a COVID-19 related forbearance plan after the cut-off
date but prior to the closing date, JPMMAC will remove such
mortgage loan from the mortgage pool and remit the related closing
date substitution amount. In the event that after the closing date
a borrower enters into or requests a COVID-19 related forbearance
plan, such mortgage loan (and the risks associated with it) will
remain in the mortgage pool.
Aggregation/Origination Quality
Moody's considers 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 aggregation
quality, Moody's has also reviewed the origination quality of
originators contributing a significant percentage of the collateral
pool (above 10%) and MAXEX Clearing LLC (an aggregator).
United Wholesale Mortgage, LLC (UWM) and loanDepot.com, LLC
(loanDepot) sold/originated approximately 44.3% and 12.9% of the
mortgage loans (by UPB) in the pool. The remaining originators each
account for less than 10.0% (by UPB) in the pool. Approximately
4.6% (by UPB) of the mortgage loans were acquired by JPMMAC from
MAXEX Cleaning, LLC (aggregator), 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 said, "We increased our base case and Aaa loss expectations
for certain originators of non-conforming loans where we do not
have clear insight into the underwriting practices, quality control
and credit risk management [except being neutral for CrossCountry
Mortgage, LLC, Guaranteed Rate, Inc. (including Guaranteed Rate
Affinity, LLC and Proper Rate, LLC), Caliber Home Loans, Inc.,
Finance of America Mortgage LLC, NewRez LLC and loanDepot under the
old QM guidelines].
"UWM originated approximately 44.3% of the mortgage loans by pool
balance. The majority of these loans were originated under UWM's
prime jumbo program which are processed using the Desktop
Underwriter (DU) automated underwriting system and are therefore
predominantly underwritten to Fannie Mae guidelines. The loans
receive a DU Approve Ineligible feedback due to the 1) loan amount
or 2) LTV for non-released prime jumbo cash-out refinances is over
80%. We increased our loss expectations for UWM loans due mostly to
the fact that underwriting prime jumbo loans mainly through DU is
fairly new and no performance history has been provided to Moody's
on these types of loans. More time is needed to assess UWM's
ability to consistently produce high-quality prime jumbo
residential mortgage loans under this program."
The loan pool backing this transaction includes 224 UWM loans
originated pursuant to the new general QM rule. To satisfy the new
rule, UWM implemented its prime jumbo underwriting overlays over
the GSE Automated Underwriting System (AUS) for applications on or
after March 1, 2021. Under UWM's new general QM underwriting, the
APR on all loans will not exceed the average prime offer rate
(APOR) +1.5%, and income and asset documentation will be governed
by the following, designed to meet the verification safe harbor
provisions of the new QM Rule: (i) applicable overlays, (ii) one of
(x) Fannie Mae Single Family Selling Guide or (y) Freddie Mac
guidelines and (iii) Desktop Underwriter.
Servicing Arrangement
Moody's considers the overall servicing framework for this pool to
be adequate given the servicing arrangement of the servicers, as
well as the presence of an experienced master servicer. Nationstar
Mortgage LLC (Nationstar) (Nationstar Mortgage Holdings Inc.
corporate family rating B2) will act as the master servicer.
United Wholesale Mortgage, LLC (subserviced by Cenlar FSB),
JPMorgan Chase Bank, National Association (JPMCB), loanDepot
(subserviced by Cenlar FSB) and A&D Mortgage LLC are the principal
servicers in this transaction and will service approximately 44.3%,
41.8%, 12.9% and 0.9% (by UPB), respectively. NewRez LLC f/k/a New
Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing will act as
interim servicer for the mortgage loans serviced by JPMCB from the
closing date until the servicing transfer date, which is expected
to occur on or about February 1, 2022 (but which may occur after
such date).
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 predominantly 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 (fixed fee
framework servicers, which will be paid a monthly flat servicing
fee equal to one-twelfth of 0.25% of the remaining principal
balance of the mortgage loans, account for less than 1.00% of
UPB).
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit, property valuation and data
integrity. 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.
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-LTV2's R&W framework is in line with that of other JPMMT
transactions we 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 we 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 make 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. In this
transaction, we've adjusted our base case and Aaa loss expectations
for R&W providers that are unrated and/or financially weaker
entities.
Transaction Structure
JPMMT 2021-LTV2 features a sequential payment structure, albeit
principal is paid pro-rata amongst the senior bonds until a trigger
event has occurred, which is more beneficial to senior bondholders
than the shifting interest structure that is typical of prime jumbo
transactions In addition, the excess spread in this transaction can
be used to absorb losses, whereas shifting interest structures
don't have any excess spread.
Interest payments to the bonds will be made using the interest
remittance amount and principal payments will be made using the
principal remittance amount. Although the transaction has separate
interest and principal waterfalls, principal can be used to
reimburse interest shortfalls. Any excess spread will be used to
reimburse realized loss, pay Class XS certificates, reimburse
unpaid trust expenses with any remaining amounts being funded to an
Interest Reserve Account which will be used to cover losses.
Realized losses and note write-downs will be allocated in reverse
sequential order starting with the class B-3 certificates.
There is less than 0.5% excess spread (annualized) available in the
deal. When excess spread is a form of credit enhancement, it can
provide a significant amount of credit protection to investors.
However, the amount of protection actually provided by excess
spread will depend on: (1) WAC deterioration or yield compression
resulting from (i) high-yielding mortgage loans prepaying or
defaulting at a faster pace than other mortgage loans; or (ii)
modifications of loan interest rates lowering the average rate and
(2) the speed with which mortgage loans prepay or default during
the life of the securitization.
In its analysis, Moody's accounted for WAC deterioration by
applying a 15% haircut to the weighted average interest rate of the
mortgage loans in the pool. Moody's used this calculated lower
interest rate in our cash flow modeling. Moody's also applied a
prepayment rate of 25% based on historical prepayment rate of loans
with similar characteristics.
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.
KINGS PARK: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned ratings to Kings Park CLO Ltd./Kings
Park CLO LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Blackstone Liquid Credit Strategies
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 management team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Kings Park CLO Ltd./Kings Park CLO LLC
Class A, $315.00 million: AAA (sf)
Class B-1, $30.00 million: AA (sf)
Class B-2, $35.00 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, $50.85 million: Not rated
LCM 36 LTD: Moody's Rates $16MM Class E Notes 'Ba3'
---------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by LCM 36 Ltd. (the "Issuer" or "LCM 36").
Moody's rating action is as follows:
US$240,000,000 Class A-1 Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class A-2 Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$44,000,000 Class B Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
US$24,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2034, Definitive Rating Assigned A2 (sf)
US$24,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2034, Definitive Rating Assigned Baa3 (sf)
US$16,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2034, Definitive Rating Assigned Ba3 (sf)
The notes listed above 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.
LCM 36 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and fixed rate collateral debt obligations. The
portfolio is approximately 90% ramped as of the closing date.
LCM Asset 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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2794
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.56 years
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.
LCM XIII: S&P Affirms B (sf) Rating on Class E-R Notes
------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R3, B-R3,
and C-R3 replacement notes from LCM XIII L.P./LCM XIII LLC, a CLO
originally issued in 2013, reset in 2016 and refinanced in 2019
that is managed by LCM Asset Management LLC. At the same time, S&P
withdrew its ratings on the class A-RR, B-RR, and C-R notes
following payment in full on the Dec. 23, 2021, refinancing date.
S&P affirmed its ratings on the class D-R and E-R notes, which were
not affected by this refinancing. This transaction has exited its
reinvestment period and has started to paydown the principal
balance of the senior class A-RR notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture the non-call period was extended to June
2022.
Replacement And Refinanced Note Issuances
Replacement notes
Class A-R3, $303.14 million: Three-month LIBOR + 0.87%
Class B-R3, $52.50 million: Three-month LIBOR + 1.50%
Class C-R3, $41.50 million: Three-month LIBOR + 2.00%
Refinanced notes
Class A-RR, $303.14 million: Three-month LIBOR + 1.14%
Class B-RR, $52.50 million: Three-month LIBOR + 1.75%
Class C-R, $41.50 million: Three-month LIBOR + 2.70%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
LCM XIII L.P./LCM XIII LLC
Class A-R3, $303.14 million: AAA (sf)
Class B-R3, $52.50 million: AA (sf)
Class C-R3, $41.50 million: A (sf)
Ratings Withdrawn
LCM XIII L.P./LCM XIII LLC
Class A-RR to not rated from 'AAA (sf)'
Class B-RR to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Ratings Affirmed
LCM XIII L.P./LCM XIII LLC
Class D-R: BBB- (sf)
Class E-R: B (sf)
Other Outstanding Ratings
LCM XIII L.P./LCM XIII LLC
Subordinated notes: Not rated
MAN GLG I: Moody's Affirms B1 Rating on Class F Notes
-----------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Man GLG Euro CLO I Designated Activity Company:
EUR42,000,000 Class B-1 Senior Secured Floating Rate Notes due
2030, Upgraded to Aaa(sf); previously on Jun 22, 2020 Affirmed
Aa2(sf)
EUR13,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2030,
Upgraded to Aaa(sf); previously on Jun 22, 2020 Affirmed Aa2(sf)
EUR26,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2030, Upgraded to A1(sf); previously on Jun 22, 2020 Affirmed
A2(sf)
EUR22,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2030, Upgraded to Baa1(sf); previously on Jun 22, 2020 Confirmed at
Baa2(sf)
Moody's has also affirmed the ratings on the following notes:
EUR219,000,000 Class A-1 Senior Secured Floating Rate Notes due
2030, Affirmed Aaa(sf); previously on Jun 22, 2020 Affirmed
Aaa(sf)
EUR15,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2030,
Affirmed Aaa(sf); previously on Jun 22, 2020 Affirmed Aaa(sf)
EUR22,200,000 Class E Deferrable Junior Floating Rate Notes due
2030, Affirmed Ba2(sf); previously on Jun 22, 2020 Confirmed at
Ba2(sf)
EUR12,000,000 Class F Deferrable Junior Floating Rate Notes due
2030, Affirmed B1(sf); previously on Jun 22, 2020 Confirmed at
B1(sf)
Man GLG Euro CLO I Designated Activity Company, originally issued
in April 2015, refinanced in July 2017 and reset again in April
2018, is a collateralised loan obligation (CLO) backed by a
portfolio of mostly high-yield senior secured European loans. The
portfolio is managed by GLG Partners LP. The transaction's
reinvestment period will end in 15 April 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1, B-2, C and D Notes are
primarily a result of the benefit of the shorter period of time
remaining before the end of the reinvestment period in April 2022.
The affirmations on the ratings on the Class A-1, A-2, E and F
Notes are primarily a result of the expected losses on the notes
remaining consistent with their current rating levels, after taking
into account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from a lower WARF and a shorter WAL than it
had assumed at the last rating action in June 2020.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
MARATHON CLO 2020-15: S&P Affirms BB- (sf) Rating on Class D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1J-R, A-2-R,
B-R, and C-R replacement notes from Marathon CLO 2020-15
Ltd./Marathon CLO 2020-15 LLC, a CLO originally issued in 2020 that
is managed by Marathon Asset Management L.P. At the same time, S&P
withdrew its ratings on the class A-1J, A-2A, A-2B, B, C-1S, and
C-1J notes following payment in full on the Dec. 27, 2021,
refinancing date. S&P also affirmed its ratings on the class A-1S
and D notes, which were not refinanced.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period is November 2022.
-- The new class A-2-R notes refinanced the class A-2A and A-2B
notes.
-- The new class C-R notes refinanced the class C-1S and C-1J
notes.
Replacement And Refinanced Note Issuances
Replacement notes
Class A-1J-R, $10 million: Three-month LIBOR + 1.60%
Class A-2-R, $54 million: Three-month LIBOR + 1.80%
Class B-R, $24 million: Three-month LIBOR + 2.60%
Class C-R, $24 million: Three-month LIBOR + 3.90%
Refinanced notes
Class A-1J, $10 million: Three-month LIBOR + 2.17%
Class A-2A, $40 million: Three-month LIBOR + 2.30%
Class A-2B, $14 million: 2.90%
Class B, $24 million: Three-month LIBOR + 3.10%
Class C-1S, $12 million: Three-month LIBOR + 4.89%
Class C-1J, $12 million: Three-month LIBOR + 6.01%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Marathon CLO 2020-15 Ltd./Marathon CLO 2020-15 LLC
Class A-1J-R, $10 million: AAA (sf)
Class A-2-R, $54 million: AA (sf)
Class B-R, $24 million: A (sf)
Class C-R, $24 million: BBB- (sf)
Ratings Withdrawn
Marathon CLO 2020-15 Ltd./Marathon CLO 2020-15 LLC
Class A-1J to not rated from 'AAA (sf)'
Class A-2A to not rated from 'AA (sf)'
Class A-2B to not rated from 'AA (sf)'
Class B to not rated from 'A (sf)'
Class C-1S to not rated from 'BBB+ (sf)'
Class C-1J to not rated from 'BBB- (sf)'
Ratings Affirmed
Marathon CLO 2020-15 Ltd./Marathon CLO 2020-15 LLC
Class A-1S: AAA (sf)
Class D: BB- (sf)
Other Outstanding Ratings
Marathon CLO 2020-15 Ltd./Marathon CLO 2020-15 LLC
Subordinated notes: Not rated
MARATHON CLO 2021-17: Moody's Gives Ba3 Rating to $17MM Cl. D Notes
-------------------------------------------------------------------
Moody's Investors Service has assigned ratings to nine classes of
notes issued and one class of loans incurred by Marathon CLO
2021-17 Ltd. (the "Issuer" or "Marathon CLO 2021-17").
Moody's rating action is as follows:
US$160,000,000 Class A-1 Loans maturing 2035, Assigned Aaa (sf)
US$99,250,000 Class A-1A Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
Up to US$160,000,000 Class A-1B Senior Secured Floating Rate Notes
due 2035, Assigned Aaa (sf)
US$17,000,000 Class A-1J Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$22,000,000 Class A-2A Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$24,750,000 Class A-2B Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$19,500,000 Class B-1 Senior Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$6,000,000 Class B-2 Senior Secured Deferrable Fixed Rate Notes
due 2035, Assigned A2 (sf)
US$23,300,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Baa3 (sf)
US$17,000,000 Class D Secured Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes and loans listed above are referred to herein,
collectively, as the "Rated Debt."
On the closing date, the Class A-1 Loans and the Class A-1B Notes
have a principal balance of $160,000,000 and $0, respectively. At
any time, the Class A-1 Loans may be converted in whole or in part
to Class A-1B Notes, thereby decreasing the principal balance of
the Class A-1 Loans and increasing, by the corresponding amount,
the principal balance of the Class A-1B Notes. The aggregate
principal balance of the Class A-1 Loans and Class A-1B Notes will
not exceed $160,000,000, less the amount of any principal
repayments.
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Marathon CLO 2021-17 is a managed cash flow CLO. The issued debt
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is approximately 85% ramped as of
the closing date.
Marathon Asset Management, L.P. (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 Debt, 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 debt 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: $425,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS): 3.45%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9.08 years
The discount rate used to calculate both the PV of the promise and
the PV of the cash flows received is the coupon rate of the fixed
rate notes, or the scenario-specific Libor curve plus the promised
spread of the floating rate notes. For the Term SOFR based Class
A-2B Notes, Moody's made a negative adjustment of 0.20% to the
promised spread when using the scenario-specific Libor curve. In
addition, Moody's also modeled the transaction using the discount
rate of the Class A-2B Notes based on SOFR.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
MARATHON CLO X: S&P Affirms B- (sf) Rating on Class D Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1A-R and
A-1B-R replacement notes from Marathon CLO X Ltd./Marathon CLO X
LLC, a CLO originally issued in 2017 that is managed by Marathon
Asset Management L.P. At the same time, S&P withdrew its ratings on
the class A-1A and A-1B notes following payment in full on the Dec.
29, 2021, refinancing date. S&P also affirmed its ratings on the
class A-2, B, C, and D notes, which were not refinanced. The
reinvestment period for this transaction ended on Nov. 15, 2021.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture, the non-call period is December 2022.
Replacement And Refinanced Note Issuances
Replacement notes
Class A-1A-R, $306.78 million: Three-month LIBOR + 1.00%
Class A-1B-R, $5.40 million: Three-month LIBOR + 1.25%
Refinanced notes
Class A-1A, $306.78 million: Three-month LIBOR + 1.25%
Class A-1B, $5.40 million: Three-month LIBOR + 1.35%
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Marathon CLO X Ltd./Marathon CLO X LLC
Class A-1A-R, $306.78 million: AAA (sf)
Class A-1B-R, $5.40 million: AAA (sf)
Ratings Withdrawn
Marathon CLO X Ltd./Marathon CLO X LLC
Class A-1A to NR from 'AAA (sf)'
Class A-1B to NR from 'AAA (sf)'
Ratings Affirmed
Marathon CLO X Ltd./Marathon CLO X LLC
Class A-2: AA (sf)
Class B: A- (sf)
Class C: BB+ (sf)
Class D: B- (sf)
Other Outstanding Ratings
Marathon CLO X Ltd./Marathon CLO X LLC
Subordinated notes: NR
NR--Not rated.
MF1 2021-W10X: S&P Assigns B- (sf) Rating on Class F Certificates
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to MF1 2021-W10X's
commercial mortgage pass-through certificates series 2021-W10X.
Since issuing preliminary ratings, class X-CP was removed from the
transaction, and S&P withdrew its preliminary rating on class
X-NCP.
The note issuance is a CMBS securitization backed by the borrowers'
fee simple interest in a 585-unit multifamily rental property
located in Weston, Fla.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsor's and the manager's experience,
the trustee-provided liquidity, the loan terms, and the
transaction's structure.
Ratings Assigned
MF1 2021-W10X
Class A, $59,087,000: AAA (sf)
Class X-NCP, $59,087,000(i): Not rated
Class B, $14,056,000: AA- (sf)
Class C, $10,449,000: A- (sf)
Class D, $10,698,000: BBB- (sf)
Class E, $12,440,000: BB- (sf)
Class F, $13,061,000: B- (sf)
Class G, $14,334,000: Not rated
Class H, $31,290,000: Not rated
Class HRR(ii), $8,710,000: Not rated
Note: The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(i)Notional balance. The notional amount of the class X-NCP
certificates will equal the certificate balance of the class A
certificates.
(ii)Horizontal risk retention certificates.
MFA 2021-AEINV2 TRUST: Moody's Gives B3 Rating to Class B-5 Debt
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
forty-seven (47) classes of residential mortgage-backed securities
(RMBS) issued by MFA 2021-AEINV2 Trust. The ratings range from Aaa
(sf) to B3 (sf). MFA Financial, Inc. (MFA), a Maryland corporation
is the sponsor of the transaction.
MFA 2021-AEINV2 Trust is a securitization of first lien,
government-sponsored enterprises' (GSE)-eligible mortgage loans on
investor properties sponsored by MFA. As of the cut-off date, the
securitization is backed by 972 fully amortizing, fixed-rate
mortgage loans, with an aggregate stated principal balance (UPB) of
approximately $339,655,385. 100% of the pool was originated by
loanDepot.com, LLC (loanDepot).
In this transaction, the Class A-11, A-11-X, Class A-11-A, and
Class A-11-B certificates' 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
certificates, including the floating rate certificates, are subject
to the net WAC cap, which prevents the floating rate classes 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 certificates and does not provide
for any excess spread.
Although loanDepot is named servicer, Cenlar FSB (Cenlar) will be
the sub-servicer of the loans and Computershare Trust Company, N.A.
(Computershare) will be the master servicer. loanDepot will also be
responsible for servicer advances, with the master servicer
stepping in if loanDepot cannot fulfill its obligation to advance
scheduled principal and interest.
Servicing compensation is subject to a step-up incentive fee
structure. Servicing fee includes base fee plus delinquency and
incentive fees. Delinquency and incentive fees will be deducted
reverse sequentially starting from the Class B-6 interest payment
amount first and could result in interest shortfall to the
certificates depending on the magnitude of the delinquency and
incentive fees.
The complete rating actions are as follows:
Issuer: MFA 2021-AEINV2 Trust
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-A, Definitive Rating Assigned Aaa (sf)
Cl. A-3-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-A, Definitive Rating Assigned Aaa (sf)
Cl. A-4-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5-A, Definitive Rating Assigned Aaa (sf)
Cl. A-5-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-A, Definitive Rating Assigned Aaa (sf)
Cl. A-6-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-A, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-8-A, Definitive Rating Assigned Aaa (sf)
Cl. A-8-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-9-A, Definitive Rating Assigned Aaa (sf)
Cl. A-9-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-10-A, Definitive Rating Assigned Aaa (sf)
Cl. A-10-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-11-A, Definitive Rating Assigned Aaa (sf)
Cl. A-11-AI*, Definitive Rating Assigned Aaa (sf)
Cl. A-11-B, Definitive Rating Assigned Aaa (sf)
Cl. A-11-BI*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Definitive Rating Assigned Aa1 (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating 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 is 1.13%
at the mean, 0.81% at the median and reaches 7.77% at a stress
level consistent with its Aaa ratings.
Moody's said, "We base our ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, our assessments of the origination quality and
servicing arrangement, the strength of the third-party due
diligence (TPR) and the representations and warranties (R&W)
framework of the transaction."
Collateral description
As of the cut-off date of December 1, 2021, the collateral
comprises 972 GSE-eligible mortgage loans originated by loanDepot,
secured by first liens on residential investment properties, with
an aggregate principal balance of $339,655,385. All the loans are
underwritten in accordance with Freddie Mac or Fannie Mae
guidelines, which take into consideration, among other factors, the
income, assets, employment and credit score of the borrower as well
as loan-to-value (LTV). These loans are run through one of the GSE
automated underwriting systems (AUS) and have received an "Approve"
or "Accept" recommendation.
The majority of the loans have a 30-year term, with five loans
having terms ranging from 25 to 26 years. All of the loans have a
fixed rate. The WA original credit score is 765 for the primary
borrower only and the WA combined original LTV (CLTV) is 65.0%. The
WA original debt-to-income (DTI) ratio is 34.8%. Around 35.1% of
the mortgage loans by UPB are backed by properties located in
California.
Approximately 6.07% of the mortgage loans by count are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable. "We made an adjustment in
our analysis to account for the increased risk associated with such
loans. However, we have tempered this adjustment by taking into
account the GSEs' robust risk modeling, which helps minimize
collateral valuation risk, as well as the GSEs' conservative
eligibility requirements for AW loans which helps to support deal
collateral quality," Moody's said.
Origination quality
The mortgage loans for this transaction were acquired by MFA, the
sponsor. The sponsor does not originate any mortgage loans,
including the mortgage loans included in the mortgage pool.
Instead, MFA acquired the mortgage loans pursuant to contracts with
loanDepot, the originator.
Moody's said, "While we consider there to be some weaknesses in the
MFA's aggregation platform, such as a lack of a formal
audit/quality control process to review mortgage loans, overall, we
consider the aggregation platform to be adequate and as a result
did not apply an adjustment to our losses mainly due to the
following mitigants: (a) loanDepot originated 100% of the pool and
loanDepot conducted audit/quality control on all their investor
agency loans. We reviewed loanDepot investors agency program and
consider loanDepot's origination quality to be in line with its
peers; (b) MFA relied on their custodian to verify the presence of
required collateral documents such as the original mortgage note,
as well as completeness of certain elements in each document; and
(c) MFA has back-end representations and warranties with loanDepot
through a private mortgage loan purchase agreement."
Servicing arrangements
Moody's considers the overall servicing arrangement for this pool
to be adequate and as a result did not make any adjustments to its
base case and Aaa stress loss assumptions based on this servicing
arrangement.
loanDepot has engaged Cenlar to subservice the mortgage loans
pursuant to a separate subservicing agreement between the servicer
and the subservicer. Computershare Trust Company, N.A. will serve
as the master servicer. loanDepot the servicer, will be primarily
responsible for funding certain servicing advances of delinquent
scheduled interest and principal payments for the mortgage loans,
unless it determines that such amounts would not be recoverable.
The master servicer will be obligated to fund any required monthly
advances if the servicer fails in its obligation to do so.
Computershare is a national banking association and a wholly-owned
subsidiary of Computershare Ltd (Baa2, long term rating), an
Australian financial services company with over $5 billion (USD) in
assets as of June 30, 2021. Computershare Ltd and its affiliates
have been engaging in financial service activities, including stock
transfer related services since 1997, and corporate trust related
services since 2000.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure. The servicer receives higher
fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less labor
intensive. The fee-for-service compensation is reasonable and
adequate for this transaction because it better aligns the
servicer's costs with the deal's performance. Furthermore, higher
fees for the more labor-intensive tasks make the transfer of these
loans to another servicer easier, should that become necessary.
Third-party review
One independent third-party review firm, Consolidated Analytics,
Inc. (Consolidated Analytics) was engaged to conduct due diligence
for credit, regulatory compliance, property valuation, and data
accuracy on a total of 25.0% (by loan count) of the loan pool. Of
the 972 mortgage loans in the pool, the TPR firm conducted due
diligence on a sample of 243 mortgage loans. We calculated the
credit-neutral sample size using a confidence interval, error rate
and a precision level of 95%/5%/2%, respectively. The number of
mortgage loans that went through a full due diligence review (243)
is below Moody's calculated credit-neutral threshold. We therefore
applied an adjustment to our losses, said Moody's.
Representations and Warranties Framework
Moody's stated, "The R&W provider is MFA (unrated). We 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. We 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. We 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.
"We increased our loss levels to account for weaknesses in the
overall R&Ws framework due to the financial weakness of the R&Ws
provider and because the loss amount remedy is subject to conflicts
of interest and will likely not adequately compensate the
transaction for loans that breach R&Ws. Unlike most other
comparable transactions that we have rated, the R&Ws framework in
this transaction has a "loss amount" remedy, namely, in case there
is a material breach to the R&Ws, the sponsor, who is the R&W
provider, is tasked with calculating the loss amount to indemnify
the trust instead of buying the loan at par, which is subject to
conflicts of interest. The party determining the loss amount will
have a natural incentive to determine a low amount since it will
have to pay that amount. Furthermore, there may be no objective way
to determine such amount since the decrease in value of a loan that
breaches a R&W may not be quantifiable at the time the breach is
discovered. The fact that the controlling holder can bring the
sponsor to arbitration in the event that it disagrees with the loss
amount is a partial mitigant. However, there may be no good way to
prove in arbitration that the sponsor's determination is not
adequate because the determination of the loss payment will be, in
many cases, subjective. Furthermore, the controlling holder must
expend its own funds to go to arbitration, which could
disincentivize it to pursue arbitration. Another partial mitigant
is that the sponsor has purchased the loans from one seller,
loanDepot, an originator whose repurchase statistics are equal to
or better than the GSEs' average."
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate 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.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balances of the
subordinate bonds are written off, losses from the pool begin to
write off the principal balances of the senior support bonds until
their principal balances are reduced to zero. Next, realized losses
are allocated to super senior bonds until their principal balance
is written off.
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 1.05% (UPB) as of the cut-off date
pool balance, and as subordination lock-out amount of 1.05% (UPB)
as of the cut-off date pool balance. We calculate the credit
neutral floors for a given target rating as shown in our principal
methodology. The senior subordination floor and the subordination
lock-out of 1.05% are consistent with the credit neutral floors for
the assigned ratings.
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.
MORGAN STANLEY 2012-C4: Moody's Cuts Class F Debt Rating to C
-------------------------------------------------------------
Moody's Investors Service, Inc. has affirmed the ratings on five
classes and downgraded the ratings on five classes in Morgan
Stanley Capital I Trust 2012-C4 ("MSC 2012-C4"), Commercial
Mortgage Pass-Through Certificates, Series 2012-C4, as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Feb 9, 2021 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Feb 9, 2021 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa2 (sf); previously on Feb 9, 2021 Affirmed Aa2
(sf)
Cl. C, Downgraded to Baa1 (sf); previously on Feb 9, 2021 Affirmed
A2 (sf)
Cl. D, Downgraded to B1 (sf); previously on Feb 9, 2021 Downgraded
to Ba2 (sf)
Cl. E, Downgraded to Caa3 (sf); previously on Feb 9, 2021
Downgraded to Caa1 (sf)
Cl. F, Downgraded to C (sf); previously on Feb 9, 2021 Downgraded
to Ca (sf)
Cl. G, Affirmed C (sf); previously on Feb 9, 2021 Downgraded to C
(sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Feb 9, 2021 Affirmed Aaa
(sf)
Cl. X-B*, Downgraded to Caa3 (sf); previously on Feb 9, 2021
Downgraded to Caa2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on three P&I classes were affirmed because of the
credit support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio and Moody's stressed debt service
coverage ratio (DSCR), are within acceptable ranges.
The ratings on four P&I classes were downgraded primarily due to an
increase in expected losses and interest shortfall risks due to the
further decline in performance of the specially serviced loan, the
Shoppes at Buckland Hills loan (30.5% of the pool). The loan is
secured by a regional mall with significant declines in performance
and a year-end 2020 NOI DSCR below 1.00X. The loan has a scheduled
maturity date in March 2022 and a receiver has taken over
management of the mall with the ultimate resolution strategy to
stabilize and sell the property. As of the November 2021 remittance
statement an appraisal reduction of 25% has been recognized on this
loan since no updated appraisal value has been reported. Moody's
anticipates interest shortfalls may increase from their current
levels due the performance of this loan. Furthermore, the pool
faces increased refinance risk as all the remaining loans mature by
March 2022.
The rating on Cl. G was affirmed because the ratings are consistent
with Moody's expected loss.
The rating on one IO class was affirmed based on the credit quality
of the referenced classes.
The rating on one IO class was downgraded due to a decline in the
credit quality of its referenced classes.
The action has considered how the coronavirus pandemic has reshaped
the US economic environment and the way its aftershocks will
continue to reverberate and influence the performance of commercial
real estate. Moody's expects the public health situation to improve
as vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will vary.
Stress on commercial real estate properties will be most directly
stemming from declines in hotel occupancies (particularly related
to conference or other group attendance) and declines in foot
traffic and sales at certain retail properties.
Moody's regards the coronavirus outbreak as a social risk under our
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 21.4% of the
current pooled balance, compared to 10.4% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.2% of the
original pooled balance, compared to 7.4% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
DEAL PERFORMANCE
As of the November 15, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by nearly 68% to $356
million from $1.1 billion at securitization. The certificates are
collateralized by twelve remaining mortgage loans. Three loans,
constituting 29% of the pool, have defeased and are secured by US
government securities.
Four loans, constituting 24% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Two have loans been liquidated from the pool, resulting in an
aggregate realized loss of $13.7 million (for an average loss
severity of 35%).
The Shoppes at Buckland Hills loan ($108.5 million -- 30.5% of the
pool), is the one loan in special servicing. The loan is secured by
a 535,000 square foot (SF) component of a 1.1 million SF regional
mall located in the Buckland Hills section of Manchester,
Connecticut, approximately 10 miles northeast of Hartford. The
property's anchors include traditional department stores Macy's,
Macy's Men's & Home, and JCPenney, as well as Dick's Sporting Goods
(only Dick's Sporting Goods is included as part of the collateral).
The property has one vacant anchor (141,000 SF) after Sears closed
their location at the property in January 2021. Furthermore, Dick's
Sporting Goods (15% of the net rentable area (NRA)) announced it
will be closing this location at their lease expiration in January
2022. The property's trade area covers the northeastern suburbs of
Hartford and parts of the north-central part of Connecticut and
competes with several regional malls and power centers, including
the Westfarms Mall, the dominant regional mall in the Hartford MSA.
As of September 2020, the collateral component of the property was
94% leased, with an inline occupancy of 79%. The historical
performance of the property generally trended down since
securitization with the 2018 net operating income (NOI)
approximately 14% lower than securitization levels. While increased
revenue caused the property's NOI to rebound to near underwritten
levels in 2019, the property's performance was significantly
impacted by the pandemic and the year-end 2020 NOI DSCR was 0.92X,
compared to 1.48X for year-end 2019. The property has also had
exposure to several apparel tenants that have declared bankruptcy
since 2019 or announced plans to reduce store counts. The loan
transferred into special servicing in November 2020 due to
delinquent payments after the borrower indicated they would no
longer fund debt service and any operating shortfalls. Brookfield,
the loan sponsor, agreed to a consensual receivership order, and a
receiver has taken over management of the mall with the ultimate
resolution to stabilize and sell the property. The loan has
amortized approximately 16.5% since securitization and the loan is
last paid through October 2021. As of the November 2021 remittance
statement an appraisal reduction of 25% has been recognized on this
loan since no updated appraisal has been reported.
Moody's has also assumed a high default probability for one poorly
performing loan, Independence Hill Independent Living ($18.7
million -- 5.3% of the pool), which is secured by a 294-unit
multifamily garden apartment property located in San Antonio,
Texas. The loan matures in March 2022 and the loan may face
increased refinance risk as the property's performance has
deteriorated since 2018 from declining occupancy and the June 2021
NOI DSCR was 0.71X, down significantly from 1.46X in December
2019.
Moody's has estimated an aggregate loss of $76.4 million (a 60%
expected loss) from the specially serviced and troubled loans.
As of the November 2021 remittance statement cumulative interest
shortfalls were $721,578. Moody's anticipates interest shortfalls
will continue because of the exposure to specially serviced loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
Moody's received full year 2020 operating results for 100% of the
pool, and partial year 2021 operating results for 87% of the pool
(excluding specially serviced and defeased loans).
The top three non-defeased performing loans represent 26.8% of the
pool balance. The largest loan is the 9 MetroTech Center Loan
($48.9 million -- 13.7% of the pool), which is secured by a
leasehold interest in a nine-story, single-tenant office building
located in the CBD of Brooklyn, New York. The property was
built-to-suit for the New York City Fire Department (FDNY) in 1996
and serves as the department's headquarters and the city emergency
command center. In addition to approximately 317,000 SF of office
space, the building also contains a two-story, below-grade, 137
space parking garage. The FDNY lease commenced in October 1997 and
featured a 20-year term, with one, 10-year extension option
exercisable. The FDNY exercised this option and extended their
lease through October 2028. Due to the single tenant concentration,
Moody's value incorporates a lit/dark analysis due to the single
tenant exposure. The loan has amortized 22% securitization and
matures in February 2022. Moody's LTV and stressed DSCR are 82% and
1.24X, respectively, compared to 85% and 1.20X at the last review.
The second largest loan is the Midtown Square Shopping Center Loan
($29.4 million -- 8.3% of the pool), which is secured by a 193,000
SF portion of a power center in Troy, Michigan. The property is
shadow anchored by Target and Home Depot, and anchored by a Kroger
grocery store. As of December 2020, the property was 98% leased.
The loan has amortized nearly 16% since securitization and is
scheduled to mature in February 2022. The loan had a June 2021 NOI
DSCR of 1.87X and Moody's LTV and stressed DSCR are 95% and 1.08X,
respectively, compared to 87% and 1.17X at the last review.
The third largest non-troubled loan is the University Park Shopping
Center Loan ($17.0 million -- 4.8% of the pool), which is secured
by an 83,900 square foot retail property located in Denver,
Colorado that was built in 2007. As of December 2020, the property
was 93% occupied, compared to 96% in December 2019. The loan has
amortized nearly 16% since securitization and is scheduled to
mature in March 2022. The loan had a June 2021 NOI DSCR of 1.72X
and Moody's LTV and stressed DSCR are 86% and 1.31X, respectively,
compared to 84% and 1.35X at the last review.
NELNET STUDENT 2005-4: Fitch Affirms B Rating on 4 Note Classes
---------------------------------------------------------------
Fitch Ratings has affirmed the class A and B notes of Nelnet
Student Loan Trust (Nelnet) 2004-3, Nelnet 2005-2, Nelnet 2005-3,
Nelnet 2005-4, and Nelnet 2006-1. Fitch has also affirmed the class
A notes of Nelnet 2004-4. The affirmations reflect the strong
collateral performance for the transactions, in line with Fitch's
expectations since the last review. All affirmed classes passed all
credit and maturity stresses at the notes' corresponding rating
levels.
Fitch upgraded the class B notes of Nelnet 2004-4 from 'AAsf' to
'AAAsf'; the upgrade reflects high and increasing total parity
available to the bonds that can withstand Fitch's 'AAAsf' credit
stresses. The bonds' maturity risk is also considered commensurate
to a 'AAAsf' rating.
Fitch also revised the Rating Outlook on the class B notes of
Nelnet 2005-2 and Nelnet 2005-3 to Positive from Stable. The
Positive Outlook reflects strong transaction performance and
increased credit enhancement (CE) available to these bonds and
highlights positive rating momentum should the current trend of
building CE and stable asset performance continue through 2022.
The Negative Outlook on all of the 'AAAsf' rated bonds reflects
Fitch's Negative Outlook on the U.S. sovereign's 'AAA' Issuer
Default Rating (IDR).
DEBT RATING PRIOR
---- ------ -----
Nelnet Student Loan Trust 2004-4
A-5 64031QBK6 LT AAAsf Affirmed AAAsf
B 64031QBL4 LT AAAsf Upgrade AAsf
Nelnet Student Loan Trust 2005-3
A-5 64031QCD1 LT AAAsf Affirmed AAAsf
B 64031QCE9 LT AAsf Affirmed AAsf
Nelnet Student Loan Trust 2006-1
A-6 64033HAA7 LT AAAsf Affirmed AAAsf
B 64031QCU3 LT Asf Affirmed Asf
Nelnet Student Loan Trust 2004-3
A-5 64031QBC4 LT AAAsf Affirmed AAAsf
B 64031QBE0 LT AAsf Affirmed AAsf
Nelnet Student Loan Trust 2005-2
A-5 64031QBX8 LT AAAsf Affirmed AAAsf
B 64031QBY6 LT AAsf Affirmed AAsf
Nelnet Student Loan Trust 2005-4
A-4AR-1 64031QCK5 LT Bsf Affirmed Bsf
A-4AR-2 64031QCM1 LT Bsf Affirmed Bsf
A-4L 64031QCJ8 LT Bsf Affirmed Bsf
B 64031QCL3 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 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:
Nelnet 2004-3: Fitch assumes a cumulative default rate of 16.25%
under the base case scenario and 48.75% under the 'AAAsf' credit
stress scenario. Fitch assumes a sustainable constant default rate
(sCDR) of 3.00% and a sustainable constant prepayment rate
(voluntary and involuntary prepayments; sCPR) of 8.0% in cash flow
modelling. Fitch applies the standard default timing curve in its
credit stress cash flow analysis, in accordance with its FFELP
criteria. The trailing 12month (TTM) levels of deferment,
forbearance and income-based repayment are 4.2%, 6.9%, and 19.1%
respectively, and are used as the starting point in cash flow
modelling. Subsequent declines or increases are modelled as per
criteria. The borrower benefit is assumed to be approximately
0.14%, based on information provided by the sponsor.
Nelnet 2004-4: Fitch assumes a cumulative default rate of 22.25%
under the base case scenario and 66.75% under the 'AAAsf' credit
stress scenario. Fitch assumes a sCDR of 4.00% and a sCPR of 8.0%
in cash flow modelling. Fitch applies the standard default timing
curve in its credit stress cash flow analysis, in accordance with
its FFELP criteria. The TTM levels of deferment, forbearance and
income-based repayment are 4.8%, 8.1%, and 24.0% respectively.
Nelnet 2005-2: Fitch assumes a cumulative default rate of 16.75%
under the base case scenario and 50.25% under the 'AAAsf' credit
stress scenario. Fitch assumes a sCDR of 3.00% and a sCPR of 8.0%
in cash flow modelling. The TTM levels of deferment, forbearance
and income-based repayment are 4.6%, 7.1%, and 16.8% respectively.
The borrower benefit is assumed to be approximately 0.17%, based on
information provided by the sponsor.
Nelnet 2005-3: Fitch assumes a cumulative default rate of 17.25%
under the base case scenario and 51.75% under the 'AAAsf' credit
stress scenario. Fitch assumes a sCDR of 3.00% and a sCPR of 8.0%
in cash flow modelling. The TTM levels of deferment, forbearance
and income-based repayment are 5.1%, 7.6%, and 19.9% respectively.
The borrower benefit is assumed to be approximately 0.18%, based on
information provided by the sponsor.
Nelnet 2005-4: Fitch assumes a cumulative default rate of 15.00%
under the base case scenario and 45.00% under the 'AAAsf' credit
stress scenario. Fitch assumes a sCDR of 2.50% and a sCPR of 8.0%
in cash flow modelling. The claim reject rate is assumed to be
0.25% in the base case and 2.0% in the 'AAAsf' case. The TTM levels
of deferment, forbearance and income-based repayment are 4.0%,
7.2%, and 19.6% respectively. The borrower benefit is assumed to be
approximately 0.18%, based on information provided by the sponsor.
Nelnet 2006-1: Fitch assumes a cumulative default rate of 13.25%
under the base case scenario and 39.75% under the 'AAAsf' credit
stress scenario. Fitch assumes a sCDR of 3.00% and a sCPRof 8.0% in
cash flow modelling. The TTM levels of deferment, forbearance and
income-based repayment are 4.0%, 6.0%, and 16.3% respectively, and
are used as the starting point in cash flow modelling. The borrower
benefit is assumed to be approximately 0.24%, based on information
provided by the sponsor.
The above assumptions were used as the starting point in cash flow
modelling and subsequent declines or increases were modelled as per
criteria. Fitch applied the standard default timing curve in its
credit stress cash flow analysis, in accordance with its FFELP
criteria. Fitch also assumed the claim reject rate to be 0.25% in
the base case and 2.0% in the 'AAAsf' case.
Basis and Interest Rate Risk:
Nelnet 2004-3: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments (SAP) and the securities. As of October
2021, 99.1% of the principal balance is indexed to one-month LIBOR
with the rest indexed to 91 Day T-Bills. All notes are indexed to
three-month LIBOR.
Nelnet 2004-4: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments (SAP) and the securities. As of October
2021, 90.4% of the principal balance is indexed to one-month LIBOR
with the rest indexed to 91 Day T-Bills. All notes are indexed to
three-month LIBOR.
Nelnet 2005-2: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments (SAP) and the securities. As of
September 2021, 98.8% of the principal balance is indexed to
one-month LIBOR with the rest indexed to 91 Day T-Bills. All notes
are indexed to three-month LIBOR.
Nelnet 2005-3: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments (SAP) and the securities. As of
September 2021, 99.7% of the principal balance is indexed to 91 Day
T-Bills. All notes are indexed to three-month LIBOR.
Nelnet 2005-4: Basis risk for this transaction arises from any rate
and reset frequency mismatch between interest rate indices for
Special Allowance Payments (SAP) and the securities. As of
September 2021, 96.0% of the principal balance is indexed to
one-month LIBOR with the rest indexed to 91 Day T-Bills. All notes
are indexed to three-month LIBOR.
Nelnet 2006-1: 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. As of
September 2021, 100% of the principal balance is indexed to
one-month LIBOR. All the notes are currently indexed to three-month
LIBOR.
Payment Structure:
Nelnet 2004-3: CE is provided by overcollateralization, excess
spread and, for the class A notes, subordination. As of the current
reporting period, total and senior effective parity ratios
(including the reserve) are 102.13% (2.09% CE) and 109.85% (8.97%
CE). Liquidity support is provided by a reserve, which is currently
at its floor of $2,011,386.13. The transaction will continue to
release cash as long as the target overcollateralization amount of
$921,831.95 is maintained.
Nelnet 2004-4: CE is provided by overcollateralization excess
spread and, for the class A notes, subordination. As of the current
reporting period, total and senior effective parity ratios
(including the reserve) are 109.34% (8.54% CE) and 124.92% (19.95%
CE). Liquidity support is provided by a reserve, which is currently
at its floor of $2,991,407.19. The transaction will continue to
release cash as long as the target overcollateralization amount of
$2,152,841.15 is maintained.
Nelnet 2005-2: CE is provided by overcollateralization, excess
spread and, for the class A notes, subordination. As of the current
reporting period, total and senior effective parity ratios
(including the reserve) are 104.23% (4.06% CE) and 113.72% (12.07%
CE). Liquidity support is provided by a reserve, which is currently
at its floor of $2,976,292.60. The transaction will continue to
release cash as long as the target overcollateralization amount of
$1,433,657.96 is maintained.
Nelnet 2005-3: CE is provided by overcollateralization, excess
spread and, for the class A notes, subordination. As of the current
reporting period, total and senior effective parity ratios
(including the reserve) are 105.56% (5.26% CE) and 116.47% (14.14%
CE). Liquidity support is provided by a reserve, which is currently
at its floor of $1,988,699.90. The transaction will continue to
release cash as long as the target overcollateralization amount of
$ 1,325,800.10 is maintained.
Nelnet 2005-4: CE is provided by overcollateralization, excess
spread and, for the class A notes, subordination. As of the current
reporting period, total and senior effective parity ratios
(including the reserve) are 101.11% (1.10% CE) and 106.15% (5.80%
CE). Liquidity support is provided by a reserve, which is currently
at its floor of $2,841,887.45. The transaction will continue to
release cash as long as the target overcollateralization amount of
$ 1,116,965.95 is maintained.
Nelnet 2006-1: Credit enhancement (CE) is provided by
overcollateralization (OC), excess spread and for the class A notes
and subordination. As of the current reporting period, for Nelnet
2006-1, total and senior effective parity ratio (which includes the
reserve account) are, 100.74% (074% CE) and 105.30% (5.03% CE)
respectively. The required reserve account balance is 0.25% of the
current pool balance with a floor of $2,951,197. Excess cash is
currently being released from the trust.
Operational Capabilities: Day-to-day servicing is provided by
Nelnet, Inc. Fitch believes Nelnet to be an acceptable servicer,
due to its extensive track record as one of the largest servicers
of FFELP loans.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Nelnet Student Loan Trust 2004-3
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAA 'sf'; 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 'AAsf'; class B 'AAsf'
Nelnet Student Loan Trust 2004-4
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAA 'sf'; 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 'AAAsf'
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'
Nelnet Student Loan Trust 2005-2
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAA 'sf'; 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 'AAAsf'
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 'AAsf'
Nelnet Student Loan Trust 2005-3
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAA 'sf'; 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 'AAAsf'
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'
Nelnet Student Loan Trust 2005-4
The current ratings reflect the risk the senior notes miss their
legal final maturity date under Fitch's base case maturity
scenario. If the margin by which these classes miss their legal
final maturity date increases, or does not improve as the maturity
date nears, the ratings may be downgraded further. Additional
defaults, increased basis spreads beyond Fitch's published
stresses, lower-than-expected payment speed or loan term extension
are factors that could lead to future rating downgrades.
Nelnet Student Loan Trust 2006-1
-- Default increase 25%: class A 'AAAA 'sf'; class B 'AAsf'
-- Default increase 50%: class A 'AAAsf'; class B 'Asf'
-- Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf'
-- Basis spread increase 0.50%: class A 'Asf; class B 'BBBsf'
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 'AAAAsf'; 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'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Nelnet Student Loan Trust 2004-3
No upgrade sensitivity is provided for the class A notes given
Fitch rates them 'AAAsf'.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAAsf'
-- Basis Spread decrease 0.25%: class B 'AAAsf'
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'AAAsf'
-- IBR usage decrease 25%: class B 'AAAsf'
Nelnet Student Loan Trust 2004-4
No upgrade sensitivity is provided for the class A and B notes
given Fitch rates them 'AAAsf'.
Nelnet Student Loan Trust 2005-2
No upgrade sensitivity is provided for the class A notes given
Fitch rates them 'AAAsf'.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAAsf'
-- Basis Spread decrease 0.25%: class B 'AAAsf'
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'AAAsf'
-- IBR usage decrease 25%: class B 'AAAsf'
Nelnet Student Loan Trust 2005-3
No upgrade sensitivity is provided for the class A notes given
Fitch rates them 'AAAsf'.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAAsf'
-- Basis Spread decrease 0.25%: class B 'AAAsf'
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'AAAsf'
-- IBR usage decrease 25%: class B 'AAAsf'
Nelnet Student Loan Trust 2005-4
The current ratings are most sensitive to Fitch's maturity risk
scenario. Key factors that may lead to positive rating action are
sustained increases in payment rate and a material reduction in
weighted average remaining loan term. A material increase of credit
enhancement from lower defaults and positive excess spread, given
favorable basis spread conditions, is a secondary factor that may
lead positive rating action.
Nelnet Student Loan Trust 2006-1
No upgrade sensitivity is provided for the class A notes given
Fitch rates them 'AAAsf'.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAAsf'
-- Basis Spread decrease 0.25%: class B 'AAAsf'
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'AAAsf'
-- IBR usage decrease 25%: class B 'AAAsf'
-- Remaining Term decrease 25%: class B 'AAAsf'
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.
NEUBERGER BERMAN 46: Moody's Rates $24MM Class E Notes 'Ba3'
------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Neuberger Berman Loan Advisers CLO 46, Ltd. (the
"Issuer" or "Neuberger Berman Loan Advisers CLO 46").
Moody's rating action is as follows:
US$372,000,000 Class A Senior Secured Floating Rate Notes due 2034
[1], Definitive Rating Assigned Aaa (sf)
US$24,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2036, Definitive Rating Assigned Ba3 (sf)
The notes listed above 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.
Neuberger Berman Loan Advisers CLO 46 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, cash and eligible
investments, and up to 10% of the portfolio may consist of second
lien loans and unsecured loans. The portfolio is approximately 80%
ramped as of the closing date.
Neuberger Berman Loan Advisers II 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 three classes of
secured notes and one class 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $600,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2950
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 8 years
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.
OAKTREE CLO 2021-2: S&P Assigns B- (sf) Rating on Class F Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Oaktree CLO 2021-2
Ltd./Oaktree CLO 2021-2 LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term
loans. The transaction is managed by Oaktree Capital Management
L.P.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Oaktree CLO 2021-2 Ltd./Oaktree CLO 2021-2 LLC
Class A, $254.0 million: AAA (sf)
Class B-1, $35.0 million: AA (sf)
Class B-2, $15.0 million: AA (sf)
Class C-1 (deferrable), $20.0 million: A (sf)
Class C-2 (deferrable), $4.0 million: A (sf)
Class D-1 (deferrable), $17.0 million: BBB+ (sf)
Class D-2 (deferrable), $7.0 million: BBB- (sf)
Class E (deferrable), $15.0 million: BB- (sf)
Class F (deferrable), $7.0 million: B- (sf)
Subordinated notes, $32.4 million: Not rated
OHA CREDIT 10: Moody's Assigns Ba3 Rating to Class E Notes
----------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued and one class of loans incurred by OHA Credit Funding
10, Ltd. (the "Issuer" or "OHA Credit Funding 10").
Moody's rating action is as follows:
US$3,000,000 Class X Senior Secured Floating Rate Notes due 2036,
Definitive Rating Assigned Aaa (sf)
US$164,500,000 Class A Senior Secured Floating Rate Notes due 2036,
Definitive Rating Assigned Aaa (sf)
US$280,000,000 Class A-L Loans due 2036, Definitive Rating Assigned
Aaa (sf)
Up to U.S.$280,000,000 Class A-L Senior Secured Floating Rate Notes
due 2036, Definitive Rating Assigned Aaa (sf)
US$21,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2036, Definitive Rating Assigned Ba3 (sf)
The notes and loans listed above are referred to herein,
collectively, as the "Rated Debt." On the closing date, the Class
A-L Loans and the Class A-L Notes have a principal balance of
$280,000,000 and $0, respectively. At any time, the Class A-L Loans
may be converted in whole or in part to Class A-L Notes, thereby
decreasing the principal balance of the Class A-L Loans and
increasing, by the corresponding amount, the principal balance of
the Class A-L Notes. The aggregate principal balance of the Class
A-L Loans and Class A-L Notes will not exceed $280,000,000, less
the amount of any principal repayments.
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
OHA Credit Funding 10 is a managed cash flow CLO. The issued debt
is collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
senior secured loans, and up to 10% of the portfolio may consist of
second lien loans, unsecured loans or permitted non-loan assets.
The portfolio is approximately 90% ramped as of the closing date.
Oak Hill Advisors, L.P. (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 Debt, the Issuer issued an additional four
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the debt 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: 55
Weighted Average Rating Factor (WARF): 2993
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 9.75 years
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
OSD CLO 2021-23: Fitch Assigns BB+ Rating on Class E Tranche
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to OSD CLO
2021-23, Ltd.
DEBT RATING
---- ------
OSD CLO 2021-23, Ltd.
A LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB+sf New Rating
E LT BB+sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
OSD CLO 2021-23, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Onex Credit
Partners, LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400.0 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.7 versus a maximum covenant, in accordance with the
initial matrix point of 26.0. Issuers rated in the 'B' rating
category denote a highly speculative credit quality; however, the
class A, B, C, D and E notes benefit from credit enhancement (CE)
of 32.0%, 20.0%, 14.0%, 10.5% and 7.0% respectively, and standard
U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.6% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.6% versus a
minimum covenant, in accordance with the initial expected matrix
point of 75.6%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 50.0% of the portfolio balance in aggregate, while
no obligors can represent greater than 2.0% of the portfolio
balance. The level of diversity required by industry, obligor and
geographic concentrations is in line with other recent U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 0.8-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In the agency's stress scenarios, the class A, B, C, D
and E notes can withstand default rates of up to 54.3%, 49.2%,
43.8%, 42.2% and 41.5%, respectively, assuming portfolio recovery
rates of 41.0%, 49.3%, 58.6%, 67.7% and 73.9% in Fitch's 'AAAsf',
'AAsf', 'Asf', 'BBB+sf' and 'BB+sf' scenarios, respectively. The
performance of the class A through E notes at the other matrix
points is in line with other recent CLO notes using a Fitch
matrix.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in
a downgrade. Fitch evaluated the notes' sensitivity to
potential changes in such a metric.
-- The results under these sensitivity scenarios are between
'BBB+sf' and 'AAAsf' for class A, between 'BB+sf' and 'AA-sf'
for class B, between 'Bsf' and 'Asf' for class C, between less
than 'B-sf' and 'BBB+sf' for class D, and between less than
'B-sf' and 'BB+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A notes, as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in
recovery rates and decreases in default rates, could result in
an upgrade.
-- Fitch evaluated the notes' sensitivity to potential changes in
such metrics; results under these sensitivity scenarios are
'AAAsf' for class B notes, between 'A+sf' and 'AA+sf' for
class C notes, 'A+sf' for class D notes, and between 'BBB+sf'
and 'A+sf' for class E notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
PALMER SQUARE 2020-3: S&P Assigns B- (sf) Rating on Class E-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1a-R,
A-1b-R, A-2-R, B-R, C-R, D-R, and E-R replacement notes from Palmer
Square CLO 2020-3 Ltd., a CLO originally issued in December 2020
that is managed by Palmer Square Capital Management. At the same
time, S&P withdrew its ratings on the original class A-1a, A-1b,
A-2, B, C, D, and E notes following payment in full on the Dec. 22,
2021, refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The required overcollateralization ratios for the class C and D
notes were lowered, along with reinvestment overcollateralization
test trigger.
-- The notional balance of the class C-R notes increased by $4
million to $24 million from the original $20 million of the class C
notes.
-- The collateral obligation definition was amended to prohibit
the purchase of debt securities related to controversial weapons.
-- A non-call period extending through Nov. 15, 2022, was
implemented.
-- The subordinated notes remain outstanding following the
refinancing.
Replacement And Original Note Issuances
Replacement notes
Class A-1a-R, $248.0 million: Three-month LIBOR + 1.08%
Class A-1b-R, $8.0 million: Three-month LIBOR + 1.35%
Class A-2-R, $48.0 million: Three-month LIBOR + 1.60%
Class B-R, $24.0 million: Three-month LIBOR + 1.95%
Class C-R, $24.0 million: Three-month LIBOR + 2.95%
Class D-R, $16.0 million: Three-month LIBOR + 6.00%
Class E-R, $6.0 million: Three-month LIBOR + 7.91%
Original notes
Class A-1a, $248.0 million: Three-month LIBOR + 1.37%
Class A-1b, $8.0 million: Three-month LIBOR + 1.65%
Class A-2, $48.0 million: Three-month LIBOR + 1.85%
Class B, $24.0 million: Three-month LIBOR + 2.65%
Class C, $20.0 million: Three-month LIBOR + 4.00%
Class D, $16.0 million: Three-month LIBOR + 7.40%
Class E, $6.0 million: Three-month LIBOR + 8.92%
Subordinated notes, $31.1 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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Palmer Square CLO 2020-3 Ltd.
Class A-1a-R, $248.0 million: AAA (sf)
Class A-1b-R, $8.0 million: AAA (sf)
Class A-2-R, $48.0 million: AA (sf)
Class B-R, $24.0 million: A (sf)
Class C-R, $24.0 million: BBB- (sf)
Class D-R, $16.0 million: BB- (sf)
Class E-R, $6.0 million: B- (sf)
Ratings Withdrawn
Palmer Square CLO 2020-3 Ltd.
Class A-1a to not rated from 'AAA (sf)'
Class A-1b to not rated from 'AAA (sf)'
Class A-2 to not rated from 'AA (sf)'
Class B to not rated from 'A (sf)'
Class C to not rated from 'BBB- (sf)'
Class D to not rated from 'BB- (sf)'
Class D to not rated from 'B- (sf)'
Other Outstanding Ratings
Palmer Square CLO 2020-3 Ltd.
Subordinated notes, $31.1 million: Not rated
PMT LOAN 2021-INV2: Moody's Assigns (P)B2 Rating to Class B-5 Debt
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 53
classes of residential mortgage-backed securities (RMBS) issued by
PMT Loan Trust 2021-INV2 (PMTLT 2021-INV2). The ratings range from
(P)Aaa (sf) to (P)B2 (sf).
PMTLT 2021-INV2 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by PennyMac
Corp. (PennyMac), the seller and sponsor of this transaction.
PennyMac acquired the mortgage loans in the pool through its
corresponding lending channel. All of the mortgage loans satisfy
the eligibility criteria of Federal National Mortgage Association
(Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie
Mac) (collectively, GSEs). This deal represents the second
PennyMac-sponsored 100% GSE eligible investor property transaction
in 2021. Overall, the credit quality of the mortgage loans backing
this transaction is in-line with recently issued GSE eligible
investor property transactions Moody's has rated.
PennyMac Loan Services, LLC is the servicer and responsible for
making servicing and principle and interest (P&I) advances. There
is no master servicer in this transaction. Citibank N.A. (long-term
debt Aa3), will be the fiscal agent and will act as the backup
advancing party with respect to advancing obligations.
As of the closing date, the sponsor or a majority-owned affiliate
of the sponsor intends to retain an eligible vertical interest or
eligible horizontal residual interest, or any combination thereof,
equal to at least 5% economic interest in the credit risk of assets
collateralizing a securities transaction.
One third-party review (TPR) firm verified the accuracy of the loan
level information that Moody's received from the sponsor. The firms
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 43.65% (by initial loan count) of the
mortgage loans in the collateral pool.
In this transaction, the Class A-11X 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 certificates, including the floating rate certificates, are
subject to the net WAC cap, which prevents the floating rate
certificates 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.
The complete rating action are as follows.
Issuer: PMT Loan Trust 2021-INV2
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-11X*, 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-25, Assigned (P) Aaa (sf)
Cl. A-26, Assigned (P) Aa1 (sf)
Cl. A-27, Assigned (P) Aa1 (sf)
Cl. A-28, Assigned (P) Aa1 (sf)
Cl. A-29, Assigned (P) Aaa (sf)
Cl. A-30, Assigned (P) Aaa (sf)
Cl. A-31, Assigned (P) Aaa (sf)
Cl. A-X1*, Assigned (P) Aaa (sf)
Cl. A-X4*, Assigned (P) Aaa (sf)
Cl. A-X5*, Assigned (P) Aaa (sf)
Cl. A-X6*, Assigned (P) Aaa (sf)
Cl. A-X8*, Assigned (P) Aaa (sf)
Cl. A-X10*, Assigned (P) Aaa (sf)
Cl. A-X13*, Assigned (P) Aaa (sf)
Cl. A-X15*, Assigned (P) Aaa (sf)
Cl. A-X17*, Assigned (P) Aaa (sf)
Cl. A-X19*, Assigned (P) Aaa (sf)
Cl. A-X21*, Assigned (P) Aaa (sf)
Cl. A-X25*, Assigned (P) Aaa (sf)
Cl. A-X26*, Assigned (P) Aa1 (sf)
Cl. A-X27*, Assigned (P) Aa1 (sf)
Cl. A-X28*, Assigned (P) Aa1 (sf)
Cl. A-X30*, Assigned (P) Aaa (sf)
Cl. B-1, Assigned (P) Aa3 (sf)
Cl. B-2, 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-mean is
0.78%, in a baseline scenario-median is 0.55%, and reaches 5.15% at
a stress level consistent with Moody's Aaa ratings.
Moody's said, "We base our ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, our assessments of the origination quality and
servicing arrangement, the strength of the TPR and the
representations & warranties (R&W) framework of the transaction."
Collateral Description
As of the cut-off date, the mortgage loans will consist of 827
conforming mortgage loans secured by first lien investment property
with an aggregate stated principal balance (UPB) of approximately
$298,630,269, with an original term to maturity between ten (10)
and thirty (30) years. All of the mortgage loans in the pool were
run through one of the GSE automated underwriting systems (AUS) and
received an "Approve" or "Accept" recommendation.
Overall, 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. The average liquid/cash
reserves is $307,114 with approximately 68.8% of the borrowers (by
UPB) having more than 60 months of liquid/cash reserves. The
weighted average (WA) FICO for the aggregate pool is 781 with a WA
LTV of 60.7% and WA CLTV of 60.8%. Approximately 37.5% of the
mortgage loans (by UPB) were originated in California and
approximately 2.33% of the mortgage loans (by UPB) have primary
mortgage insurance coverage. The pool has clean pay history and WA
seasoning of approximately three months. No borrower under any
mortgage loan is currently in an active COVID-19 related
forbearance plan with the servicer. All mortgage loans are current
as of the cut-off date.
Approximately 4.17% (by UPB) of the mortgage loans by count are
"Appraisal Waiver" (AW) loans, whereby the sponsor obtained an AW
for each such mortgage loan from Fannie Mae or Freddie Mac through
their respective programs. In each case, neither Fannie Mae nor
Freddie Mac required an appraisal of the related mortgaged property
as a condition of approving the related mortgage loan for purchase
by Fannie Mae or Freddie Mac, as applicable. All of the AW loans
had a secondary valuation product (26 with an automatic valuation
model and 14 with a broker price opinion). Because AW loans may
present a greater risk as the value of the related mortgaged
properties may be less than the value ascribed to such mortgaged
properties, Moody's made an adjustment in its analysis to account
for the increased risk associated with such loans.
Aggregation and Origination Quality
PennyMac's loan program consists of retail origination,
correspondent lending, and whole loan purchases nationwide. All of
the mortgage loans in the pool were acquired by PennyMac via
correspondent lending. Based on the available information related
to PennyMac's valuation and risk management practices, Moody's
took into account qualitative factors during the ratings process
including its review of the origination quality and servicing
arrangement, the results of the TPR, and the R&W framework. Moody's
considers PennyMac to be an adequate originator of conforming
mortgages. As a result, Moody's did not make any adjustments to its
base case and Aaa stress loss assumptions based on Moody's review
of PennyMac's origination practices/underwriting, audit/quality
control and loan performance.
Servicing Arrangement
Moody's said, "We assess the overall servicing arrangement for this
pool as adequate, given the ability, scale and experience of
PennyMac Loan Services, LLC as a servicer. However, compared to
other prime transactions which typically have a master servicer,
servicer oversight for this transaction is relatively weaker.
Overall, we did not apply any adjustment to our expected losses for
the lack of master servicer due to the following mitigants: (i)
PennyMac Loan Services, LLC was established in 2008 and is an
experienced servicer of residential mortgage loans; PennyMac Loan
Services, LLC is an approved servicer for both Fannie Mae and
Freddie Mac; (ii) PennyMac had no instances of non-compliance for
its 2020 Regulation AB or Uniformed Single Audit Program (USAP)
independent servicer reviews; (iii) Although not directly related
to this transaction, there is still third party oversight of
PennyMac Loan Services, LLC from the GSEs, the CFPB, the accounting
firms and state regulators; (iv) The complexity of the loan product
is relatively low, reducing the complexity of servicing and
reporting; and (v) Citibank, N.A, is the securities administrator
and fiscal agent, and backup advancing party with respect to P&I
advances.
Third-Party Review
One TPR firm verified the accuracy of the loan level information
that Moody's received from the sponsor. The firm conducted detailed
credit, property valuation, data accuracy and compliance reviews on
354 out of 827 loans (42.8% by final loan count). The number of
mortgage loans that went through a full due diligence review meets
Moody's credit neutral threshold. However, the results of the TPR
are weaker than those for other confirming transactions from other
programs. According to the preliminary TPR results, 5 mortgage
loans had a final credit grade C or D, 2 mortgage loans had a final
compliance grade C, and 5 mortgage loans had a final valuation
grade C. While these mortgage loans were ultimately excluded from
the final mortgage pool, Moody's nevertheless made an adjustment to
its losses by extrapolating the aforementioned results to the
non-sampled portion of the pool.
Representations & Warranties
Moody's assessed the R&Ws 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.
PennyMac (the R&W provider) makes the loan level R&Ws for the
mortgage loans. Moody's applied a qualitative adjustment in its
model analysis to account for certain weaknesses in the R&W
framework. First, the R&W provider (unrated) may not have the
financial wherewithal to remedy defective mortgage loans in a
stressed economic environment, given that its monoline mortgage
business is highly correlated with the economy. Second, PennyMac is
the R&W provider and a MOA of PennyMac is the controlling holder in
this transaction, which Moody's considers to be a weak alignment of
interest as PennyMac may not force any R&W breach review which will
in-turn force it to buy-back the mortgage loans. The alignment of
interest concern is partially mitigated because (a) if the
controlling holder fails to act, the directing holder can direct
the trustee to do so, and (b) PennyMac is a 100% correspondent
platform and PennyMac has a history of buying back mortgage loans
and enforcing its R&W obligations with the underlying corresponding
sellers, as applicable. Moody's has adjusted its loss expectations
to account for these weaknesses in the R&W framework.
Transaction Structure
PMTLT 2021-INV2 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 1.15% 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.
PMT LOAN 2021-INV2: Moody's Assigns B2 Rating to Class B-5 Debt
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 53
classes of residential mortgage-backed securities (RMBS) issued by
PMT Loan Trust 2021-INV2 (PMTLT 2021-INV2). The ratings range from
Aaa (sf) to B2 (sf).
PMTLT 2021-INV2 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by PennyMac
Corp. (PennyMac), the seller and sponsor of this transaction.
PennyMac acquired the mortgage loans in the pool through its
corresponding lending channel. All of the mortgage loans satisfy
the eligibility criteria of Federal National Mortgage Association
(Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie
Mac) (collectively, GSEs). This deal represents the second
PennyMac-sponsored 100% GSE eligible investor property transaction
in 2021. Overall, the credit quality of the mortgage loans backing
this transaction is in-line with recently issued GSE eligible
investor property transactions Moody's has rated.
PennyMac Loan Services, LLC is the servicer and responsible for
making servicing and principle and interest (P&I) advances. There
is no master servicer in this transaction. Citibank N.A. (long-term
debt Aa3), will be the fiscal agent and will act as the backup
advancing party with respect to advancing obligations.
As of the closing date, the sponsor or a majority-owned affiliate
of the sponsor intends to retain an eligible vertical interest or
eligible horizontal residual interest, or any combination thereof,
equal to at least 5% economic interest in the credit risk of assets
collateralizing a securities transaction.
One third-party review (TPR) firm verified the accuracy of the loan
level information that Moody's received from the sponsor. The firms
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 43.65% (by initial loan count) of the
mortgage loans in the collateral pool.
In this transaction, the Class A-11X 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 certificates, including the floating rate certificates, are
subject to the net WAC cap, which prevents the floating rate
certificates 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.
The complete rating action are as follows.
Issuer: PMT Loan Trust 2021-INV2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11X*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. A-25, Definitive Rating Assigned Aaa (sf)
Cl. A-26, Definitive Rating Assigned Aa1 (sf)
Cl. A-27, Definitive Rating Assigned Aa1 (sf)
Cl. A-28, Definitive Rating Assigned Aa1 (sf)
Cl. A-29, Definitive Rating Assigned Aaa (sf)
Cl. A-30, Definitive Rating Assigned Aaa (sf)
Cl. A-31, Definitive Rating Assigned Aaa (sf)
Cl. A-X1*, Definitive Rating Assigned Aaa (sf)
Cl. A-X4*, Definitive Rating Assigned Aaa (sf)
Cl. A-X5*, Definitive Rating Assigned Aaa (sf)
Cl. A-X6*, Definitive Rating Assigned Aaa (sf)
Cl. A-X8*, Definitive Rating Assigned Aaa (sf)
Cl. A-X10*, Definitive Rating Assigned Aaa (sf)
Cl. A-X13*, Definitive Rating Assigned Aaa (sf)
Cl. A-X15*, Definitive Rating Assigned Aaa (sf)
Cl. A-X17*, Definitive Rating Assigned Aaa (sf)
Cl. A-X19*, Definitive Rating Assigned Aaa (sf)
Cl. A-X21*, Definitive Rating Assigned Aaa (sf)
Cl. A-X25*, Definitive Rating Assigned Aaa (sf)
Cl. A-X26*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X27*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X28*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X30*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned 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-mean is
0.78%, in a baseline scenario-median is 0.55%, and reaches 5.11% at
a stress level consistent with its Aaa ratings.
Moody's bases its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
its assessments of the origination quality and servicing
arrangement, the strength of the TPR and the representations &
warranties (R&W) framework of the transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 827
conforming mortgage loans secured by first lien investment property
with an aggregate stated principal balance (UPB) of approximately
$298,630,269, with an original term to maturity between ten (10)
and thirty (30) years. All of the mortgage loans in the pool were
run through one of the GSE automated underwriting systems (AUS) and
received an "Approve" or "Accept" recommendation.
Overall, 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. The average liquid/cash
reserves is $307,114 with approximately 68.8% of the borrowers (by
UPB) having more than 60 months of liquid/cash reserves. The
weighted average (WA) FICO for the aggregate pool is 781 with a WA
LTV of 60.7% and WA CLTV of 60.8%. Approximately 37.5% of the
mortgage loans (by UPB) were originated in California and
approximately 2.33% of the mortgage loans (by UPB) have primary
mortgage insurance coverage. The pool has clean pay history and WA
seasoning of approximately three months. No borrower under any
mortgage loan is currently in an active COVID-19 related
forbearance plan with the servicer. All mortgage loans are current
as of the cut-off date.
Approximately 4.17% (by UPB) of the mortgage loans by count are
"Appraisal Waiver" (AW) loans, whereby the sponsor obtained an AW
for each such mortgage loan from Fannie Mae or Freddie Mac through
their respective programs. In each case, neither Fannie Mae nor
Freddie Mac required an appraisal of the related mortgaged property
as a condition of approving the related mortgage loan for purchase
by Fannie Mae or Freddie Mac, as applicable. All of the AW loans
had a secondary valuation product (26 with an automatic valuation
model and 14 with a broker price opinion). Because AW loans may
present a greater risk as the value of the related mortgaged
properties may be less than the value ascribed to such mortgaged
properties, Moody's made an adjustment in its analysis to account
for the increased risk associated with such loans.
Aggregation and Origination Quality
PennyMac's loan program consists of retail origination,
correspondent lending, and whole loan purchases nationwide. All of
the mortgage loans in the pool were acquired by PennyMac via
correspondent lending. Based on the available information related
to PennyMac's valuation and risk management practices, Moody's took
into account qualitative factors during the ratings process
including its review of the origination quality and servicing
arrangement, the results of the TPR, and the R&W framework. Moody's
considers PennyMac to be an adequate originator of conforming
mortgages. As a result, Moody's did not make any adjustments to its
base case and Aaa stress loss assumptions based on its review of
PennyMac's origination practices/underwriting, audit/quality
control and loan performance.
Servicing Arrangement
Moody's said, "We assess the overall servicing arrangement for this
pool as adequate, given the ability, scale and experience of
PennyMac Loan Services, LLC as a servicer. However, compared to
other prime transactions which typically have a master servicer,
servicer oversight for this transaction is relatively weaker.
Overall, we did not apply any adjustment to our expected losses for
the lack of master servicer due to the following mitigants: (i)
PennyMac Loan Services, LLC was established in 2008 and is an
experienced servicer of residential mortgage loans; PennyMac Loan
Services, LLC is an approved servicer for both Fannie Mae and
Freddie Mac; (ii) PennyMac had no instances of non-compliance for
its 2020 Regulation AB or Uniformed Single Audit Program (USAP)
independent servicer reviews; (iii) Although not directly related
to this transaction, there is still third party oversight of
PennyMac Loan Services, LLC from the GSEs, the CFPB, the accounting
firms and state regulators; (iv) The complexity of the loan product
is relatively low, reducing the complexity of servicing and
reporting; and (v) Citibank, N.A, is the securities administrator
and fiscal agent, and backup advancing party with respect to P&I
advances."
Third-Party Review
One TPR firm verified the accuracy of the loan level information
that Moody's received from the sponsor. The firm conducted detailed
credit, property valuation, data accuracy and compliance reviews on
354 out of 827 loans (42.8% by final loan count). The number of
mortgage loans that went through a full due diligence review meets
Moody's credit neutral threshold. However, the results of the TPR
are weaker than those for other confirming transactions from other
programs. According to the preliminary TPR results, 5 mortgage
loans had a final credit grade C or D, 2 mortgage loans had a final
compliance grade C, and 5 mortgage loans had a final valuation
grade C. While these mortgage loans were ultimately excluded from
the final mortgage pool, Moody's nevertheless made an adjustment to
its losses by extrapolating the aforementioned results to the
non-sampled portion of the pool.
Representations & Warranties
Moody's said, "We assessed the R&Ws 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. We 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."
PennyMac (the R&W provider) makes the loan level R&Ws for the
mortgage loans. Moody's said, "We applied a qualitative adjustment
in our model analysis to account for certain weaknesses in the R&W
framework. First, the R&W provider (unrated) may not have the
financial wherewithal to remedy defective mortgage loans in a
stressed economic environment, given that its monoline mortgage
business is highly correlated with the economy. Second, PennyMac is
the R&W provider and a MOA of PennyMac is the controlling holder in
this transaction, which we consider to be a weak alignment of
interest as PennyMac may not force any R&W breach review which will
in-turn force it to buy-back the mortgage loans. The alignment of
interest concern is partially mitigated because (a) if the
controlling holder fails to act, the directing holder can direct
the trustee to do so, and (b) PennyMac is a 100% correspondent
platform and PennyMac has a history of buying back mortgage loans
and enforcing its R&W obligations with the underlying corresponding
sellers, as applicable. We have adjusted our loss expectations to
account for these weaknesses in the R&W framework."
Transaction Structure
PMTLT 2021-INV2 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 1.15% 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.
RAD CLO 14: Moody's Assigns Ba3 Rating to $20MM Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by RAD CLO 14, Ltd. (the "Issuer" or "RAD CLO 14").
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
RAD CLO 14 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
7.5% of the portfolio may consist of second-lien loans, permitted
non-loan assets, and unsecured loans, of which 5% may consist of
permitted non-loan assets. The portfolio is approximately 95%
ramped as of the closing date.
Irradiant Partners, LP (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.
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: 65
Weighted Average Rating Factor (WARF): 3274
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.0%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 years
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.
RAD CLO 15: Moody's Assigns Ba3 Rating to $15MM Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Rad CLO 15, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$252,000,000 Class A Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$52,000,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$24,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$15,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed above are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Rad CLO 15, Ltd. is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, permitted
non-loan assets, and unsecured loans. The portfolio is
approximately 88% ramped as of the closing date.
Irradiant Partners, LP (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 three-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 subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2784
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.0 years
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.
RATE MORTGAGE 2021-HB1: Moody's Rates Class B-5 Debt 'B3'
---------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 82
classes of residential mortgage-backed securities (RMBS) issued by
RATE Mortgage Trust (RATE) 2021-HB1. The ratings range from Aaa
(sf) to B3 (sf).
RATE 2021-HB1 is the first agency-eligible high balance issue and
fifth issue overall from Guaranteed Rate, Inc. (Guaranteed Rate or
GRI), the sponsor of the transaction.
The transaction is a prime RMBS securitization of predominantly
30-year, fixed rate agency-eligible high balance mortgage loans
with an aggregate stated principal balance of $382,880,138. All the
loans in the pool are originated by Guaranteed Rate and are
designated as Qualified Mortgages (QM) either under the QM safe
harbor or the GSE temporary exemption under the Ability-to-Repay
(ATR) rules. Borrowers of the mortgage loans backing this
transaction have strong credit profiles demonstrated by strong
credit scores and low loan-to-value (LTV) ratios. No borrower under
any mortgage loan is currently in an active COVID-19 related
forbearance plan with the servicer. All mortgage loans are current
as of the cut-off date.
Similar to the RATE 2021-J3 transaction Moody's has rated, RATE
2021-HB1 contains a structural deal mechanism according to which
the servicing administrator will not advance principal and interest
(P&I) to mortgage loans that are 120 days or more delinquent. Here,
the servicing administrator will be responsible for funding any
advance of delinquent monthly payments of principal and interest
due but not received by the servicer on the mortgage loans. The
sponsor and the servicing administrator are the same party, GRI.
One TPR firm verified the accuracy of the loan level information
that Moody's has received from the sponsor. This firm conducted
detailed credit, property valuation, data accuracy and compliance
reviews on 205 (37.3% by loan count) mortgage loans in the final
collateral pool. ServiceMac, LLC (ServiceMac) will service all of
the mortgage loans as of the cut-off Date. Computershare Trust
Company, N.A. (CTCNA) will be the master servicer. Moody's
considers the presence of a strong master servicer to be a mitigant
against the risk of any servicing disruptions.
The transaction 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 for each of the
certificate classes using Moody's proprietary cash flow tool.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
The complete rating actions are as follows:
Issuer: RATE Mortgage Trust 2021-HB1
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. A-25, Definitive Rating Assigned Aaa (sf)
Cl. A-26, Definitive Rating Assigned Aaa (sf)
Cl. A-27, Definitive Rating Assigned Aaa (sf)
Cl. A-28, Definitive Rating Assigned Aaa (sf)
Cl. A-29, Definitive Rating Assigned Aaa (sf)
Cl. A-30, Definitive Rating Assigned Aaa (sf)
Cl. A-31, Definitive Rating Assigned Aa1 (sf)
Cl. A-32, Definitive Rating Assigned Aa1 (sf)
Cl. A-33, Definitive Rating Assigned Aa1 (sf)
Cl. A-34, Definitive Rating Assigned Aa1 (sf)
Cl. A-35, Definitive Rating Assigned Aa1 (sf)
Cl. A-36, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-5*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-6*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-7*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-8*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-9*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-10*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-11*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-12*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-13*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-14*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-15*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-16*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-17*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-18*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-19*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-20*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-21*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-22*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-23*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-24*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-25*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-26*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-27*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-28*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-29*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-30*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-31*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-32*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-33*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-34*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-35*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-36*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-37*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Definitive Rating Assigned Aa3 (sf)
Cl. B-X-1*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-2A, Definitive Rating Assigned A3 (sf)
Cl. B-X-2*, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating 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
0.36%, in a baseline scenario-median is 0.17% and reaches 5.07% at
a stress level consistent with its Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
its assessments of the origination quality and servicing
arrangement, the strength of the TPR and the representations and
warranties (R&W) framework, and the transaction's legal structure
and documentation.
Collateral Description
In general, the borrowers have high FICO scores, high income,
significant liquid assets and a stable employment history, all of
which have been verified as part of the underwriting process and
for loans in the due diligence sample, reviewed by the TPR firm.
All the loans were originated through the retail channel. The
borrowers have a high weighted average total monthly income of
$18,813, significant weighted average liquid cash reserves of
$155,074 (approximately 41.2% of the pool has more than 24 months
of mortgage payments in reserve), and sizeable equity in their
properties (weighted average LTV of 66.9%, CLTV of 67.2%). The pool
has approximately 1.4 months of seasoning as of November 1, 2021,
and all loans are contractually current as of the cut-off date. All
of the mortgage loans in RATE 2021-HB1 are qualified mortgages (QM)
meeting the requirements of the safe harbor provision under the QM
safe harbor (per the original (old) QM rule) or the GSE temporary
exemption under the Ability-to-Repay (ATR) rules.
Origination Quality
Guaranteed Rate has originated 100% of the loan pool. Moody's
considers Guaranteed Rate to be an acceptable originator of
agency-eligible loans following a detailed review of its
underwriting guidelines, quality control processes, policies and
procedures, technology infrastructure, disaster recovery plan, and
historical performance information relative to its peers.
Therefore, Moody's did not apply a separate adjustment for
origination quality.
Founded in 2000 by Victor Ciardelli, Guaranteed Rate is the largest
non-bank jumbo mortgage originator in the U.S. and 3rd largest
retail originator overall (as of Q1 2021). Headquartered in
Chicago, the company has approximately 350+ branch offices across
the U.S. and is licensed in all 50 states and Washington, D.C. The
company employs over 6,500 employees nationwide. In 2020 Guaranteed
Rate funded nearly $74B in total loan volume ($9B from jumbo
loans), up 100% from 2019. The company invests heavily in
technology. Guaranteed Rate originates primarily through its retail
channels and focuses primarily on purchase, agency-eligible loans.
The company is an approved Ginnie Mae, Fannie Mae, and Freddie Mac
lender.
Servicing Arrangement
Moody's said, "We consider the overall servicing arrangement for
this pool to be adequate. ServiceMac has the necessary processes,
staff, technology and overall infrastructure in place to
effectively service a transaction. CTCNA is responsible for
servicer oversight, the termination of servicers and the
appointment of successor servicers in its role as a master
servicer. We did not make any adjustments to its base case and Aaa
stress loss assumptions based on the servicing arrangement."
Third-Party Review
One independent TPR firm was engaged to conduct due diligence for
the credit, regulatory compliance, property valuation, and data
accuracy on 205 loans in the final collateral pool (37.3% by loan
count). The due diligence results confirm compliance with the
originator's underwriting guidelines, no material regulatory
compliance issues, and no material property valuation issues. The
TPR identified all loans as level A grades and no level B, level C
or level D grades in its review. However, the sample size does not
meet its credit neutral criteria, therefore, Moody's made an
adjustment to loss levels to account for this risk.
Representations & Warranties
Moody's said, "We evaluate 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. We 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.
We 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. Overall, we consider the R&W
framework for this transaction to be adequate, generally consistent
with that of other prime transactions which we rated. However, we
applied an adjustment to its losses to account for the risk that
the R&W provider (unrated) may be unable to repurchase defective
loans in a stressed economic environment."
Transaction Structure
RATE 2021-HB1 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.
Similar to the RATE 2021-J3 transaction Moody's has rated, RATE
2021-HB1 contains a structural deal mechanism according to which
the servicing administrator will not advance principal and interest
to loans that are 120 days or more delinquent. Although this
feature lowers the risk of high advances that may negatively affect
the recoveries on liquidated loans, the reduction in interest
distribution amount is credit negative to the subordinate
certificates.
The balance and the interest accrued on these "Stop Advance
Mortgage Loans (SAML)" will be removed from the calculation of the
principal and interest distribution amounts with respect to the
seniors and subordinate bonds. The interest distribution amount
will be reduced by the interest accrued on the SAML loans. This
reduction will be allocated first to the subordinate certificates
and then to the senior certificates in the reverse order of payment
priority. In the case of the senior certificates, such reduction in
distribution amounts, are allocated (i) first to the senior support
(including the linked interest-only classes) and (ii) then to the
super senior classes (including the linked interest-only classes),
on a pro rata basis.
Once a SAML is liquidated, the net recovery from that loan's
liquidation is included in available funds and thus follows the
transaction's priority of payment. However, the reimbursement of
stop advance shortfalls happens only after liquidation or curing of
SAML. As a result, higher delinquencies could lead to higher
shortfalls especially for the subordinate bonds as compared to a
transaction without the stop advance feature.
"While the transaction is backed by collateral with strong credit
characteristics, we considered scenarios in which the delinquency
pipeline rises, and results in higher shortfalls for the
certificates outstanding. In our analysis, we have considered the
additional interest shortfall that the certificates may incur due
to the transaction's stop-advance feature," Moody's said.
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 0.80% of the cut-off date pool
balance, and as subordination lockout amount of 0.80% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to its
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.
REGATTA XXIII FUNDING: Moody's Rates $26.5MM Class E Notes 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Regatta XXIII Funding Ltd. (the "Issuer" or
"Regatta XXIII").
Moody's rating action is as follows:
US$5,000,000 Class X Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$315,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$10,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$52,500,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$24,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$31,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$26,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Regatta XXIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments, up
to 10% of the portfolio may consist of second lien loans, unsecured
loans and bonds, and up to 5% of the portfolio may consist of
bonds. The portfolio is approximately 95% ramped as of the closing
date.
Napier Park Global Capital (US) LP (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 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: 70
Weighted Average Rating Factor (WARF): 2870
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.0 years
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 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1242167.
Alternatively, please see the Rating Methodologies page on
www.moodys.com for a copy of this methodology.
Please note that a Request for Comment was published in which
Moody's requested market feedback on potential revisions to one or
more of the methodologies used in determining these Credit Ratings.
If the revised methodologies are implemented as proposed, it is not
currently expected that the Credit Ratings referenced in this press
release will be affected. Request for Comments can be found on the
rating methodologies page on www.moodys.com
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.
ROMARK CLO V: Moody's Rates $18.6MM Class E Notes 'Ba3'
-------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Romark CLO - V Ltd. (the "Issuer" or "Romark CLO -
V").
Moody's rating action is as follows:
US$4,000,000 Class X Senior Floating Rate Notes due 2035, Assigned
Aaa (sf)
US$256,000,000 Class A Senior Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$48,000,000 Class B Senior Floating Rate Notes due 2035, Assigned
Aa2 (sf)
US$22,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2035, Assigned A2 (sf)
US$23,400,000 Class D Deferrable Mezzanine Floating Rate Notes due
2035, Assigned Baa3 (sf)
US$18,600,000 Class E Deferrable Mezzanine Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above 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.
Romark CLO - V is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, unsecured
loans and permitted non-loan assets. The portfolio is approximately
100% ramped as of the closing date.
Romark CLO Advisors LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2765
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.0 years
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.
SCULPTOR CLO XXVIII: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sculptor CLO XXVIII
Ltd./Sculptor CLO XXVIII 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
Sculptor CLO XXVIII Ltd./Sculptor CLO XXVIII LLC
Class A, $248.0 million: AAA (sf)
Class B-1, $36.0 million: AA (sf)
Class B-2, $20.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D-1 (deferrable), $16.0 million: BBB (sf)
Class D-2 (deferrable), $8.0 million: BBB- (sf)
Class E (deferrable), $16.0 million: BB- (sf)
Subordinated A, $16.5 million: Not rated
Subordinated B, $23.5 million: Not rated
SIGNAL PEAK 10: Moody's Rates $18MM Class E Notes 'Ba3'
-------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Signal Peak CLO 10, Ltd. (the "Issuer" or "Signal
Peak 10").
Moody's rating action is as follows:
US$256,000,000 Class A Floating Rate Notes due 2035, Assigned Aaa
(sf)
US$48,000,000 Class B Floating Rate Notes due 2035, Assigned Aa2
(sf)
US$22,000,000 Class C Mezzanine Deferrable Floating Rate Notes due
2035, Assigned A2 (sf)
US$24,000,000 Class D Mezzanine Deferrable Floating Rate Notes due
2035, Assigned Baa3 (sf)
US$18,000,000 Class E Mezzanine Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above 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.
Signal Peak 10 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10.0% of
the portfolio may consist of second lien loans, unsecured loans and
permitted non-loan assets. The portfolio is approximately 85%
ramped as of the closing date.
ORIX Advisers, 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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8 years
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.
SOUND POINT XXXII: Moody's Rates Class E Notes 'Ba3'
----------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued and one class of loans incurred by Sound Point CLO
XXXII, Ltd. (the "Issuer" or "Sound Point XXXII").
Moody's rating action is as follows:
US$97,650,000 Class A Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
Up to U.S.$227,850,000 Class A-L Senior Secured Floating Rate Notes
due 2034, Assigned Aaa (sf)
US$227,850,000 Class A Loans due 2034, Assigned Aaa (sf)
US$55,200,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$18,300,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Assigned Aa2 (sf)
US$31,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$28,875,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$23,625,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes and loans listed above are referred to herein,
collectively, as the "Rated Debt."
The outstanding principal amount of the Class A-L Notes may be
increased by up to $227,850,000 and the outstanding principal
amount of the Class A Loans reduced to $0 upon the exercise of the
conversion option and the conversion of the Class A Loans into the
Class A-L 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.
Sound Point XXXII is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, unsecured
loans and bonds, provided no more than 5% of the portfolio may
consist of bonds . The portfolio is approximately 95% ramped as of
the closing date.
Sound Point Capital Management, LP (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 Debt, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $525,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2788
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.75%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9 years
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
STRATUS CLO 2021-2: Fitch Assigns BB+ Rating on Class F Tranche
---------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Stratus
CLO 2021-2, Ltd.
DEBT RATING
---- ------
Stratus CLO 2021-2, Ltd.
A LT AAAsf New Rating
B LT AA+sf New Rating
C LT A+sf New Rating
D LT BBB+sf New Rating
E LT BBB-sf New Rating
F LT BB+sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Stratus CLO 2021-2, Ltd. (the issuer) is a static arbitrage cash
flow collateralized loan obligation (CLO). Blackstone Liquid Credit
Strategies LLC will be the collateral manager for the transaction,
and net proceeds from the issuance of the secured and subordinated
notes will provide financing on a portfolio of approximately $500.0
million of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
purchased portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The purchased portfolio consists of 100%
first lien (inclusive of first lien last out) senior secured loans
and has a weighted average recovery assumption of 75.4%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 42.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 2.9% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction does not have a
reinvestment period; however, the issuer has the ability to extend
the weighted average life (WAL) of the portfolio as a result of
maturity amendments. Fitch Ratings' analysis was based on a
stressed portfolio incorporating potential maturity amendments on
the underlying loans as well as a one-notch downgrade on the Fitch
Issuer Default Rating (IDR) Equivalency for assets with a Negative
Outlook on the driving rating of the obligor. The shorter risk
horizon means the transaction is less vulnerable to underlying
price movements, economic conditions and asset performance.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. Each class of notes was able to withstand default
rates in excess of their respective rating hurdle.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in a
downgrade. Fitch evaluated the notes' sensitivity to potential
changes in such a metric. The results under these sensitivity
scenarios are between 'A-sf' and 'AAAsf' for class A notes, between
'BBB-sf' and 'AA+sf' for class B notes, between 'BB-sf' and 'A+sf'
for class C notes, between 'B-sf' and 'BBB+sf' for class D notes,
between 'B-sf' or lower and 'BBB+sf' for class E notes, and between
'B-sf' or lower and 'BBB-sf' for class F notes.
-- The issuer has the flexibility to apply principal proceeds to
acquire received obligations (e.g. rescue financing assets) so long
as each OC test is satisfied after giving effect to the
acquisition. Fitch ran a sensitivity scenario whereby the maximum
allowable amount of principal proceeds (taking into consideration
the OC requirements noted above) is applied to purchase these
loans, which are assumed to experience a 100% loss severity.
-- This reduction of par is assumed to occur on the closing date.
The results under this sensitivity were 'AAAsf' for class A notes,
'AA+sf' for class B notes, 'A+sf' for class C notes, between
'BBB+sf' and 'A-sf' for class D notes, between 'BB+sf' and 'BBB+sf'
for class E notes, and between 'BB+sf' and 'BBB-sf' for class F
notes.
-- The transaction allows the issuer to consent to spread
amendments on the underlying loans without regard for a minimum
weighted average spread (WAS) covenant. Fitch analyzed a spread
compression sensitivity where the WAS of the portfolio was reduced
by 33 bps (10% of the initial portfolio WAS), applied in 8-bp
increments during the first four quarters. The results under this
sensitivity was 'AAAsf' for class A notes, 'AA+sf' for class B
notes, 'A+sf' for class C notes, between 'BBB+sf' and 'Asf' for
class D notes, between 'BB+sf' and 'BBB+sf' for class E notes, and
between 'BB+sf' and 'BBBsf' for class F notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A notes, as
these notes are in the highest rating category of 'AAAsf'.
-- nVariability in key model assumptions, such as increases in
recovery rates and decreases in default rates, could result in an
upgrade. Fitch evaluated the notes' sensitivity to potential
changes in such metrics; results under these sensitivity scenarios
are 'AAAsf' for class B notes, between 'A+sf' and 'AA+sf' for class
C notes, between 'A+sf' and 'AAsf' for class D notes, between
'A-sf' and 'A+sf' for class E notes, and between 'BBB+sf' and
'A+sf' for class F notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
STRATUS CLO 2021-3: Fitch Assigns BB+ Rating on Class F Debt
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Stratus
CLO 2021-3, Ltd.
DEBT RATING
---- ------
Stratus CLO 2021-3, Ltd.
A LT AAAsf New Rating
B LT AA+sf New Rating
C LT A+sf New Rating
D LT BBB+sf New Rating
E LT BBB-sf New Rating
F LT BB+sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Stratus CLO 2021-3, Ltd. (the issuer) is a static arbitrage cash
flow collateralized loan obligation (CLO). Blackstone Liquid Credit
Strategies LLC will be the collateral manager for the transaction,
and net proceeds from the issuance of the secured and subordinated
notes will provide financing on a portfolio of approximately $400.0
million of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
purchased portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The purchased portfolio consists of 100%
first lien (inclusive of first lien last out) senior secured loans
and has a weighted average recovery assumption of 75.8%.
Portfolio Composition (Positive): The largest three industries
compose 38.9% of the portfolio balance in aggregate, while the top
five obligors represent 3.1% of the portfolio balance in aggregate.
The level of diversity required by industry, obligor and geographic
concentrations is in line with other recent U.S. CLOs.
Portfolio Management (Neutral): The transaction does not have a
reinvestment period; however, the issuer has the ability to extend
the weighted average life (WAL) of the portfolio as a result of
maturity amendments. Fitch's analysis was based on a stressed
portfolio incorporating potential maturity amendments on the
underlying loans, as well as a one-notch downgrade on the Fitch IDR
Equivalency Rating for assets with a Negative Outlook on the
driving rating of the obligor. The shorter risk horizon means the
transaction is less vulnerable to underlying price movements,
economic conditions and asset performance.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls,
and assessed the effectiveness of various structural features of
the transaction. Each class of notes was able to withstand default
rates in excess of their respective rating hurdle.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in
a downgrade. Fitch evaluated the notes' sensitivity to
potential changes in such a metric. The results under these
sensitivity scenarios are between 'A-sf' and 'AAAsf' for class
A notes, between 'BBB-sf' and 'AA+sf' for class B notes,
between 'BB-sf' and 'A+sf' for class C notes, between 'B-sf'
and 'BBB+sf' for class D notes, between less than 'B-sf' and
'BBB+sf' for class E notes, and between less than 'B-sf' and
'BBB-sf' for class F notes.
-- The issuer has the flexibility to apply principal proceeds to
acquire received obligations (e.g. rescue financing assets) so
long as each OC test is satisfied after giving effect to the
acquisition. Fitch ran a sensitivity scenario whereby the
maximum allowable amount of principal proceeds (taking into
consideration the OC requirements noted above) is applied to
purchase these loans, which are assumed to experience a 100%
loss severity.
-- This reduction of par is assumed to occur on the closing date.
The results under this sensitivity was 'AAAsf' for class A
notes, 'AA+sf' for class B notes, 'A+sf' for class C notes,
between 'BBB+sf' and 'A-sf' for class D notes, between 'BB+sf'
and 'BBBsf' for class E notes, and 'BB+sf' for class F notes.
-- The transaction allows the issuer to consent to spread
amendments on the underlying loans without regard for a
minimum weighted average spread covenant. Fitch analyzed a
spread compression sensitivity where the WAS of the portfolio
was reduced by 10% of the initial portfolio WAS, applied in 8-
bp increments during the first four quarters. The results
under this sensitivity was 'AAAsf' for class A notes, 'AA+sf'
for class B notes, 'A+sf' for class C notes, between 'BBB+sf'
and 'A-sf' for class D notes, between 'BB+sf' and 'BBB+sf' for
class E notes, and between 'BB+sf' and 'BBB-sf' for class F
notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A notes, as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in
recovery rates and decreases in default rates, could result in
an upgrade. Fitch evaluated the notes' sensitivity to
potential changes in such metrics.
-- The results under these sensitivity scenarios are 'AAAsf' for
class B notes, between 'AA-sf' and 'AA+sf' for class C notes,
between 'A+sf' and 'AAsf' for class D notes, between 'A-sf'
and 'A+sf' for class E notes, and between 'BBB+sf' and 'A+sf'
for class F notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
TIKEHAU US I: Moody's Rates $21MM Class E Notes 'Ba3'
-----------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Tikehau US CLO I Ltd. (the "Issuer" or "Tikehau
I").
Moody's rating action is as follows:
US$252,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$8,000,000 Class A-2 Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$40,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$23,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$21,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Tikehau I is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans, unsecured
loans and permitted debt securities provided that no more than 5.0%
of the portfolio may consist of permitted debt securities. The
portfolio is close to 100% ramped as of the closing date.
Tikehau Structured 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. This is the Manager's
first US CLO.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2740
Weighted Average Spread (WAS): 3.45%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 45.0%
Weighted Average Life (WAL): 8 years
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
TOWD POINT 2021-SJ2: Fitch Assigns B- Rating on 7 Tranches
----------------------------------------------------------
Fitch Ratings has assigned ratings to Towd Point Mortgage Trust
2021-SJ2 (TPMT 2021-SJ2).
DEBT RATING PRIOR
---- ------ -----
TPMT 2021-SJ2
A1A LT AAAsf New Rating AAA(EXP)sf
A1B LT AA-sf New Rating AA-(EXP)sf
A2 LT AA-sf New Rating AA-(EXP)sf
M1 LT A-sf New Rating A-(EXP)sf
M2 LT BBB-sf New Rating BBB-(EXP)sf
B1 LT BB-sf New Rating BB-(EXP)sf
B2 LT B-sf New Rating B-(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
B4 LT NRsf New Rating NR(EXP)sf
B5 LT NRsf New Rating NR(EXP)sf
A1 LT AA-sf New Rating AA-(EXP)sf
A1C LT AAAsf New Rating AAA(EXP)sf
A1CX LT AAAsf New Rating AAA(EXP)sf
A1D LT AAAsf New Rating AAA(EXP)sf
A1DX LT AAAsf New Rating AAA(EXP)sf
A1E LT AA-sf New Rating AA-(EXP)sf
A1EX LT AA-sf New Rating AA-(EXP)sf
A1F LT AA-sf New Rating AA-(EXP)sf
A1FX LT AA-sf New Rating AA-(EXP)sf
A3 LT AA-sf New Rating AA-(EXP)sf
A4 LT A-sf New Rating A-(EXP)sf
A5 LT BBB-sf New Rating BBB-(EXP)sf
A2A LT AA-sf New Rating AA-(EXP)sf
A2AX LT AA-sf New Rating AA-(EXP)sf
A2B LT AA-sf New Rating AA-(EXP)sf
A2BX LT AA-sf New Rating AA-(EXP)sf
M1A LT A-sf New Rating A-(EXP)sf
M1AX LT A-sf New Rating A-(EXP)sf
M1B LT A-sf New Rating A-(EXP)sf
M1BX LT A-sf New Rating A-(EXP)sf
M2A LT BBB-sf New Rating BBB-(EXP)sf
M2AX LT BBB-sf New Rating BBB-(EXP)sf
M2B LT BBB-sf New Rating BBB-(EXP)sf
M2BX LT BBB-sf New Rating BBB-(EXP)sf
B1A LT BB-sf New Rating BB-(EXP)sf
B1AX LT BB-sf New Rating BB-(EXP)sf
B1B LT BB-sf New Rating BB-(EXP)sf
B1BX LT BB-sf New Rating BB-(EXP)sf
B1C LT BB-sf New Rating BB-(EXP)sf
B1CX LT BB-sf New Rating BB-(EXP)sf
B2A LT B-sf New Rating B-(EXP)sf
B2AX LT B-sf New Rating B-(EXP)sf
B2B LT B-sf New Rating B-(EXP)sf
B2BX LT B-sf New Rating B-(EXP)sf
B2C LT B-sf New Rating B-(EXP)sf
B2CX LT B-sf New Rating B-(EXP)sf
B3A LT NRsf New Rating NR(EXP)sf
B3AX LT NRsf New Rating NR(EXP)sf
B3B LT NRsf New Rating NR(EXP)sf
B3BX LT NRsf New Rating NR(EXP)sf
B3C LT NRsf New Rating NR(EXP)sf
B3CX LT NRsf New Rating NR(EXP)sf
XA LT NRsf New Rating NR(EXP)sf
XB LT NRsf New Rating NR(EXP)sf
XS1 LT NRsf New Rating NR(EXP)sf
XS2 LT NRsf New Rating NR(EXP)sf
XS3 LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
D LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by Towd Point Mortgage Trust 2021-SJ2
(TPMT 2021-SJ2) as indicated above. The collateral pool generally
consists of peak-vintage seasoned performing loans (SPLs) and
re-performing loans (RPLs). The pool is backed first and junior
lien standalone loans, as well as first and junior lien open and
closed home equity line of credit (HELOC) residential mortgage
loans.
The notes are supported by one collateral group consisting of 9,998
seasoned performing loans (SPLs) and reperforming loans (RPLs) with
a total balance of approximately $581.6 million, including $34.2
million, or 6%, of the aggregate pool balance in
noninterest-bearing deferred principal amounts, as of the
statistical calculation date. The maximum available draw amount for
HELOC loans is expected to be $13.6 million as of the statistical
calculation date.
Additionally, approximately $527.7 million of the collateral
consists of junior liens, while the remaining $53.9 million
comprises first liens, as of the statistical calculation date.
Fitch's analysis incorporated the maximum available draw amount for
HELOC loans; however, the data in this presale reflects the total
aggregate pool balance of $581.6 million.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior-subordinate, sequential
structure. The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. To the extent the holders of the class D certificates are
required to fund additional draws, the class D balance will
increase. Class D is paid sequentially in the waterfall and
receives interest payments after class B4 and principal payments
after class B5. The servicers will not advance delinquent monthly
payments of P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
for this pool as 10.5% above a long-term sustainable level (versus
11.7% on a national level). Underlying fundamentals are not keeping
pace with growth in prices, which is the result of a supply/demand
imbalance driven by low inventory, low mortgage rates and new
buyers entering the market. These trends have led to significant
home price increases over the past year, with home prices rising
18.6% yoy nationally as of June 2021.
Credit Quality (Negative): The collateral pool consists of
generally peak-vintage SPLs and RPLs with a weighted average (WA)
model credit score of 715, a sustainable loan-to-value ratio (sLTV)
of 59.4%, 73.4% at 36 months of clean pay history (under the
Mortgage Bankers Association [MBA] method) and seasoning of
approximately 175 months, per Fitch's analysis. None of the loans
were delinquent (DQ) as of the statistical calculation date.
Roughly 42% have been modified.
Junior liens account for 91% of the collateral pool. No recovery
and 100% loss severity (LS) were assumed on junior lien loans based
on the historical behavior of junior lien loans in economic stress
scenarios, and a transactional feature that applies the balance of
a defaulted loan as a realized loss to the trust at 150 days' DQ
using the Office of Thrift Supervision (OTS) methodology, excluding
forbearance mortgage loans. Fitch assumes junior lien loans default
at a rate comparable to first lien loans; after controlling for
credit attributes, no additional default penalty was applied.
Additionally, about 10% of pool consists of open HELOCs, with the
ability for borrowers to draw down additional amounts. To address
this risk, the maximum draw amount was used in Fitch's loss
analysis and for determining applicable loan-to-value ratios
(LTVs).
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to reallocate principal to pay interest
on the 'AAAsf' and 'AA-sf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing. Similar to the
prior Fitch-rated TPMT 2021-SJ1 transaction, excess cash flow will
not be used to turbo down the senior classes.
Junior Lien Realized Loss and Writedown Feature (Positive): Junior
lien loans that are DQ for 150 days or more under the OTS method
will be considered a realized loss (excluding forbearance mortgage
loans) and, therefore, will cause the most subordinated class to be
written down. Despite the 100% LS assumed for each defaulted junior
lien loan, Fitch views the writedown feature positively, as cash
flows will not be needed to pay timely interest to the 'AAAsf' and
'AA-sf' rated notes during loan resolution by the servicers. In
addition, subsequent recoveries realized after the writedown at 150
days' DQ (excluding forbearance mortgage loans) will be passed on
to bondholders as principal.
No Servicer P&I Advances (Mixed): The servicers will not advance DQ
monthly payments of P&I, which reduces liquidity to the trust. P&I
advances made on behalf of loans that become DQ and eventually
liquidate reduce liquidation proceeds to the trust. Due to the lack
of P&I advancing, the loan-level LS is less for this transaction
than for those where the servicer is obligated to advance P&I.
Structural provisions and cash flow priorities, together with
increased subordination, provide for timely payments of interest to
the 'AAAsf' and 'AA-sf' rated classes.
ESG Impact Rating Relevant: TPMT 2021-SJ2 has an ESG Relevance
Score of '4' for Transaction Parties and Operational Risk due to
elevated operational risk, which resulted in an increase in
expected losses. While the originator, aggregator and servicing
parties did not have an impact on the expected losses, the Tier 3
R&W framework (Tier 2 for first lien loans and Tier 4 for newly
originated loans) with an unrated counterparty and the transaction
due diligence resulted in an increase in the expected losses. (See
the ESG Navigator in Appendix 4 for further details.)
RATING SENSITIVITIES
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 41.9% at 'AAAsf'. 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 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
assigned 'AAAsf' 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
Fitch's analysis incorporated one criteria variation from the "U.S.
RMBS Rating Criteria".
The variation is related to the due diligence sample size. Per the
criteria, Fitch expects to receive 100% due diligence on first lien
RPL loans from unknown originators. A due diligence review was
conducted on 96.4% (by loan count) of the first lien loans. To
address this variation, Fitch applied the indeterminate HUD-1
adjustment to each of these loans. While these loans may not carry
material defects, the adjustment reflects the fact that a
compliance review was not performed and, as a result, adherence to
predatory lending regulations cannot be confirmed.
The adjustment applies a 100% LS to the loan in states included on
Freddie Mac's "Do Not Purchase" list and a 5% LS penalty to all
remaining loans. This variation had no rating impact, as the number
of loans impacted represents a very small portion of the overall
pool.
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, Clayton and Westcor.
A third-party due diligence review was completed on 25.6% (by loan
count) of the loans in this transaction. The scope, which was
consistent with Fitch's criteria, centered on compliance with
federal and state lending laws. The diligence results indicated
comparable operational risk to the recent TPMT transactions, as
well as other Fitch-reviewed RPL transactions. Approximately 21.0%
(536) of the loans reviewed were assigned a 'C' or 'D' grade,
primarily due to missing loan documentation.
Approximately 21% of the loans reviewed for regulatory compliance
due diligence were assigned a 'C' or 'D' grade primarily due to
missing documentation, such as missing final HUD-1 files. Expected
loss adjustments were not applied to junior lien mortgages for the
due diligence findings since 100% LS is already assumed for these
loans. Approximately 2.9% (by loan count) of first lien loans
received a loss adjustment due to indeterminate HUD-1s.
ESG CONSIDERATIONS
TPMT 2021-SJ2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to elevated operational risk, which
resulted in an increase in expected losses. While the originator,
aggregator and servicing parties did not have an impact on the
expected losses, the R&W framework with an unrated counterparty and
the transaction due diligence resulted in an increase in the
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.
TRIMARAN CAVU 2021-3: Moody's Rates $22.5MM Class E Notes 'Ba3'
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Trimaran CAVU 2021-3 Ltd. (the "Issuer" or
"Trimaran CAVU 2021-3").
Moody's rating action is as follows:
US$320,000,000 Class A Floating Rate Notes due 2035, Assigned Aaa
(sf)
US$40,000,000 Class B-1 Floating Rate Notes due 2035, Assigned Aa2
(sf)
US$20,000,000 Class B-2 Fixed Rate Notes due 2035, Assigned Aa2
(sf)
US$15,750,000 Class C-1 Deferrable Floating Rate Notes due 2035,
Assigned A2 (sf)
US$10,500,000 Class C-2 Deferrable Hybrid Fixed/Floating Rate Notes
due 2035, Assigned A2 (sf)
US$28,750,000 Class D Deferrable Floating Rate Notes due 2035,
Assigned Baa3 (sf)
US$22,500,000 Class E Deferrable Floating Rate Notes due 2035,
Assigned Ba3 (sf)
The notes listed above 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.
Trimaran CAVU 2021-3 is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans and eligible investments, and up to
7.5% of the portfolio may consist of second-lien loans, senior
unsecured loans, first lien last out loans and permitted non-loan
assets. The portfolio is approximately 97% ramped as of the closing
date.
Trimaran Advisors, L.L.C.(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 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2869
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8 years
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.
UWM MORTGAGE 2021-INV5: Moody's Rates Class B-5 Debt 'B3'
---------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
thirty-five classes of residential mortgage-backed securities
(RMBS) issued by UWM Mortgage Trust 2021-INV5. The ratings range
from Aaa (sf) to B3 (sf).
UWM Mortgage Trust 2021-INV5 is a securitization of 1,531
fully-amortizing, fixed rate, first-lien non-owner occupied
residential investor properties mortgage loans with original terms
to maturity between 20 and 30 years, with an aggregate stated
principal balance of approximately $564,038,640. All the loans in
the pool are originated by United Wholesale Mortgage, LLC (UWM -
Ba3 long-term corporate family and Ba3 senior unsecured bond
ratings, with stable outlook) in accordance with the underwriting
guidelines of Fannie Mae or Freddie Mac, subject to certain
permitted variances, with additional credit overlays. The average
stated principal balance is approximately $368,412 and the weighted
average (WA) current mortgage rate is 3.4%.
None of the mortgage loans in the pool are subject to TILA because
each such mortgage loan is an extension of credit primarily for a
business purpose and is not a "covered transaction" as defined in
Section 1026.43(b)(1) of Regulation Z.
Cenlar FSB (Cenlar) will service all the mortgage loans in the
pool. Servicing compensation is subject to a step-up incentive fee
structure. UWM will be the servicing administrator and Nationstar
Mortgage LLC (Nationstar - B2 long-term issuer rating, with
positive outlook) will be the master servicer. UWM will be
responsible for principal and interest advances as well as other
servicing advances. The master servicer will be required to make
principal and interest advances if UWM is unable to do so. If the
servicing administrator and the master servicer fail in their
obligations to fund any required advance, the securities
administrator will be obligated to do so.
Two third-party review (TPR) firms conducted credit, data accuracy,
and compliance reviews on approximately 29.4% of the loans in the
pool by loan count and property valuation review on 100.0% of the
loans in the pool. The number of loans that went through a full due
diligence review is above our credit-neutral sample size. Also, 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 expected loss for
this pool in a baseline scenario-mean is 1.14% in a baseline
scenario-median is 0.84% and reaches 7.09% at a stress level
consistent with our Aaa ratings. Moody's also compared the
collateral pool to other securitizations with agency eligible
loans. Overall, this pool has average credit risk profile as
compared to that of recent transactions.
The securitization 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.
The complete rating actions are as follows:
Issuer: UWM Mortgage Trust 2021-INV5
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-A, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-A, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-A, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-9-A, Definitive Rating Assigned Aaa (sf)
Cl. A-9-AI*, Definitive Rating Assigned Aaa (sf)
Cl. A-9-B, Definitive Rating Assigned Aaa (sf)
Cl. A-9-BI*, Definitive Rating Assigned Aaa (sf)
Cl. A-9-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-12-A, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Definitive Rating Assigned Aa1 (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating 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 is 1.14%
at the mean, 0.84% at the median, and reaches 7.09% at a stress
level consistent with our Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
our 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
The transaction is backed by 1,531 fully-amortizing, fixed rate,
first-lien non-owner occupied residential investor properties
mortgage loans with original terms to maturity between 20 and 30
years, with an aggregate stated principal balance of approximately
$564,038,640. The average stated principal balance is approximately
$368,412 and the weighted average (WA) current mortgage rate is
3.4%. Borrowers of the mortgage loans backing this transaction have
strong credit profiles demonstrated by strong credit scores and low
combined loan-to-value (CLTV) ratios. The weighted average primary
borrower original FICO score and original CLTV ratio of the pool is
766 and approximately 66.3% respectively. The WA original debt-to
income (DTI) ratio is approximately 37.5%.
Approximately 45.2% of the mortgages (by loan balance) are backed
by properties located in California. The next largest geographic
concentration is Arizona (approximately 6.1% by loan balance) and
Florida (approximately 5.3% by loan balance). All other states each
represent 5.0% or less by loan balance. Approximately 23.5% (by
loan balance) of the pool is backed by properties that are
two-to-four family residential properties whereas loans backed by
single family residential properties represent approximately 42.2%
(by loan balance) of the pool.
Approximately 80.1% and 19.9% (by loan balance) of the loans were
originated through the broker and the correspondent channels
respectively. Irrespective of the origination channel, UWM
underwrites all the loans it originates through its underwriting
process. Nevertheless, the MILAN model adjusts the loan probability
of default (PD) to account for different loan origination channels
- retail (the least risk), broker (the most risk) and correspondent
(intermediate risk) channels.
Origination Quality and Underwriting Guidelines
All the mortgage loans in this pool (including correspondent
channel loans) were originated in accordance with the underwriting
guidelines of Fannie Mae or Freddie Mac, subject to certain
permitted variances, with additional credit overlays and approved
for origination through Fannie Mae's Desktop Underwriter Program or
Freddie Mac's Loan Prospector Program. Loan file reviews are
conducted through a pre-funding and post-closing quality control
(QC) process.
Moody's considers UWM to be an adequate originator of GSE eligible
loans following its review of its underwriting guidelines, quality
control processes, policies and procedures, and historical
performance relative to its peers. As a result, Moody's did not
make any adjustments to its base case and Aaa stress loss
assumptions.
Servicing arrangement
Cenlar (the servicer) will service all the mortgage loans in the
transaction. UWM will serve as the servicing administrator and
Nationstar will serve as the master servicer. The servicing
administrator will be required to (i) make advances in respect of
delinquent interest and principal on the mortgage loans and (ii)
make certain servicing advances with respect to the preservation,
restoration, repair and protection of a mortgaged property,
including delinquent tax and insurance payments, unless the
servicer determines that such amounts would not be recoverable. The
master servicer will be obligated to fund any required monthly
advance if the servicing administrator fails in its obligation to
do so. Moody's considers the overall servicing arrangement for this
pool as adequate given the ability and experience of Cenlar as a
servicer and the presence of a master servicer. As a result,
Moody's did not make any adjustments to our base case and Aaa
stress loss assumptions.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure. The servicer receives higher
fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less labor
intensive. The fee-for-service incentive structure includes an
initial monthly base servicing fee of $40 for all performing loans
and increases according to certain delinquent and incentive fee
schedules. The fees in this transaction are similar to other
transactions with fee-for-service structure which Moody's has
rated.
Third-party review (TPR)
Two independent third-party review firms, Wipro Opus Risk
Solutions, LLC and Consolidated Analytics, Inc., were engaged to
conduct due diligence on approximately 29.4% (by loan count) of the
loans in the pool for credit, compliance and data accuracy and
100.0% of the loans for property valuation review. The number of
loans that went through a full due diligence review is above our
calculated credit-neutral sample size. Also, there were generally
no material findings. The loans that had exceptions to the
originators' underwriting guidelines had significant compensating
factors that were documented. Moody's did not make any adjustments
to its credit enhancement for TPR scope, sample size and results.
Representations and Warranties Framework
Moody's said, "UWM as the sponsor, makes the loan-level R&Ws for
the mortgage loans. The R&Ws cover most of the categories that we
identified in our methodology as credit neutral. Further, R&W
breaches are evaluated by an independent third party using a set of
objective criteria. The independent reviewer will perform detailed
reviews to determine whether any R&Ws were breached when any loan
becomes a severely delinquent mortgage loan, a delinquent modified
mortgage loan, or is liquidated at a loss. These reviews are
thorough in that the transaction documents set forth detailed tests
for each R&W that the independent reviewer will perform. However,
we applied an adjustment to our expected losses to account for the
risk that UWM may be unable to repurchase defective loans in a
stressed economic environment in which a substantial portion of the
loans breach the R&Ws, given that it is a non-bank entity with a
monoline business (mortgage origination and servicing) that is
highly correlated with the economy."
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments on a pro-rata basis up to the
senior bonds principal distribution amount, and then interest and
principal payments on a sequential basis up to each subordinate
bond principal distribution amount. As in all transactions with
shifting interest structures, the senior bonds benefit from a cash
flow waterfall that allocates all prepayments to the senior bonds
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.
Realized losses are allocated reverse sequentially among the
subordinate and senior support certificates and on a pro-rata basis
among the super senior certificates.
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 eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 1.10%, 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 1.10% of the closing pool balance.
Moody's calculates the credit neutral floors for a given target
rating as shown in our principal methodology. The senior
subordination floor and the subordinate floor of 1.10% and 1.10%,
respectively, are consistent with the credit neutral floors for the
assigned ratings.
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.
UWM MORTGAGE 2021-J1: Moody's Gives (P)B3 Rating to Class B-5 Debt
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
thirty-five classes of residential mortgage-backed securities
(RMBS) issued by UWM Mortgage Trust 2021-J1. The ratings range from
(P)Aaa (sf) to (P)B3 (sf).
UWM Mortgage Trust 2021-J1 is a securitization of 479
fully-amortizing, fixed rate, first-lien, predominantly
owner-occupied mortgage loans with original term to maturity of 30
years, with an aggregate stated principal balance of approximately
$498,428,076. All the loans in the pool are originated by United
Wholesale Mortgage, LLC (UWM - Ba3 long-term corporate family and
Ba3 senior unsecured bond ratings, with stable outlook). All the
loans in this pool were originated under UWM's prime jumbo program
which are processed using the Desktop Underwriter (DU) automated
underwriting system, and are therefore predominantly underwritten
to Fannie Mae guidelines with the exception of loan limits. The
average stated principal balance is approximately $1,040,560 and
the weighted average (WA) current mortgage rate is 3.2%.
The CFPB recently issued a final rule amending Regulation Z ability
to repay rule/qualified mortgage (QM) requirements to replace the
strict 43% debt-to-income (DTI) ratio basis for the general QM with
an annual percentage rate (APR) limit, while still requiring the
consideration of the DTI ratio or residual income (the new general
QM rule). All the loans in the pool were originated pursuant to the
new general QM rule. With respect to these mortgage loans, the
sponsor will represent that such mortgage loans are "qualified
mortgages" under Regulation Z.
Cenlar FSB (Cenlar) will service all the mortgage loans in the
pool. Servicing compensation is subject to a step-up incentive fee
structure. UWM will be the servicing administrator and Nationstar
Mortgage LLC (Nationstar - B2 long-term issuer rating, with
positive outlook) will be the master servicer. UWM will be
responsible for principal and interest advances as well as other
servicing advances. The master servicer will be required to make
principal and interest advances if UWM is unable to do so. If the
servicing administrator and the master servicer fail in their
obligations to fund any required advance, the securities
administrator will be obligated to do so.
One third-party review (TPR) firm, Consolidated Analytics, Inc.
(Consolidated Analytics) conducted credit, compliance and data
accuracy reviews on approximately 51.4% (by loan count) of the
loans in the pool and property valuation review on 100.0% of the
loans in the pool. The number of loans that went through a full due
diligence review is above Moody's credit-neutral sample size. 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 expected loss for
this pool in a baseline scenario-mean is 0.72% in a baseline
scenario-median is 0.48% and reaches 5.60% at a stress level
consistent with its Aaa ratings. Moody's also compared the
collateral pool to other securitizations with agency eligible
loans. Overall, this pool has average credit risk profile as
compared to that of recent transactions.
The securitization 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.
The complete rating actions are as follows:
Issuer: UWM Mortgage Trust 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-3-A, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-A, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-A, 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-9-X*, Assigned (P)Aaa (sf)
Cl. A-9-A, Assigned (P)Aaa (sf)
Cl. A-9-AI*, Assigned (P)Aaa (sf)
Cl. A-9-B, Assigned (P)Aaa (sf)
Cl. A-9-BI*, 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-12-A, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aa1 (sf)
Cl. A-15, Assigned (P)Aa1 (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. A-X-2*, Assigned (P)Aa1 (sf)
Cl. A-X-3*, Assigned (P)Aaa (sf)
Cl. A-X-4*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.72%
at the mean, 0.48% at the median, and reaches 5.60% at a stress
level consistent with Moody's Aaa ratings.
Moody's said, "We base our ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, our 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
The transaction is backed by 479 fully-amortizing, fixed rate,
first-lien, predominantly owner-occupied mortgage loans with
original term to maturity of 30 years, with an aggregate stated
principal balance of approximately $498,428,076. The average stated
principal balance is approximately $1,040,560 and the weighted
average (WA) current mortgage rate is 3.2%. Borrowers of the
mortgage loans backing this transaction have strong credit profiles
demonstrated by strong credit scores and low combined loan-to-value
(CLTV) ratios. The weighted average primary borrower original FICO
score and original CLTV ratio of the pool is 767 and approximately
72.1% respectively. The WA original debt-to income (DTI) ratio is
approximately 34.3%.
Approximately 54.4% of the mortgages (by loan balance) are backed
by properties located in California. The next largest geographic
concentration is Florida (approximately 8.9% by loan balance), Utah
(approximately 6.2% by loan balance), Colorado (approximately 5.3%
by loan balance) and Arizona (approximately 4.4% by loan balance).
All other states each represent 3.0% or less by loan balance.
Approximately 0.7% (by loan balance) of the pool is backed by
properties that are two-to-four family residential properties
whereas loans backed by single family residential properties
represent approximately 62.3% (by loan balance) of the pool.
Approximately 91.4% and 8.6% (by loan balance) of the loans were
originated through the broker and the correspondent channels
respectively. Irrespective of the origination channel, UWM
underwrites all the loans it originates through its underwriting
process. Nevertheless, the MILAN model adjusts the loan probability
of default (PD) to account for different loan origination channels
- retail (the least risk), broker (the most risk) and correspondent
(intermediate risk) channels.
Origination Quality and Underwriting Guidelines
All the loans in this pool were originated under UWM's prime jumbo
program which are processed using the Desktop Underwriter (DU)
automated underwriting system, and are therefore predominantly
underwritten to Fannie Mae guidelines with the exception of loan
limits. Loan file reviews are conducted through a pre-funding and
post-closing quality control (QC) process.
Moody's increased its loss expectations for UWM loans due mostly to
the fact that underwriting prime jumbo loans mainly through DU is
fairly new. More time is needed to assess UWM's ability to
consistently produce high-quality prime jumbo residential mortgage
loans under this program.
Servicing arrangement
Cenlar (the servicer) will service all the mortgage loans in the
transaction. UWM will serve as the servicing administrator and
Nationstar will serve as the master servicer. The servicing
administrator will be required to (i) make advances in respect of
delinquent interest and principal on the mortgage loans and (ii)
make certain servicing advances with respect to the preservation,
restoration, repair and protection of a mortgaged property,
including delinquent tax and insurance payments, unless the
servicer determines that such amounts would not be recoverable. The
master servicer will be obligated to fund any required monthly
advance if the servicing administrator fails in its obligation to
do so. If the servicing administrator and the master servicer fail
in their obligations to fund any required advance, the securities
administrator will be obligated to do so. Moody's considera the
overall servicing arrangement for this pool as adequate given the
ability and experience of Cenlar as a servicer and the presence of
a master servicer. As a result, Moody's did not make any
adjustments to its base case and Aaa stress loss assumptions.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure. The servicer receives higher
fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less labor
intensive. The fee-for-service incentive structure includes an
initial monthly base servicing fee of $40 for all performing loans
and increases according to certain delinquent and incentive fee
schedules. The fees in this transaction are similar to other
transactions with fee-for-service structure which Moody's has
rated.
Third-party review (TPR)
One third-party review (TPR) firm, Consolidated Analytics, Inc.
(Consolidated Analytics) conducted credit, compliance and data
accuracy reviews on approximately 51.4% (by loan count) of the
loans in the pool and property valuation review on 100.0% of the
loans in the pool. The number of loans that went through a full due
diligence review is above Moody's credit-neutral sample size. The
TPR results indicate that there are no material compliance, credit,
or data issues and no appraisal defects. Moody's did not make any
adjustments to its credit enhancement for TPR scope, sample size
and results.
Representations and Warranties Framework
Moody's said, "UWM as the sponsor, makes the loan-level R&Ws for
the mortgage loans. The R&Ws cover most of the categories that we
identified in our methodology as credit neutral. Further, R&W
breaches are evaluated by an independent third party using a set of
objective criteria. The independent reviewer will perform detailed
reviews to determine whether any R&Ws were breached when any loan
becomes a severely delinquent mortgage loan, a delinquent modified
mortgage loan, or is liquidated at a loss. These reviews are
thorough in that the transaction documents set forth detailed tests
for each R&W that the independent reviewer will perform. However,
we applied an adjustment to our expected losses to account for the
risk that UWM may be unable to repurchase defective loans in a
stressed economic environment in which a substantial portion of the
loans breach the R&Ws, given that it is a non-bank entity with a
monoline business (mortgage origination and servicing) that is
highly correlated with the economy."
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments on a pro-rata basis up to the
senior bonds principal distribution amount, and then interest and
principal payments on a sequential basis up to each subordinate
bond principal distribution amount. As in all transactions with
shifting interest structures, the senior bonds benefit from a cash
flow waterfall that allocates all prepayments to the senior bonds
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.
Realized losses are allocated reverse sequentially among the
subordinate and senior support certificates and on a pro-rata basis
among the super senior certificates.
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 eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 1.25% 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 1.10% of the closing pool balance.
Moody's calculates the credit neutral floors for a given target
rating as shown in its principal methodology. The senior
subordination floor and the subordinate floor of 1.25% and 1.10%,
respectively, are consistent with the credit neutral floors for the
assigned ratings.
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.
VERUS SECURITIZATION 2021-8: S&P Assigns B-(sf) Rating on B-2 Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2021-8's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
first-lien, fixed-rate, and adjustable-rate residential mortgage
loans, including mortgage loans with initial interest-only periods
and/or balloon terms. The loans are secured primarily by
single-family residences, planned unit developments, two- to
four-family residential properties, condominiums, cooperatives,
mixed-use properties, and multifamily residences to both prime and
nonprime borrowers. The pool has 836 loans backed by 878
properties, which are primarily non-qualified
mortgage/ability-to-repay (ATR) compliant and ATR-exempt loans.
Eleven of the 836 loans are cross-collateralized loans backed by 53
properties.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representation and warranty framework, and geographic
concentration;
-- The mortgage aggregator, Invictus Capital Partners; 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.
Ratings Assigned
Verus Securitization Trust 2021-8
Class A-1, $293,099,000: AAA (sf)
Class A-2, $28,337,000: AA (sf)
Class A-3, $45,641,000: A (sf)
Class M-1, $21,631,000: BBB (sf)
Class B-1, $16,224,000: BB (sf)
Class B-2, $16,223,000: B- (sf)
Class B-3, $11,464,745: Not rated
Class A-IO-S, notional(i): Not rated
Class XS, notional(i): Not rated
Class DA: Not rated
Class R: Not rated
(i)The notional amount equals the aggregate stated principal
balance of loans in the pool.
VIBRANT CLO XV: Moody's Assigns Ba3 Rating to Class D-2 Debt
------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by Vibrant CLO XV, Ltd. (the "Issuer" or "Vibrant
XV").
Moody's rating action is as follows:
US$283,500,000 Class A-1A Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$13,500,000 Class A-1B Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$45,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aa2 (sf)
US$15,000,000 Class B-1 Secured Deferrable Floating Rate Notes due
2035, Assigned A2 (sf)
US$9,750,000 Class B-2 Secured Deferrable Fixed Rate Notes due
2035, Assigned A2 (sf)
US$25,875,000 Class C Secured Deferrable Floating Rate Notes due
2035, Assigned Baa3 (sf)
US$7,875,000 Class D-1 Secured Deferrable Floating Rate Notes due
2035, Assigned Ba1 (sf)
US$13,500,000 Class D-2 Secured Deferrable Floating Rate Notes due
2035, Assigned Ba3 (sf)
The notes listed above 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.
Vibrant XV is a managed cash flow CLO. The issued notes will be
collateralized primarily by 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,
and up to 10.0% of the portfolio may consist of non-senior secured
loans. The portfolio is approximately 96% ramped as of the closing
date.
Vibrant Capital Partners, Inc. (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 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: $450,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2782
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9 years
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.
VOYA CLO 2019-4: S&P Assigns BB- (sf) Rating on Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R, B-R,
C-R, D-R, E-R replacement notes and new class X notes from Voya CLO
2019-4 Ltd./Voya CLO 2019-4 LLC, a CLO originally issued in
December 2019 that is managed by Voya Alternative Asset Management
LLC.
On the Dec. 21, 2021, refinancing date, the proceeds from the
replacement notes were used to redeem the original notes. At that
time, S&P withdrew its ratings on the original notes and assigned
ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-1R, A-2R, B-R, C-R, D-R, E-R notes were
issued at a lower spread over three-month LIBOR than the original
notes.
-- The stated maturity was extended two years, and the
reinvestment period was extended a little over two years.
-- New class X notes were issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first twelve payment dates beginning
with the payment April 15, 2022, date.
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 the
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. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the 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 take rating actions as we deem
necessary."
Ratings Assigned
Voya CLO 2019-4 Ltd./Voya CLO 2019-4 LLC
Class X, $4.00 million: AAA (sf)
Class A-1R, $372.00 million: AAA (sf)
Class A-2R, $18.00 million: Not Rated
Class B-R, $66.00 million: AA (sf)
Class C-R (deferrable), $36.00 million: A (sf)
Class D-R (deferrable), $36.00 million: BBB- (sf)
Class E-R (deferrable), $24.00 million: BB- (sf)
Ratings Withdrawn
Voya CLO 2019-4 Ltd./Voya CLO 2019-4 LLC
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)'
Class E to NR from 'BB- (sf)'
NR—Not rated.
WELLFLEET CLO 2021-3: Moody's Rates $21.5MM Class E Notes 'Ba3'
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Wellfleet CLO 2021-3, Ltd. (the "Issuer" or
"Wellfleet 2021-3").
Moody's rating action is as follows:
US$315,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$65,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$26,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$29,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$21,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed above 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.
Wellfleet 2021-3 is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, senior
unsecured loans, first-lien last out loans and permitted non-loan
assets, provided no more than 5% of the portfolio may consist of
non-loan assets. The portfolio is approximately 100% ramped as of
the closing date.
Wellfleet Credit Partners, 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 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: 65
Weighted Average Rating Factor (WARF): 2827
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.50%
Weighted Average Life (WAL): 9 years
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.
WELLS FARGO 2013-LC12: Moody's Lowers Class C Debt Rating to B3
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and downgraded the ratings on three classes in Wells Fargo
Commercial Mortgage Trust 2013-LC12 ("WFCM 2013-LC12"), Commercial
Mortgage Pass-Through Certificates, Series 2013-LC12 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed Aaa
(sf)
Cl. A-3FL, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed
Aaa (sf)
Cl. A-3FX, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aa2 (sf); previously on Apr 23, 2021 Downgraded
to Aa2 (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed
Aaa (sf)
Cl. B, Downgraded to Ba1 (sf); previously on Apr 23, 2021
Downgraded to Baa3 (sf)
Cl. C, Downgraded to B3 (sf); previously on Apr 23, 2021 Downgraded
to B2 (sf)
Cl. PEX**, Downgraded to Ba3 (sf); previously on Apr 23, 2021
Downgraded to Ba2 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Nov 18, 2020 Affirmed
Aaa (sf)
*Reflects Interest-Only Class
**Reflects Exchangeable Clsas
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because of their
credit support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges.
The ratings on two P&I classes, Cl. B and Cl. C, were downgraded
due to anticipated losses and increased interest shortfall risk
driven by the significant exposure to specially serviced loans,
driven primarily by the exposure to poorly performing regional
malls. Specially serviced loans represent 17% of the pool, of which
the two largest loans (14.8% of the pool) are secured by regional
malls and are more than 90 days delinquent, or a foreclosure action
is already in progress. The two specially serviced mall loans
include the White Marsh Mall (7.7% of the pool) and Rimrock Mall
(7.0% of the pool), which have both experienced significant
declines in performance and value in recent years. Appraisal
reductions of over 35% have already been recognized on the two
specially serviced regional mall loans. Furthermore, Moody's
identified one troubled loan secured by a regional mall, Carolina
Place (7.8% of the pool), which has also recently experienced
declines in occupancy and cash flow.
The rating on the IO class was affirmed based on the credit quality
of its referenced classes.
The rating on class PEX was downgraded due to the decline in credit
quality of the referenced exchangeable classes.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of commercial real estate as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors,
including the rollout of vaccines, growing household consumption
and an accommodative central bank policy. However, specific sectors
and individual businesses will remain weakened by extended pandemic
related restrictions. Stress on commercial real estate properties
will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and
declines in foot traffic and sales at certain retail properties.
Moody's regards the coronavirus outbreak as a social risk under our
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 14.0% of the
current pooled balance, compared to 12.4% at Moody's last review.
Moody's base expected loss plus realized losses is now 11.3% of the
original pooled balance, compared to 11.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the November 18, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 27% to $1.03 billion
from $1.41 billion at securitization. The certificates are
collateralized by 76 mortgage loans ranging in size from less than
1% to 8.7% of the pool, with the top ten loans (excluding
defeasance) constituting 58.7% of the pool. Fifteen loans,
constituting 10.3% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 19, compared to 22 at Moody's last review.
As of the November 2021 remittance report, loans representing 82%
were current or within their grace period on their debt service
payments, 1% were beyond their grace period but less than 30 days
delinquent and 17% were greater than 90 days, foreclosure, REO or
non-performing past their maturity date.
Fifteen loans, constituting 21.5% of the pool, are on the master
servicer's watchlist, of which four loans, representing 3% of the
pool, indicate the borrower has requested relief in relation to the
coronavirus impact on the property. The watchlist includes loans
that meet certain portfolio review guidelines established as part
of the CRE Finance Council (CREFC) monthly reporting package. As
part of Moody's ongoing monitoring of a transaction, the agency
reviews the watchlist to assess which loans have material issues
that could affect performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $14.1 million (for an average loss
severity of 71%). Six loans, constituting 17.1% of the pool, are
currently in special servicing. Four of the specially serviced
loans, representing 16% of the pool, have transferred to special
servicing since May 2020.
The largest specially serviced loan is the White Marsh Mall Loan
($80.0 million -- 7.7% of the pool), which represents a pari-passu
portion of a $190.0 million mortgage loan. The loan is secured by
an approximately 700,000 square feet (SF) component of a 1.2
million SF super-regional mall located in Baltimore, Maryland. The
mall is anchored by Macy's, JC Penney, Boscov's, and Macy's Home
Store. Macy's and JC Penny are not part of the loan collateral and
Sears, a former non-collateral anchor, closed in April 2020. As of
June 2021, inline and collateral occupancy were 81% and 89%,
respectively, compared to 89% and 93% in June 2020 and 92% and 95%
in September 2019. Property performance declined in 2019 due to
lower rental revenues and increased inline vacancy, and the 2019
year-end net operating income (NOI) was approximately 8% lower than
underwritten levels. The loan transferred to special servicing in
August 2020 due to imminent monetary default and is paid through
its April 2021 payment date. The loan is interest-only throughout
its entire term. The loan failed to pay-off at its maturity date in
May 2021 and the borrower and special servicer continue to hold
discussions. The special servicer has consented to several
deferrals, abatements, renewals, and lease amendments.
The second largest specially serviced loan is the Rimrock Mall Loan
($72.7 million -- 7.0% of the pool) which is secured by an
approximately 430,000 SF portion of a 586,000 SF regional mall
located in Billings, Montana. The Rimrock Mall is the only dominant
mall within a 150-mile radius. The mall is currently anchored by
Dillard's, Dillard's Men & Children (both Dillard's spaces are
non-collateral) and JCPenney. A former anchor, Herberger's, vacated
in 2018 and accounted for approximately 14% of net rentable area
(NRA). As of September 2020, the collateral and inline occupancy
were 85% and 92%, respectively, compared to 95% and 91% in
September 2019. Property performance has declined significantly
since securitization due to declining revenue and increased
vacancy, and the 2019 year-end NOI was approximately 42% lower than
underwritten levels. The loan began amortizing in August 2018 after
its five-year interest-only period ended and has since amortized
5.6%. The loan transferred to special servicing in May 2020 due to
imminent monetary default and is paid through its June 2020 payment
date. The borrower has indicated they are no longer willing to fund
the loan or contribute additional capital into the property and
have requested to transition the property to the lender. A receiver
has been appointed and the lender and borrower are finalizing a
deed in lieu of foreclosure.
The remaining four specially serviced loans are all secured by
hotel properties which have been impacted by business disruptions
stemming from the coronavirus pandemic. Moody's has also assumed a
high default probability for one poorly performing loan,
constituting 7.8% of the pool, and has estimated an aggregate loss
of $129.8 million (a 50.5% expected loss based on average) from
these specially serviced and troubled loans. The troubled loan is
the Carolina Place loan which is discussed in detail further
below.
As of the November 2021 remittance statement cumulative interest
shortfalls were $3.5 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
we make various adjustments to the MLTV. We adjust the MLTV for
each loan using a value that reflects capitalization (cap) rates
that are between our sustainable cap rates and market cap rates. We
also use an adjusted loan balance that reflects each loan's
amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 99% of the
pool, and full or partial year 2021 operating results for 95% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 97%, compared to 99% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 22% to the most recently
available net operating income (NOI), excluding hotel properties
that had significantly depressed NOI in 2020. Moody's value
reflects a weighted average capitalization rate of 9.9%.
Moody's actual and stressed conduit DSCRs are 1.66X and 1.15X,
respectively, compared to 1.63X and 1.12X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three non specially serviced loans represent 23% of the
pool balance. The largest loan is the Cumberland Mall Loan ($90.0
million -- 8.7% of the pool), which represents a pari-passu portion
of a $160.0 million mortgage loan. The loan is secured by an
approximately 540,000 SF component of a one million SF
super-regional mall located in Atlanta, Georgia. The property was
built in 1973, expanded in 2006 and most recently renovated in
2012. The mall is anchored by a Macy's (non-collateral) and a
Costco Warehouse. A former non-collateral anchor, Sears, had
vacated the property at the end of 2018. As of September 2021,
collateral and inline occupancy were 94% and 94%, respectively,
compared to 95% and 96% in June 2020 and 97% and 96% in September
2019. Round 1 Bowling & Amusement was issued permits by Cobb County
to replace the 80,000 SF first floor of the former Sears building
and has begun construction. Another 70,000 SF of the former Sears
space has been backfilled by Dick's Sporting Goods which opened in
November 2021. Brookfield, the loan sponsor, plans to redevelop the
area surrounding the mall into a town center with office space,
multifamily residences, retail and restaurant space. The loan is
interest-only throughout its entire term and remains current on
debt service payments. Moody's LTV and stressed DSCR are 108% and
0.97X, respectively, unchanged from last review.
The second largest loan is the Carolina Place Loan ($80.7 million
-- 7.8% of the pool), which represents a pari-passu portion of a
$156.9 million mortgage loan. The loan is secured by an
approximately 647,000 SF component of a 1.2 million SF
super-regional mall located in Pineville, North Carolina. The mall
is anchored by Dillard's, Belk, Dick's Sporting Goods, and
JCPenney. JCPenney is the only current anchor that is part of the
collateral. A former collateral anchor, Sears, had vacated the
property in early 2019. As of September 2021, collateral and inline
occupancy were 67% and 85%, respectively, compared to 73% and 92%
in June 2020 and 75% and 95% in September 2019. Total mall
occupancy declined to 83% from 99% largely due to the departure of
Sears in January 2019. The loan was put on the watchlist in
September 2019 due to the occupancy dropping below 80% and the
borrower reports continuing conversations with several potential
tenants. After an initial three-year IO period, the loan has
amortized 10% since securitization. Due to declining occupancy and
NOI, Moody's considers this as a troubled loan.
The third largest loan is the Innsbrook Office Portfolio Loan
($66.8 million -- 6.5% of the pool), which is secured by a
portfolio of ten office properties located in and around Richmond,
Virginia. The portfolio originally comprised of 13 properties.
Since securitization, one property has been paid off and two others
have been released from the portfolio but remain in the pool. The
portfolio was collectively 82% leased as of September 2021 compared
to 90% as of June 2020, 89% in 2019 and 96% at securitization.
Approximately 40% of the total leased square footage will expire
over the next two years. The loan has amortized approximately 33%
since securitization. Moody's LTV and stressed DSCR are 126% and
0.85X, respectively, compared to 128% and 0.84X at the last review.
WELLS FARGO 2020-2: Moody's Hikes Class B-5 Debt Rating to Ba3
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 30 classes
from seven transactions issued by Wells Fargo Mortgage Backed
Securities Trust. The transactions are securitizations of fixed
rate, prime jumbo mortgage loans. Wells Fargo Bank, N.A. is the
servicer and master servicer.
Complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2018-1 Trust
Cl. B-1, Upgraded to Aaa (sf); previously on Oct 25, 2018
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa1 (sf); previously on Oct 30, 2019 Upgraded
to A1 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Oct 30, 2019 Upgraded
to Baa1 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Oct 25, 2018
Definitive Rating Assigned Ba1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2019-1 Trust
Cl. B-1, Upgraded to Aaa (sf); previously on Oct 30, 2019 Upgraded
to Aa2 (sf)
Cl. B-2, Upgraded to Aaa (sf); previously on Oct 30, 2019 Upgraded
to Aa3 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Oct 30, 2019 Upgraded
to A3 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Jan 28, 2019
Definitive Rating Assigned Ba1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2019-2 Trust
Cl. B-1, Upgraded to Aaa (sf); previously on Jan 28, 2020 Upgraded
to Aa2 (sf)
Cl. B-2, Upgraded to Aaa (sf); previously on Jan 28, 2020 Upgraded
to Aa3 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Jan 28, 2020 Upgraded
to Baa1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2019-3 Trust
Cl. A-17, Upgraded to Aaa (sf); previously on Sep 25, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. A-18, Upgraded to Aaa (sf); previously on Sep 25, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aaa (sf); previously on Sep 25, 2019
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa2 (sf); previously on Oct 30, 2019 Upgraded
to A2 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Oct 30, 2019 Upgraded
to Baa2 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2019-4 Trust
Cl. A-17, Upgraded to Aaa (sf); previously on Nov 22, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. A-18, Upgraded to Aaa (sf); previously on Nov 22, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Nov 22, 2019
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Nov 22, 2019 Definitive
Rating Assigned A3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2020-2 Trust
Cl. A-17, Upgraded to Aaa (sf); previously on Jun 26, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. A-18, Upgraded to Aaa (sf); previously on Jun 26, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Jun 26, 2020
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jun 26, 2020 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Jun 26, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Jun 26, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Jun 26, 2020
Definitive Rating Assigned B1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2020-3 Trust
Cl. A-17, Upgraded to Aaa (sf); previously on Jul 29, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. A-18, Upgraded to Aaa (sf); previously on Jul 29, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Jul 29, 2020
Definitive Rating Assigned Aa3 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools. In these
transactions, high prepayment rates averaging 41%-56% over the last
six months, driven by the low interest rate environment, have
benefited the bonds by increasing the paydown and building credit
enhancement.
In its analysis Moody'sconsidered the additional risk posed by
borrowers enrolled in payment relief programs. Moody's increased
its MILAN model-derived median expected losses by 15% and its Aaa
losses by 5% to reflect the performance deterioration resulting
from a slowdown in US economic activity due to the COVID-19
outbreak.
For transactions where more than 4% of the loans in pool have been
enrolled in payment relief programs for more than 3 months, Moody's
further increased the expected loss to account for the rising risk
of potential deferral losses to the subordinate bonds. We also
considered higher adjustments for transactions where more than 10%
of the pool is either currently enrolled or was previously enrolled
in a payment relief program. Specifically, Moody's accounts for the
marginally increased probability of default for borrowers that have
either been enrolled in a payment relief program for more than 3
months or have already received a loan modification, including a
deferral, since the start of the pandemic.
Moody's will reduce the adjustment to pool losses in instances
where the collateral has demonstrated strong performance since the
start of the pandemic. For transactions where (1) the current
proportion of loans enrolled in payment relief programs is lower
than 2.5%, and (2) the proportion of loans that are cash flowing
today but were previously enrolled in a payment relief program
since the start of the pandemic is lower than 5%, we increase the
median expected loss by 10% and our Aaa loss by 2.5%. The reduced
adjustment reflects the assumption that pools with a higher
proportion of borrowers that continued to make payments throughout
the pandemic are likely to have lower default rates as COVID-19
continues to decline.
Moody's estimated the proportion of loans granted payment relief in
a pool based on a review of loan level cashflows. In its analysis,
Moody's considered a loan to be enrolled in a payment relief
program if (1) the loan was not liquidated but took a loss in the
reporting period (to account for loans with monthly deferrals that
were reported as current), or (2) the actual balance of the loan
increased in the reporting period, or (3) the actual balance of the
loan remained unchanged in the last and current reporting period,
excluding interest-only loans and pay ahead loans. Based on Moody's
analysis, the proportion of borrowers that are enrolled in payment
relief plans in the underlying pools ranged between 0%-6.6% over
the last six months.
Given the pervasive financial strains tied to the pandemic,
servicers have been making advances on increased amount of
non-cash-flowing loans, sometimes resulting in interest shortfalls
due to insufficient funds in subsequent periods when such advances
are recouped. Moody's expects such interest shortfalls to be
reimbursed over the next several months.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, our assessment of the representations and warranties
frameworks of the transactions, the due diligence findings of the
third-party reviews received at the time of issuance, and the
strength of the transaction's originators and servicer.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
WFRBS COMMERCIAL 2014-C20: Moody's Cuts Class C Debt Rating to B1
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and downgraded the ratings on two classes in WFRBS Commercial
Mortgage Trust 2014-C20 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed Aaa
(sf)
Cl. A-5, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed
Aaa (sf)
Cl. A-SFL, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed
Aaa (sf)
Cl. A-SFX, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed
Aaa (sf)
Cl. B, Downgraded to Baa1 (sf); previously on Mar 31, 2021
Downgraded to A2 (sf)
Cl. C, Downgraded to B1 (sf); previously on Mar 31, 2021 Downgraded
to Ba2 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Mar 31, 2021 Affirmed
Aaa (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on six P&I classes were affirmed due to the credit
support and because the transaction's key metrics, including
Moody's loan-to-value (LTV) ratio, Moody's stressed debt service
coverage ratio (DSCR) and the transaction's Herfindahl Index
(Herf), are within acceptable ranges.
The ratings on two P&I classes were downgraded due to increased
anticipated losses and interest shortfall risk due to the
significant exposure to specially serviced and troubled loans.
Specially serviced loans represent over 26% of the pool, of which
two loans, representing 19%, are secured by regional malls that
have already suffered significant decline in operating performance
and foreclosure is currently being pursued. The three largest
specially serviced loans include the Woodbridge Center Loan (14.0%
of the pool), Sugar Creek I & II (7.0% of the pool) and Brunswick
Square (4.8% of the pool), all of which have recognized appraisal
reductions of 20% or greater as of the November 2021 remittance
statement. As a result of the significant appraisal reduction and
declining performance of these loans, Moody's anticipates interest
shortfalls will continue and may increase from their current
levels. The remaining specially serviced and troubled loans are
secured by retail and hotel loans which have exhibited recent
declines in occupancy and performance.
The rating on the interest only (IO) class was affirmed based on
the credit quality of the referenced classes.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of commercial real estate as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors,
including the rollout of vaccines, growing household consumption
and an accommodative central bank policy. However, specific sectors
and individual businesses will remain weakened by extended pandemic
related restrictions. Stress on commercial real estate properties
will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and
declines in foot traffic and sales for non-essential items at
retail properties.
Moody's regards the coronavirus outbreak as a social risk under our
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 19.6% of the
current pooled balance, compared to 17.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 13.5% of the
original pooled balance, compared to 12.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
DEAL PERFORMANCE
As of the November 18, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 31% to $858 million
from $1.25 billion at securitization. The certificates are
collateralized by 79 mortgage loans ranging in size from less than
1% to 14% of the pool, with the top ten loans (excluding
defeasance) constituting 52% of the pool. Eleven loans,
constituting 7.0% of the pool, have defeased and are secured by US
government securities. The pool contains ten low leverage
cooperative loans, constituting 4.4% of the pool balance, that were
too small to credit assess; however, have Moody's leverage that is
consistent with other loans previously assigned an investment grade
Structured Credit Assessments.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 20, compared to 21 at Moody's last review.
As of the November 2021 remittance report, loans representing 73.7%
were current or within their grace period on their debt service
payments, 7.5% were 90+ days delinquent and 18.8% were in the
foreclosure.
Seventeen loans, constituting 19.4% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Two loans have been liquidated from the pool, resulting in the
realized loss of $1.7 million (for a 21% loss severity). Four
loans, constituting 26.3% of the pool, are currently in special
servicing. All of the loans have transferred to special servicing
since March 2020.
The largest specially serviced loan is the Woodbridge Center Loan
($120.5 million -- 14.0% of the pool), which represents a
pari-passu portion of a $231.7 million senior mortgage loan. The
loan is secured by a 1.1 million square foot (SF) component of a
two-story, regional mall in Woodbridge, New Jersey. The loan is
sponsored and the property is managed by Brookfield Properties. The
mall's anchors now include Macy's, Boscov's, JC Penney, and Dick's
Sporting Goods. Two anchor spaces are currently vacant following
the December 2019 closure of Lord and Taylor (120,000 SF) and the
April 2020 closure of Sears (274,100 SF). Macy's, JC Penny and the
former Lord & Taylor space are not included as collateral for the
loan. Other major tenants include Boscov's, Dick's Sporting Goods
and Dave & Busters. As of December 2020, the servicer reported 69%
occupany compared to 97% in December 2019 and 97% at
securitization. Property performance has declined annually since
2015 and the 2019 net operating income (NOI) was nearly 17% lower
than in 2014 with a 2019 NOI DSCR of 1.19X. The year-end 2020 NOI
declined further by 18% compared to 2019, and the NOI DSCR was
below 1.00X. The property was closed temporarily in 2020 as a
result of the coronavirus pandemic. The loan transferred to special
servicing in June 2020 due for imminent monetary default stemming
from the business impacts of the pandemic. Furthermore, the
property also faces significant competition with seven competitive
regional and super regional centers located within a 20 miles
radius . The loan is last paid through its May 2021 payment date
and foreclosure is currently being pursued. The property was
appraised in September 2021 at a value significantly below the
outstanding loan balance and the master servicer subsequently
recognized an appraisal reduction of $82 million, nearly 68% of the
outstanding loan amount.
The second largest specially serviced loan is the Sugar Creek I &
II Loan ($60.2 million -- 7.0% of the pool), which is secured by
two adjacent, eight-story office buildings totaling 409,168 SF
located in Sugarland, Texas, 20 miles southwest of the Houston CBD.
The asset is also encumbered with $8.6 million of mezzanine
financing held outside the trust, which is currently in default.
Both buildings are of Class-A quality. Sugar Creek-I was
constructed in 2000 while Sugar Creek-II was completed in 2008.
Collateral for the loan also includes a four-story 1,198-space
parking garage in addition to 326 surface parking spaces. The
largest tenant, Noble Drilling Services Inc. (originally 41% of the
net rentable area (NRA)), reduced their space by 52,075 SF in
January 2019 as part of their 10-year renewal. However, the company
filed for Chapter 11 bankruptcy in July 2020. The loan transferred
to special servicing in October 2020 for imminent monetary default.
As of June 2020, the properties were 68% leased, compared to 67% at
year-end 2019, and 93% in 2018. The loan is reported 90+ days
delinquent and it is last paid through its April 2021 payment date.
The property was appraised in August 2021 at a value below the
outstanding loan balance and the master servicer subsequently
recognized an appraisal reduction of $12 million, nearly 21% of the
outstanding loan amount.
The third largest specially serviced loan is the Brunswick Square
loan ($40.8 million -- 4.8% of the pool), which is secured by
293,000 SF component of a 760,000 SF enclosed regional mall located
in East Brunswick, New Jersey. The property is anchored by J.C.
Penney and Macy's, both of which own their respective improvements.
Collateral junior anchors include Barnes & Noble, Old Navy, Forever
21 and a 13-screen Starplex Cinemas, however, the mall does not
contain a food court. As of June 2021, the property was 95%
occupied, compared to 88% as of December 2020. In June 2021, the
sponsor, Washington Prime Group (WPG) filed for Chapter 11
bankruptcy. The Brunswick Square Mall is identified as a non-core
asset by WPG. The loan transferred to special servicing second time
in July 2021 due for imminent monetary default. The loan is last
paid through its May 2021 payment date and foreclosure is currently
being pursued. The property was appraised in August 2021 at a value
below the outstanding loan balance and the master servicer
subsequently recognized an appraisal reduction of $22 million,
nearly 56% of the outstanding loan amount.
The fourth specially serviced loan is the Sunrise Plaza loan ($4.4
million -- 0.5% of the pool), which is secured by a 36,139 SF
retail center located in Brownsville, Texas. The loan transferred
to special servicing in May 2020 as a result of the coronavirus
pandemic. The loan is last paid through its March 2021 payment date
and is reported as 90+ days delinquent. The property was appraised
in July 2021 at a value above the outstanding loan balance.
Moody's has also assumed a high default probability for four poorly
performing loans, constituting 5.0% of the pool, and has estimated
an aggregate loss of $153 million (a 57% expected loss on average)
from the specially serviced and troubled loans. Four troubled loans
are secured by hotels and report significant decline in performance
due to pandemic hardship.
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,
we make various adjustments to the MLTV. We adjust the MLTV for
each loan using a value that reflects capitalization (cap) rates
that are between our sustainable cap rates and market cap rates. We
also use an adjusted loan balance that reflects each loan's
amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 83% of the
pool, and partial year 2021 operating results for 75% of the pool
(excluding specially serviced and defeased loans). Moody's weighted
average conduit LTV is 104%, compared to 102% at Moody's last
review. Moody's conduit component excludes loans with structured
credit assessments, defeased and CTL loans, and specially serviced
and troubled loans. Moody's net cash flow (NCF) reflects a weighted
average haircut of 23% to the most recently available net operating
income (NOI). Moody's value reflects a weighted average
capitalization rate of 10.0%.
Moody's actual and stressed conduit DSCRs are 1.44X and 1.12X,
respectively, compared to 1.47X and 1.13X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 15.8% of the pool balance.
The largest loan is the Worldgate Center Loan ($56.6 million --
6.6% of the pool), which is secured by a 229,326 SF shopping center
in Herndon, Virginia. The collateral for the loan also includes a
two-level subterranean parking garage and surface parking totaling
1,170 parking spaces. The property was developed in 1990 and was
anchored by Worldgate Sport & Health flagship facility (108,670 SF)
and AMC Worldgate 9 Theaters (38,238 SF). As of June 2021, the
property was 96% occupied, compared to 98% at year-end 2020. The
loan transferred to special servicing in June 2020 due to imminent
monetary default stemming from the coronavirus impact on the
property. However, the loan was returned to the master servicer in
August 2020 and was brought current in September 2020. As of June
2021, the servicer reported NOI DSCR at 0.39X, compared to 1.41X at
year-end 2019. Property performance declined significantly when the
former largest tenant, Sport & Health (55% of total base rent)
stopped paying rents and was evicted. The Worldgate fitness
facility has changed management companies, moving from Sport &
Health to WTS International. The loan is currently cash managed and
on the servicer's watch list. The loan has paid down approximately
13% since securitization and has been current since returning from
special servicing. Moody's LTV and stressed DSCR are 134% and
0.77X, respectively, compared to 136% and 0.75X at the last
review.
The second largest loan is the Rockwell -- ARINC HQ Loan ($46.6
million -- 5.4% of the pool), which is secured by three office
buildings that are part of a six-building office complex located in
Annapolis, Maryland. The collateral contains approximately 271,000
SF of NRA and is 100% triple-net leased to ARINC, a wholly owned
subsidiary of Rockwell Collins, through March 2029. The lease does
not contain any termination options and is fully guaranteed by
Rockwell Collins. The loan has paid down approximately 4.1% since
securitization. Moody's LTV and stressed DSCR are 106% and 1.20X,
respectively, compared to 107% and 1.19X at the last review.
The third largest loan is the Savoy Retail & 60th Street
Residential Loan ($32.2 million -- 3.8% of the pool), which is
secured by a mixed-use retail and residential development located
on Third Avenue between 60th Street and 61st Street in New York,
New York. The collateral includes the Savoy Retail Condo and the
60th Street Residential. The retail portion is comprised of
approximately 36,000 SF of retail space and approximately 12,000 SF
of subterranean garage containing 70 spaces. 60th Street
Residential is comprised of four abutting 4-story walk-up
residential buildings. As of March 2021, the total collateral was
76% leased down from 87% at year-end 2019. The largest two retail
tenants, Zavo Restaurant and Dylan's Candy Bar, are closed or
vacating their space. The loan has paid down approximately 8% since
securitization. Moody's LTV and stressed DSCR are 127% and 0.73X,
respectively, compared to 123% and 0.72X at the last review.
WIND RIVER 2021-4: Moody's Assigns B3 Rating to Class F Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by Wind River 2021-4 CLO Ltd. (the "Issuer").
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$53,750,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$26,875,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$33,125,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$5,500,000 Class E-1 Junior Secured Deferrable Floating Rate
Notes due 2035, Assigned Ba1 (sf)
US$12,750,000 Class E-2 Junior Secured Deferrable Floating Rate
Notes due 2035, Assigned Ba2 (sf)
US$8,000,000 Class E-3 Junior Secured Deferrable Floating Rate
Notes due 2035, Assigned Ba3 (sf)
US$10,000,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned B3 (sf)
The notes listed above are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Wind River 2021-4 CLO Ltd. is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of non-senior secured loans and
eligible investments. The portfolio is approximately 80% ramped as
of the closing date.
First Eagle Alternative Credit, 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 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: 55
Weighted Average Rating Factor (WARF): 2825
Weighted Average Spread (WAS): 3.58%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 9 years
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.
[*] Moody's Hikes $219MM of US RMBS Issued 2006-2007
----------------------------------------------------
Moody's Investors Service, on Dec. 17, 2021, upgraded the ratings
of nine bonds from four US residential mortgage backed transactions
(RMBS), backed by subprime and option ARM mortgages issued by
multiple issuers.
Complete rating actions are as follows:
Issuer: Carrington Mortgage Loan Trust, Series 2006-NC2
Cl. A-3, Upgraded to Aa3 (sf); previously on Mar 6, 2018 Upgraded
to A3 (sf)
Cl. A-4, Upgraded to A2 (sf); previously on Mar 6, 2018 Upgraded to
Baa2 (sf)
Issuer: Bear Stearns Asset Backed Securities I Trust 2006-HE10
Cl. I-A-2, Upgraded to A2 (sf); previously on Nov 15, 2018 Upgraded
to Baa2 (sf)
Cl. I-A-3, Upgraded to A3 (sf); previously on Nov 15, 2018 Upgraded
to Baa3 (sf)
Issuer: Bear Stearns Asset Backed Securities I Trust 2006-HE9
Cl. I-A-2, Upgraded to Ba3 (sf); previously on Nov 20, 2018
Upgraded to B2 (sf)
Cl. I-A-3, Upgraded to B3 (sf); previously on Nov 20, 2018 Upgraded
to Caa1 (sf)
Cl. II-A, Upgraded to Ba3 (sf); previously on Nov 20, 2018 Upgraded
to B3 (sf)
Cl. III-A, Upgraded to Ba3 (sf); previously on Nov 20, 2018
Upgraded to B3 (sf)
Issuer: Bear Stearns Mortgage Funding Trust 2007-AR2, Mortgage
Pass-Through Certificates, Series 2007-AR2
Cl. A-1, Upgraded to B2 (sf); previously on Dec 7, 2010 Downgraded
to Caa2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools and an increase in credit enhancement available to
the bonds.
Moody's said, "In light of the current macroeconomic environment,
we revised loss expectations based on the extent of performance
deterioration of the underlying mortgage loans, resulting from a
slowdown in economic activity and increased unemployment due to the
coronavirus outbreak. Specifically, we have observed an increase in
delinquencies, payment forbearance, and payment deferrals since the
start of pandemic, which could result in higher realized losses.
"Our analysis considers the current proportion of loans granted
payment relief in each individual transaction. We identified these
loans based on a review of loan level cashflows over the last few
months. Based on our analysis, the proportion of borrowers that are
currently enrolled in payment relief plans varied greatly, ranging
between approximately 2% and 14% among RMBS transactions issued
before 2009. In our analysis, we assume these loans to experience
lifetime default rates that are 50% higher than default rates on
the performing loans.
"In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Our analysis considered
the impact of six months of scheduled principal payments on the
loans enrolled in payment relief programs being passed to the trust
as a loss. The magnitude of this loss will depend on the proportion
of the borrowers in the pool subject to principal deferral and the
number of months of such deferral. The treatment of deferred
principal as a loss is credit negative, which could incur
write-downs on bonds when missed payments are deferred.
"Our rating actions also take into consideration the buildup in
credit enhancement of the bonds, especially in an environment of
elevated prepayment rates. The increase in credit enhancement,
driven by elevated prepayment rates, has helped offset the impact
of the increase in expected losses spurred by the pandemic."
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regards the coronavirus outbreak as a social risk under our
ESG framework, given the substantial implications for public health
and safety.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Lowers Ratings on 24 Classes from 19 US RMBS Transactions
-----------------------------------------------------------------
S&P Global Ratings completed its review of 24 classes from 19 U.S.
RMBS transactions. The review yielded 12 downgrades due to observed
principal write-downs and 12 downgrades due to observed interest
shortfalls/missed interest payments.
Analytical Considerations
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;
-- Historical and/or outstanding interest shortfalls/missed
interest payments; and
-- Available and/or insufficient subordination and/or
overcollateralization.
Rating Actions
S&P said, "The rating changes reflect our view of the associated
transaction-specific collateral performance, the structural
characteristics, or the application of criteria relevant to these
classes. See the ratings list below for the specific rationales
associated with each of the classes with rating transitions.
"The lowered ratings due to interest shortfalls are consistent with
our "S&P Global Ratings Definitions," published Nov. 10, 2021,
which imposes a maximum rating threshold on classes that have
incurred missed interest payments resulting from credit or
liquidity erosion. In applying our ratings definitions, we looked
to see if the applicable class received additional compensation
beyond the imputed interest due as direct economic compensation for
the delay in interest payments (e.g., interest on interest) and if
the missed interest payments will be repaid by the maturity date.
"In instances where the class does receive additional compensation
for outstanding interest shortfalls, our analysis considers the
likelihood that the missed interest payments, including the
capitalized interest, would be reimbursed under our various rating
scenarios. Nine classes from six transactions were impacted in this
review.
"In instances where the class does not receive additional
compensation for outstanding interest shortfalls, our analysis
focuses on our expectations regarding the length of the interest
payment interruptions to assign the rating on the class. Three
class from two transactions were impacted in this review.
"The lowered ratings due to outstanding principal write-downs
reflect our assessment of the principal write-downs' impact on the
affected classes during recent remittance periods. All of these
classes were rated 'CCC (sf)' before the rating actions."
Ratings List
RATING
ISSUER NAME
SERIES CLASS CUSIP RATING
TO FROM
Merrill Lynch Mortgage Investors Inc., 2004-CB6 Trust
2004-CB6 AF3 59020UJC0 B+ (sf) BB (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
Equifirst Mortgage Loan Trust 2004-3
2004-3 M3 29445FBZ0 A (sf) AA (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
Equifirst Mortgage Loan Trust 2004-3
2004-3 M4 29445FCA4 BBB (sf) A (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
Equifirst Mortgage Loan Trust 2004-3
2004-3 M5 29445FCB2 BB (sf) BBB (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
First Franklin Mortgage Loan Trust 2004-FF6
2004-FF6 M1 32027NKJ9 B+ (sf) BB (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
MASTR Asset Backed Securities Trust 2004-HE1
2004-HE1 M4 57643LEM4 BB- (sf) BB+ (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
MASTR Asset Backed Securities Trust 2004-HE1
2004-HE1 M5 57643LEN2 B- (sf) B+ (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
Morgan Stanley ABS Capital I Inc. Trust 2005-WMC4
2005-WMC4 M5 61744CRE8 B- (sf) B+ (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
MASTR Specialized Loan Trust 2005-01
2005-01 M1 576436BY4 B+ (sf) BB+ (sf)
-- PRIMARY RATING DRIVER(S): Ultimate repayment of missed
interest unlikey at higher rating levels.
Banc of America Funding 2006-5 Trust
2006-5 4A2 05950NBP2 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
Bear Stearns Asset Backed Securities Trust 2003-SD2
2003-SD2 B1 07384YMH6 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
Chevy Chase Funding LLC
2005-4 A2 16678REU7 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
CSFB Mortgage-Backed Trust Series 2003-1
2003-1 AX 2254W0GK5 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
CHL Mortgage Pass-Through Trust 2004-7
2004-7 2A1 12669FXW8 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
CHL Mortgage Pass Through Trust 2005-7
2005-7 1A1 12669GNX5 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
GSMPS Mortgage Loan Trust 2004-4
2004-4 1A2 36242DJS3 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
MASTR Adjustable Rate Mortgages Trust 2004-7
2004-7 1A1 576433QG4 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
RFMSI Series 2006-S12 Trust
2006-S12 IIIA1 74958EAJ5 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
RFMSI Series 2006-S12 Trust
2006-S12 IIIA4 74958EAM8 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
Structured Asset Mortgage Investments II Trust 2006-AR5
2006-AR5 1A1 86360JAA9 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
Washington Mutual Mortgage Pass Through Certificates
WMALT Series 2005-1 Trust
2005-1 1A1 9393362H5 D (sf) CCC (sf)
-- PRIMARY RATING DRIVER(S): Principal writedown.
Bear Stearns Asset Backed Securities I Trust 2005-AC6
2005-AC6 IA3 073879L55 D (sf) CC (sf)
-- PRIMARY RATING DRIVER(S): Interest shortfall.
Bear Stearns Asset Backed Securities I Trust 2005-AC6
2005-AC6 IA4 073879L63 D (sf) CC (sf)
-- PRIMARY RATING DRIVER(S): Interest shortfall.
CWABS Asset-Backed Notes Trust 2004-SD4
2004-SD4 B1 126673SH6 D (sf) CC (sf)
-- PRIMARY RATING DRIVER(S): Interest shortfall.
*********
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