/raid1/www/Hosts/bankrupt/TCR_Public/220327.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, March 27, 2022, Vol. 26, No. 85
Headlines
ACC TRUST 2019-2: Moody's Upgrades Rating on Class C Notes to B2
AMMC CLO 19: S&P Raises Class E Notes Rating to 'BB (sf)'
ARROYO MORTGAGE 2022-1: DBRS Finalizes B Rating on Class B-2 Notes
BAIN CAPITAL 2019-4: Moody's Assigns Ba3 Rating to $33MM E-R Notes
BENCHMARK MORTGAGE 2022-B34: Fitch Assigns B- Rating to 2 Tranches
CARVANA AUTO 2022-P1: S&P Assigns Prelim BB (sf) Rating on N Notes
CIFC FUNDING 2017-I: Moody's Cuts Class D Notes Rating From Ba1
CITIGROUP COMMERCIAL 2016-P4: Fitch Lowers Class F Debt to 'CCC'
CITIGROUP COMMERCIAL 2019-PRM: Moody's Cuts F Certs Rating From B2
COLT 2022-3: Fitch Gives Final B Rating to Class B-2 Certs
COMM 2013-CCRE12: Fitch Lowers Rating on Class D Debt to 'C'
DBUBS 2011-LC1: Moody's Lowers Rating on Cl. X-B Certs to Ca
DEEPHAVEN 2022-2: S&P Assigns B- (sf) Rating on Class B-2 Notes
DIAMETER CAPITAL 3: S&P Assigns BB- (sf) Rating on Class D Notes
DRYDEN 98: S&P Assigns BB- (sf) Rating on $20.63MM Class E Notes
ELMWOOD CLO 14: S&P Assigns B- (sf) Rating on Class F Notes
ELMWOOD CLO 15: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
FANNIE MAE 2022-R03: S&P Assigns Prelim 'BB-' Rating on 1B-1 Notes
FREDDIE MAC 2022-HQA1: S&P Assigns B- (sf) Rating on B-1I Notes
GS MORTGAGE 2022-GR2: Moody's Gives (P)B3 Rating to Cl. B-5 Certs
HERTZ VEHICLE III: Moody's Assigns (P)Ba2 Rating to 3 Tranches
IMSCI 2013-4: Fitch Affirms CC Rating on Class G Certs
IMSCI 2014-5: Fitch Affirms B Rating on Class G Debt
JFIN CLO 2015-II: Moody's Ups Rating on $20MM Cl. E-R Notes to Ba1
JP MORGAN 2014-C21: Fitch Affirms CC Rating on Class F Debt
JP MORGAN 2022-3: Fitch Gives B(EXP) Rating to Class B-5 Debt
JP MORGAN 2022-INV3: Fitch Gives B-(EXP) Rating to Class B-5 Debt
MADISON PARK XXXVI: Moody's Assigns Ba3 Rating to $24MM E-R Notes
MAGNETITE XXXII: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
MARTIN MIDSTREAM: S&P Affirms 'B-' ICR, Outlook Stable
MCAP CMBS 2014-1: Fitch Affirms B Rating on Class G Certs
MIDOCEAN CREDIT VIII: Fitch Raises Rating on Class F Notes to 'B+'
MONROE CAPITAL 2014-1: Moody's Hikes Rating on Class E Notes to Ba1
MONROE CAPITAL XIII: Moody's Assigns Ba3 Rating to $27MM E Notes
MORGAN STANLEY 2016-UBS11: Fitch Affirms CCC Rating on 2 Tranches
MORGAN STANLEY I 2022-L8: Fitch to Rate 2 Tranches 'B-'
NATIONAL COLLEGIATE 2007-A: Fitch Affirms B Rating on Cl. C Notes
NATIONAL COLLEGIATE: Fitch Affirms 37 Tranches From 12 Transactions
OFSI FUND VI: S&P Corrects Class E Notes Rating to 'D (sf)'
PARALLEL LTD 2015-1: Moody's Ups Rating on Class E Notes to Ba3
PARK AVENUE 2022-1: S&P Assigns BB- (sf) Rating on Class D Notes
PMT LOAN 2022-INV1: Moody's Assigns (P)B2 Rating to Cl. B-5 Certs
RUN TRUST 2022-NQM1: Fitch Gives 'B-(EXP)' Rating to Cl. B-2 Certs
SIERRA TIMESHARE 2022-1: Fitch Gives BB Rating to Class D Notes
SIERRA TIMESHARE 2022-1: S&P Assigns BB (sf) Rating on D Notes
SLM STUDENT 2014-1: Fitch Affirm B Rating on 2 Tranches
SYMPHONY CLO XXXI: S&P Assigns BB- (sf) Rating on Class E Notes
WEHLE PARK CLO: Moody's Assigns (P)Ba3 Rating to $21.6MM E Notes
WELLS FARGO 2016-C35: Fitch Affirms CCC Rating on Class F Debt
[*] S&P Takes Actions on 52 Classes from 7 US RMBS Non-QM Deals
*********
ACC TRUST 2019-2: Moody's Upgrades Rating on Class C Notes to B2
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Moody's Investors Service has upgraded five classes of notes issued
by ACC Trust 2019-1, 2019-2 and 2021-1. The transactions are
sponsored by RAC King, LLC (not rated), the parent company of
American Car Center (ACC). The notes are backed by a pool of
closed-end retail automobile leases to non-prime borrowers
originated by RAC King, LLC. RAC Servicer, LLC is the servicer and
the administrator of the transaction.
The complete rating actions are as follows:
Issuer: ACC Trust 2019-1
Class C Notes, Upgraded to Ba3 (sf); previously on Sep 11, 2020
Downgraded to B3 (sf)
Issuer: ACC Trust 2019-2
Class B Notes, Upgraded to A3 (sf); previously on May 25, 2021
Upgraded to Baa2 (sf)
Class C Notes, Upgraded to B2 (sf); previously on Sep 11, 2020
Downgraded to B3 (sf)
Issuer: ACC Trust 2021-1
Class B Notes, Upgraded to A3 (sf); previously on Jun 23, 2021
Definitive Rating Assigned Baa1 (sf)
Class C Notes, Upgraded to Baa3 (sf); previously on Jun 23, 2021
Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The upgrades are driven by a build-up of credit enhancement due to
the sequential pay structure of the notes in addition to
overcollateralization and a non-declining reserve account.
Moody's lifetime cumulative credit net loss (CNL) expectation is
between 36% and 38% for the underlying pools. The loss expectations
reflect updated performance trends on the underlying pools.
Moody's analyzed credit losses as well as the residual risk of the
pool based on exposure to residual value risk, the historical
turn-in rate, and historical residual value performance. Non-prime
auto leases are more susceptible to an economic slowdown due to the
relatively weak credit quality of the underlying obligors.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
September 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
higher ratings. Moody's expectation of pool losses could decline as
a result of a lower number of obligor defaults or appreciation in
the value of the vehicles leading to a residual value gain when the
vehicle is turned in at the end of the lease and remarketed.
Portfolio losses also depend greatly on the US job markets, the
market for used vehicles, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given Moody's expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. 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 vehicles leading to higher
residual value loss when the vehicle is turned in at the end of a
lease and remarketed. Portfolio losses also depend greatly on the
US job markets and the market for used vehicles. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance,
and fraud.
AMMC CLO 19: S&P Raises Class E Notes Rating to 'BB (sf)'
---------------------------------------------------------
S&P Global Ratings raised its ratings on the class BR, CR, D, and E
notes from AMMC CLO 19 Ltd. At the same time, S&P affirmed its
rating on the class AR notes from the same transaction.
The rating actions follow its review of the transaction's
performance using data from the Feb. 3, 2022, trustee report.
The upgrades reflect the transaction's $168.18 million in paydowns
to the class AR notes since our Aug. 6, 2020, rating actions. These
paydowns resulted in improved reported overcollateralization (O/C)
ratios since the June 3, 2020, trustee report, which we used for
our previous rating actions:
-- The class A/B O/C ratio improved to 156.81% from 127.54%.
-- The class C O/C ratio improved to 133.35% from 117.11%.
-- The class D O/C ratio improved to 120.05% from 110.42%.
-- The class E O/C ratio improved to 110.16% from 105.01%.
The collateral portfolio's credit quality has improved since S&P's
last rating actions. Collateral obligations with ratings in the
'CCC' category have declined, with $52.15 million reported as of
the June 2020 trustee report, compared with $16.71 million reported
as of the February 2022 trustee report. Over the same period, the
par amount of defaulted collateral has declined to $0.65 million
from $6.47 million. The transaction has also benefited from a drop
in the weighted average life due to underlying collateral's
seasoning, with 3.32 years reported as of the February 2022 trustee
report, compared with 4.25 years reported at the time of S&P's
August 2020 rating actions.
The upgrades reflect the improved credit support at the prior
rating levels and the improvement in collateral portfolio's credit
quality; the affirmation reflects S&P's view that the credit
support available is commensurate with the current rating level.
On a standalone basis, the results of the cash flow analysis
indicated a higher rating on the class E notes. However, based on
the current subordination/over-collateralization levels, S&P's
limited the upgrade on class E notes to offset future potential
credit migration in the underlying collateral.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the aforementioned trustee report, to estimate future performance.
In line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest 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 all of the rated
outstanding classes have adequate credit enhancement available at
the rating levels associated with these rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
Ratings Raised
AMMC CLO 19 Ltd./AMMC CLO 19 Corp.
Class BR: to 'AAA (sf)' from 'AA (sf)'
Class CR: to 'AA+ (sf)' from 'A (sf)'
Class D: to 'A+ (sf)' from 'BBB (sf)'
Class E: to 'BB (sf)' from 'B+ (sf)'
Rating Affirmed
AMMC CLO 19 Ltd./AMMC CLO 19 Corp.
Class AR: AAA (sf)
ARROYO MORTGAGE 2022-1: DBRS Finalizes B Rating on Class B-2 Notes
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DBRS, Inc. finalized its provisional ratings on the Mortgage-Backed
Notes, Series 2022-1 issued by Arroyo Mortgage Trust 2022-1 as
follows:
-- $21.2 million Class A-2 at AA (sf)
-- $28.1 million Class A-3 at A (sf)
-- $17.9 million Class M-1 at BBB (sf)
-- $12.5 million Class B-1 at BB (sf)
-- $9.9 million Class B-2 at B (sf)
DBRS Morningstar simultaneously assigned new ratings to the
following classes of notes issued by the Trust:
-- $248.8 million Class A-1A at AAA (sf)
-- $82.9 million Class A-1B at AAA (sf)
Finally, DBRS Morningstar discontinued the existing provisional
rating on the following class of notes that was to be issued by the
Trust:
-- $333.3 million Class A-1 at AAA (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) ratings on the Class A-1A and Class A-1B Notes reflect
23.20% of credit enhancement provided by subordinate notes. The AA
(sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 18.30%,
11.80%, 7.65%, 4.75%, and 2.45% of credit enhancement,
respectively.
This is a securitization of a portfolio of fixed- and
adjustable-rate expanded prime first-lien residential mortgages
funded by the issuance of the Notes. The Notes are backed by 759
mortgage loans with a total principal balance of $431,989,498 as of
the Cut-Off Date (January 1, 2022).
This transaction represents the seventh securitization by Western
Asset Mortgage Capital Corporation (the Seller) or an affiliate
since 2018. The largest Originator and Servicer for the mortgage
pool is AmWest Funding Corp. (AmWest; 95.9%). The remaining
originators and servicers each comprise less than 10.0% of the
mortgage loans.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's Ability-to-Repay (ATR) rules, they
were made to borrowers who generally do not qualify for agency,
government, or private-label nonagency prime jumbo products for
various reasons. In accordance with the Qualified Mortgage (QM)/ATR
rules, approximately 65.3% of the loans are designated as non-QM.
The remaining approximately 34.7% of the loans are made to
investors for business purposes and, hence, are not subject to the
QM/ATR rules.
For this transaction, each servicer will fund advances of
delinquent principal and interest (P&I) until loans become 180 days
delinquent or are otherwise deemed unrecoverable. Additionally,
each servicer is obligated to make advances with respect to taxes,
insurance premiums, and reasonable costs incurred in the course of
servicing and disposing of properties.
The Sponsor, directly or through a wholly owned affiliate, is
expected to retain an eligible horizontal residual interest
consisting of the Class B-1, B-2, B-3, A-IO-S, and XS Notes,
collectively representing at least 5% of the fair value of the
Notes, to satisfy the credit risk-retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On or after (1) the three-year anniversary of the Closing Date or
(2) the date when the aggregate stated principal balance of the
mortgage loans is reduced to less than or equal to 30% of the
Cut-Off Date balance, the Administrator, on behalf of the Issuer,
may redeem the Notes (Optional Redemption) at the redemption price
(par plus interest).
The Seller will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 90 or more days
delinquent under the Mortgage Bankers Association method at the
repurchase price (par plus interest), provided that such
repurchases in aggregate do not exceed 10% of the total principal
balance as of the Cut-Off Date.
The Issuer can redeem the Notes in whole but not in part at the tax
redemption price (par plus interest)
following a tax event as described in the transaction documents
(Tax Redemption).
The transaction employs a sequential-pay cash flow structure for
all classes with no performance-based triggers. Principal proceeds
can be used to cover interest shortfalls on the Class A-1A and A-1B
Notes before being applied sequentially to amortize the balances of
the remaining notes. For the Class A-2 and more subordinate classes
of notes, principal proceeds can be used to cover interest
shortfalls after the Class A-1A and A-1B Notes are paid in full.
Also, excess spread can be used to cover applied realized losses.
CORONAVIRUS DISEASE (COVID-19) IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in the delinquencies for many
residential mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief, that may perform differently from traditional
delinquencies. At the onset of the pandemic, the option to forebear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low loan-to-value ratios, and
acceptable underwriting in the mortgage market in general. Across
nearly all RMBS asset classes in recent months, delinquencies have
been gradually trending downwards, as forbearance periods come to
an end for many borrowers.
Notes: All figures are in U.S. dollars unless otherwise noted.
BAIN CAPITAL 2019-4: Moody's Assigns Ba3 Rating to $33MM E-R Notes
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Moody's Investors Service has assigned ratings to seven classes of
CLO refinancing notes issued by Bain Capital Credit CLO 2019-4,
Limited (the "Issuer").
Moody's rating action is as follows:
US$5,000,000 Class X Senior Secured Floating Rate Notes Due 2035,
Assigned Aaa (sf)
US$378,000,000 Class A-1-R Senior Secured Floating Rate Notes Due
2035, Assigned Aaa (sf)
US$12,000,000 Class A-2-R Senior Secured Floating Rate Notes Due
2035, Assigned Aaa (sf)
US$66,000,000 Class B-R Senior Secured Floating Rate Notes Due
2035, Assigned Aa2 (sf)
US$27,000,000 Class C-R Secured Deferrable Floating Rate Notes Due
2035, Assigned A2 (sf)
US$36,000,000 Class D-R Secured Deferrable Floating Rate Notes Due
2035, Assigned Baa3 (sf)
US$33,000,000 Class E-R Secured 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 first lien senior secured loans
and up to 10% of the portfolio may consist of second lien loans,
senior unsecured loans or permitted non-loan assets.
Bain Capital Credit U.S. CLO Manager, 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; changes to the
overcollateralization test levels; changes to Libor replacement
provisions; change of Issuer's jurisdiction of incorporation;
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: $600,000,000
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2963
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.50%
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 2021.
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.
BENCHMARK MORTGAGE 2022-B34: Fitch Assigns B- Rating to 2 Tranches
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Fitch Ratings has assigned expected ratings and Rating Outlooks to
Benchmark 2022-B34 Mortgage Trust commercial mortgage pass-through
certificates, series 2022-B34, as follows:
BMARK 2022-B34
-- $13,310,000 class A-1 'AAAsf'; Outlook Stable;
-- $114,778,000 class A-2 'AAAsf'; Outlook Stable;
-- $110,063,000 class A-3 'AAAsf'; Outlook Stable;
-- $18,021,000 class A-SB 'AAAsf'; Outlook Stable;
-- $110,716,000 (a) class A-4 'AAAsf'; Outlook Stable;
-- $241,475,000 (a) class A-5 'AAAsf'; Outlook Stable;
-- $67,354,0000 class A-M 'AAAsf'; Outlook Stable;
-- $675,717,000 (b) class X-A 'AAAsf'; Outlook Stable;
-- $43,455,000 class B 'AA-sf'; Outlook Stable;
-- $43,455,000 (b) class X-B 'AA-sf'; Outlook Stable;
-- $41,282,000 class C 'A-sf'; Outlook Stable;
-- $27,159,000 class D 'BBBsf'; Outlook Stable;
-- $17,381,000 class E 'BBB-sf'; Outlook Stable;
-- $44,540,000 (b) class X-D 'BBB-sf'; Outlook Stable;
-- $26,073,000 class F 'BB-sf'; Outlook Stable;
-- $26,073,000 (b) class X-F 'BB-sf'; Outlook Stable;
-- $8,691,000 class G 'B-sf'; Outlook Stable;
-- $8,691,000 (b) class X-G 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
-- $29,332,336 (b) class X-H;
-- $29,332,336 class H;
-- $45,741,597 (c) class VRR.
(a) The initial certificate balances of class A-4 and A-5 are not
yet known but are expected to be $352,191,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-4 balance range is $0 - $110,716,000, and the expected
class A-5 balance range is $241,475,000 - $352,191,000. The
balances for classes A-4 and A-5 reflect the endpoint of each
range.
(b) Notional amount and interest only (IO).
(c) Vertical risk retention interest.
The expected ratings are based on information provided by the
issuer as of Mar. 24, 2022.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 37 loans secured by 103
commercial properties having an aggregate principal balance of
$914,831,933 as of the cut-off date. The loans were contributed to
the trust by German American Capital Corporation, JPMorgan Chase
Bank, NA, Citi Real Estate Funding Inc. and Goldman Sachs Mortgage
Company. The Master Servicer is expected to be KeyBank National
Association, and the Special Servicer is expected to be LNR
Partners, LLC.
KEY RATING DRIVERS
Leverage Slightly Higher than Recent Transactions: The pool has
slightly higher leverage compared to recent multiborrower
transactions rated by Fitch. The pool's Fitch loan-to-value ratio
(LTV) of 104.9% is higher than both the 2020 and 2021 averages of
99.6% and 103.3%, respectively. Additionally, the pool's Fitch
trust debt coverage ratio (DSCR) of 1.27x is lower than the 2020
and 2021 averages of 1.32x and 1.38x, respectively.
Pool Concentration: The pool's 10 largest loans comprise 59.8% of
the pool's cutoff balance, which is a higher concentration than
both the 2020 and 2021 averages of 56.8% and 51.2%, respectively.
The Loan Concentration Index (LCI) of 496 is higher than both the
2020 and 2021 averages of 440 and 381, respectively.
Low Amortization: Based on the scheduled balances at maturity, the
pool will pay down by 3.9%, which is below the 2020 and 2021
averages of 5.3% and 4.8%, respectively. Twenty-four loans (76.4%
of the pool) are full interest-only loans, which is above the 2020
and 2021 averages of 67.7% and 70.5%, respectively. Seven loans
(13.7%) are partial interest-only loans, which is below the 2020
and 2021 averages of 20.0% and 16.8%.
Investment-Grade Credit Opinion Loans: One loan, 601 Lexington
(9.3%) received investment grade credit opinions of 'BBB-sf*'. This
total credit opinion percentage of 9.3% is lower than the 13.3%
average in 2021 and 24.5% average in 2020.
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: 'A+sf' / 'BBB+sf' / 'BBB-sf' / 'BB+sf' / 'BB-
sf' / 'CCCsf' / 'CCCsf'.
-- 20% NCF Decline: 'A-sf' / 'BBB-sf' / 'BB+sf' / 'Bsf' / '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' / 'BBB-sf' / 'BB+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.
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.
CARVANA AUTO 2022-P1: S&P Assigns Prelim BB (sf) Rating on N Notes
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S&P Global Ratings assigned its preliminary ratings to Carvana Auto
Receivables Trust 2022-P1's series 2022-P1 asset-backed notes.
The note issuance is an ABS securitization backed by prime auto
loan receivables.
The preliminary ratings are based on information as of March 21,
2022. 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 availability of approximately 14.12%, 11.40%, 8.70%, 6.92%,
5.74% credit support for the class A (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 1.60x 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 preliminary 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 552.
-- 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 1.70% 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. We are soliciting feedback
from market participants on proposed changes to our criteria, 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, which may affect the ratings on this transaction.
However, until we adopt the new criteria, we will continue to rate
and surveil these notes using our existing criteria."
Preliminary Ratings Assigned
Carvana Auto Receivables Trust 2022-P1(i)(ii)
Class A-1, $146.00 million: A-1+ (sf)
Class A-2, $324.00 million: AAA (sf)
Class A-3, $324.00 million: AAA (sf)
Class A-4, $149.35 million: AAA (sf)
Class B, $31.71 million: AA (sf)
Class C, $32.23 million: A (sf)
Class D, $24.94 million: BBB (sf)
Class N(iii), $16.25 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 actual size of these tranches will be determined on the
pricing date.
(iii)The class N notes will be paid to the extent funds are
available after the overcollateralization target is achieved, and
they will not provide any enhancement to the senior classes.
CIFC FUNDING 2017-I: Moody's Cuts Class D Notes Rating From Ba1
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by CIFC Funding 2017-I, Ltd.:
US$92,000,000 Class B Senior Secured Floating Rate Notes due 2029
(the "Class B Notes"), Upgraded to Aaa (sf); previously on March 9,
2017 Definitive Rating Assigned Aa1 (sf)
US$60,400,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class C Notes"), Upgraded to A1 (sf);
previously on March 9, 2017 Definitive Rating Assigned A2 (sf)
US$46,400,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class D Notes"), Upgraded to Baa3 (sf);
previously on September 11, 2020 Downgraded to Ba1 (sf)
US$4,800,000 Class X Amortizing Senior Secured Deferrable Floating
Rate Notes due 2029 (current outstanding balance of $1,000,000)
(the "Class X Notes"), Upgraded to Aa1 (sf); previously on March 9,
2017 Definitive Rating Assigned Aa3 (sf)
CIFC Funding 2017-I, Ltd., originally issued in March 2017, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in April 2021.
RATINGS RATIONALE
These rating actions are primarily a result of improvement in
credit quality of the portfolio since February 2021. Based on the
trustee's February 2022 report[1], the weighted average rating
factor (WARF) is currently 2837 compared to 3190 in February
2021[2].
Additionally, the Class B, Class C and Class D notes have
benefitted from deleveraging of the senior notes and an increase in
the transaction's over-collateralization (OC) ratios since February
2021. The Class A-R notes have been paid down by approximately 3.4%
or $17.3 million since then. Based on the trustee's February 2022
report[3], the OC ratios for the Class A/B, Class C and Class D
notes are reported at 133.62, 120.98% and 112.79%, respectively,
versus the trustee's February 2021 levels[4] of 131.66%, 119.53%
and 111.64%, respectively.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $772,700,499
Defaulted par: $943,511
Diversity Score: 78
Weighted Average Rating Factor (WARF): 2730
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.20%
Weighted Average Recovery Rate (WARR): 48.12%
Weighted Average Life (WAL): 4.1 years
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, near term defaults by
companies facing liquidity pressure, deterioration in credit
quality of the underlying portfolio, and lower recoveries on
defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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.
CITIGROUP COMMERCIAL 2016-P4: Fitch Lowers Class F Debt to 'CCC'
----------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 11 classes of
Citigroup Commercial Mortgage Trust 2016-P4.
DEBT RATING PRIOR
---- ------ -----
CGCMT 2016-P4
A-2 29429EAB7 LT AAAsf Affirmed AAAsf
A-3 29429EAC5 LT AAAsf Affirmed AAAsf
A-4 29429EAD3 LT AAAsf Affirmed AAAsf
A-AB 29429EAE1 LT AAAsf Affirmed AAAsf
A-S 29429EAH4 LT AAAsf Affirmed AAAsf
B 29429EAJ0 LT AA-sf Affirmed AA-sf
C 29429EAK7 LT A-sf Affirmed A-sf
D 29429EAL5 LT BBB-sf Affirmed BBB-sf
E 29429EAN1 LT B-sf Downgrade BB-sf
F 29429EAQ4 LT CCCsf Downgrade B-sf
X-A 29429EAF8 LT AAAsf Affirmed AAAsf
X-B 29429EAG6 LT AA-sf Affirmed AA-sf
X-C 29429EAW1 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations have increased
significantly since Fitch's last rating action, primarily due to
higher loss expectations on the specially serviced loan, 401 South
State Street (4.5% of pool), as well as the larger Fitch Loans of
Concern (FLOCs). In total, seven loans (33.6% of the pool) are
considered FLOCs, including the two specially serviced loans.
Fitch's current ratings reflect a base case loss of 7.30%. Losses
could reach as high as 8.10% when factoring in additional stresses
on two hotel loans to account for the ongoing business disruption
as a result of the pandemic.
The largest change in loss expectations since last rating action is
401 South State Street (4.5% of pool), which is secured by a
487,000 sf of office space located in the CBD of Chicago, IL. The
collateral consists of the 401 South State Street building (479,522
sf) and the 418 South Wabash Avenue building (7,500 sf). The
properties are 99% vacant after the former single tenant, Robert
Morris College (previously 75% of the NRA), vacated prior to its
June 2024 lease expiration and ceased paying rent in April 2020.
Per the special servicer, the borrower signed a short-term lease
with Columbia College (1% of the NRA exp August 2022).
The loan was transferred to the special servicer in June 2020 for
payment default. A receiver was appointed to the property in
September 2020 and the special servicer is dual tracking
foreclosure. Fitch's base case loss of 71% is based on the most
recent appraisal which reflects a value psf of $53.
The next largest increase in loss expectations, Opry Mills (10.7%
of pool), is secured by a 1.2 million sf super regional mall
located in Nashville, TN, seven miles from downtown Nashville. The
collateral's major tenants include Bass Pro Shops (11.0% of NRA;
April 2025); Regal Cinemas (8.5% of NRA; May 2025); Dave & Busters
(4.8% of NRA; May 2026); Forever 21 (4.5% of NRA; January 2023);
Off Broadway Shoes (2.5% of NRA; January 2023).
The loan is considered a FLOC due to upcoming lease rollover. As of
the most recent rent roll dated September 2021, approximately 39%
of the NRA has lease expirations between 2022 and 2023. The
rollover is relatively granular across nearly 90 tenants and
includes top tenants Forever 21 (4.5% of NRA; January 2023) and Off
Broadway Shoes (2.5% of NRA; January 2023). Fitch's base case loss
of 8.5% reflects a 12% cap rate and 10% stress to the YE 2020 NOI.
The last largest increase in loss expectations, Highridge Crossing
(2.5% of pool), is secured by a 57,659 sf anchored retail center
located in Santa Clarita, CA, approximately 35 miles northwest of
Los Angeles. Property occupancy has remained stable. Approximately
47% of the NRA has lease expirations between 2022 and 2023,
including the largest tenant Office Depot (27.8% of the NRA). Fitch
requested a leasing update from the master servicer, but has not
received a response. Fitch's base case loss of 23% reflects a 35%
stress to the YE 2020 NOI to account for the potential significant
upcoming rollover.
Increased Credit Enhancement: As of the March 2022 remittance, the
pool's aggregate balance has been reduced by 9.5% to $652 million
from $721 million at issuance. Since Fitch's last rating action,
two loans (previously 4.5% of pool) paid in full at maturity. No
loans are defeased. Seven loans (25.5% of pool) have full term, IO
payments. Twenty-four loans (51.3%) had partial IO payments, but
are now all amortizing.
Additional Loss Considerations: Fitch performed an additional
sensitivity scenario which applied an additional stress to the
pre-pandemic cash flow for two hotel loans given significant
pandemic-related 2020 NOI declines; this scenario also contributed
to the downgrades and Negative Outlook on classes E.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The Negative Rating Outlook on class E reflects the potential
for additional downgrades should the performance of the larger
FLOCs continue to deteriorate and fail to stabilize post
pandemic and transfer to special servicing and/or should
losses on the specially serviced loans be higher than expected
upon liquidation.
-- An increase in pool-level losses from specially serviced loans
and larger FLOCs. Downgrades to the senior classes (A-1
through A-S) are less likely due to high CE but may occur if
losses increase substantially or if there is likelihood for
interest shortfalls. A downgrade to classes B, C, D and IO
classes X-B and X-C would likely occur should additional loans
transfer to special servicing and/or the performance of the
larger FLOCs fail to stabilize post pandemic.
-- Classes E and F could be downgraded further if realized losses
on the specially serviced loans upon liquidation are higher
than expected.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Classes would not be upgraded above 'Asf'
if there is a likelihood of interest shortfalls. Upgrades to
classes B, C and associated IO classes X-B and X-C would
likely occur with significant improvement in CE and with
improved performance of the larger FLOCs.
-- An upgrade to class D is not likely until the later years of
the transaction and only if the performance of the remaining
pool is stable, as the FLOCs and other properties vulnerable
to the pandemic stabilize and if there is sufficiently high CE
to the class.
-- Upgrades to classes E and F are unlikely but could occur with
substantial improvement in performance amongst the FLOCs and
specially serviced loans or if the specially serviced loans
are disposed of with better than expected recoveries.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CITIGROUP COMMERCIAL 2019-PRM: Moody's Cuts F Certs Rating From B2
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on six classes
issued by Citigroup Commercial Mortgage Trust 2019-PRM, Commercial
Mortgage Pass-Through Certificates, Series 2019-PRM. Moody's rating
action is as follows:
Cl. B, Upgraded to Aaa (sf); previously on Nov 22, 2021 Aa3 (sf)
Placed Under Review for Possible Upgrade
Cl. C, Upgraded to Aaa (sf); previously on Nov 22, 2021 A3 (sf)
Placed Under Review for Possible Upgrade
Cl. D, Upgraded to Aaa (sf); previously on Nov 22, 2021 Baa3 (sf)
Placed Under Review for Possible Upgrade
Cl. E, Upgraded to Aaa (sf); previously on Nov 22, 2021 Ba3 (sf)
Placed Under Review for Possible Upgrade
Cl. F, Upgraded to A1 (sf); previously on Nov 22, 2021 B2 (sf)
Placed Under Review for Possible Upgrade
Cl. X*, Upgraded to Aaa (sf); previously on Nov 22, 2021 A2 (sf)
Placed Under Review for Possible Upgrade
* Reflects interest-only classes
The actions conclude the review for upgrade on the Affected Credit
Ratings initiated on November 22, 2021 as a result of the update of
the "Large Loan and Single Asset/Single Borrower Commercial
Mortgage-Backed Securitizations Methodology."
RATINGS RATIONALE
The ratings on Cl. B, Cl. C, Cl. D, and Cl. E were upgraded to Aaa
(sf) due to defeasance. The collateral for the first mortgage is
now U.S. Government Securities. The rating on the lowest rated
class, Cl. F, of A1 (sf), is due to lack of a support class or a
reserve to protect them from the risk of non-reimbursable trust
expenses. The rating on the IO class, Cl. X, was upgraded based on
the credit quality of the referenced classes (Cl. A, Cl. B, Cl. C,
and Cl. D).
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The total outstanding loan balance is now defeased, meaning that
the initial assets have been replaced by US Government Securities.
The ratings on the Certificates may be sensitive to any change in
the rating of the Government of the United States or interest
shortfalls on the Certificates.
METHODOLOGY UNDERLYING THE RATING ACTION:
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in November 2021.
DEAL PERFORMANCE
As of the March 15, 2022 Distribution Date, the transaction's
aggregate certificate balance remains unchanged from that of
securitization at $278 million. At securitization the two loans
were collateralized by two portfolios of 49 self-storage properties
located across 17 states. The total outstanding loan balance is now
defeased in its entirety and the loans mature in May 2024.
COLT 2022-3: Fitch Gives Final B Rating to Class B-2 Certs
----------------------------------------------------------
Fitch Ratings assigns final ratings to the residential
mortgage-backed certificates to be issued by COLT 2022-3 Mortgage
Loan Trust (COLT 2022-3).
DEBT RATING PRIOR
---- ------ -----
COLT 2022-3
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
A-IO-S LT NRsf New Rating NR(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
M-1 LT BBBsf New Rating BBB(EXP)sf
X LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 884 loans with a total balance of
~$495 million as of the cutoff date. Loans in the pool were
originated by multiple originators and aggregated by Hudson
Americas L.P. All loans are currently, or will be, serviced by
Select Portfolio Servicing, Inc.
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 9.9% above a long-term sustainable level (versus
10.6% 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 18.8% yoy nationally as of December 2021.
Non-Qualified Mortgage Credit Quality (Negative): The collateral
consists of 884 loans, totaling ~$495 million and seasoned
approximately five months in aggregate (calculated as the
difference between origination date and cutoff date). The borrowers
have a moderate credit profile -- 736 model FICO and 41% model debt
to income ratio (DTI) -- and leverage -- 80% sustainable
loan-to-value ratio (LTV) and 72.2% combined LTV. The pool consists
of 52.3% of loans where the borrower maintains a primary residence,
while 43.0% comprise an investor property. Additionally, 57% are
non-qualified mortgage (non-QM) and less than 1% are QM loans; for
the remainder, the QM rule does not apply.
Fitch's expected loss in the 'AAA' stress is 24%. This is mostly
driven by the non-QM collateral and the significant investor cash
flow product concentration.
Loan Documentation (Negative): Approximately 79.9% of the pool were
underwritten to less than full documentation, and 46% 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 Financial Protections Bureau's Ability
to Repay (ATR) 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 ATR.
Fitch's treatment of alternative loan documentation increased the
'AAAsf' expected loss by 547bps relative to a fully documented
loan.
High Percentage of DSCR and No Ratio Loans (Negative): There are
413 debt service coverage ratio (DSCR) and no ratio product loans
in the pool. These loans are available to real estate investors
that are qualified on a cash flow or "no-ratio" basis, rather than
DTI, and borrower income and employment are not verified. For DSCR
loans, Fitch converts the DSCR values to a DTI and treats as low
documentation.
Fitch's expected loss for these loans is 37% in the 'AAA' stress,
and this is driving the higher pool expected losses due to the 31%
concentration.
Modified Sequential-Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement trigger event occurs in a given period, principal will
be distributed sequentially to class A-1, A-2 and A-3 certificates
until they are reduced to zero.
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, then securities
administrator will be obligated to make such advance.
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 to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
COLT 2022-3 has a step-up coupon for class A-1 similar to COLT
2022-2. After April 2026, class A-1 is contractually due the net
WAC rate, but is subject to a 4.395% cap. This increases the P&I
allocation for the A-1 class and decreases the amount of excess
spread available in the transaction.
Excess Cash Flow (Positive): Although lower relative to prior
transactions due to the higher bond coupons and class A-1 step-up,
the transaction benefits from 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 due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded benchmark scenario.
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 41.6% 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.
CRITERIA VARIATION
There was one variation to Fitch's "U.S. RMBS Rating Criteria".
Fitch's assessments of Loanstream & Sprout are seasoned more than
18 months. Given the short amount of time they have expired (< 2
months), the seasoning on the loans, and the aggregator's track
record & assessment, Fitch viewed the risk as relatively
immaterial.
However, to address the incremental risk associated, Fitch rounded
up on the losses where applicable, this essentially resulted in
25bps cushion to the expected losses at AAA, whereas running as a
Below Average Originator would've resulted in a 50bps pickup.
As an additional sensitivity, Fitch ran through pending April
Model, which will be first date of transaction, with the
Originators run as Below Average, and the AAA losses are still
125bps lower.
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. This adjustment(s)
resulted in a 44bps reduction to the AAAsf expected loss.
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.
COMM 2013-CCRE12: Fitch Lowers Rating on Class D Debt to 'C'
------------------------------------------------------------
Fitch Ratings has placed seven classes from COMM 2013-CCRE12 on
Rating Watch Negative. Additionally, Fitch affirmed four classes
and downgraded one distressed class.
DEBT RATING PRIOR
---- ------ -----
COMM 2013-CCRE12
A-3 12591KAD7 LT AAAsf Affirmed AAAsf
A-4 12591KAE5 LT AAAsf Rating Watch On AAAsf
A-M 12591KAG0 LT AAAsf Rating Watch On AAAsf
A-SB 12591KAC9 LT AAAsf Affirmed AAAsf
B 12591KAH8 LT Asf Rating Watch On Asf
C 12591KAK1 LT BBBsf Rating Watch On BBBsf
D 12624SAE9 LT Csf Downgrade CCCsf
E 12624SAG4 LT Csf Affirmed Csf
F 12624SAJ8 LT Csf Affirmed Csf
PEZ 12591KAJ4 LT BBBsf Rating Watch On BBBsf
X-A 12591KAF2 LT AAAsf Rating Watch On AAAsf
X-B 12624SAA7 LT Asf Rating Watch On Asf
Class X-A and X-B are interest only.
Class A-M, class B, and class C certificates may be exchanged for
class PEZ Certificates, and Class PEZ Certificates may be exchanged
for class A-M, class B, and class C certificates.
KEY RATING DRIVERS
The Rating Watch actions primarily reflect the increased loss
expectations on the 175 West Jackson loan (14.8% of the pool). The
loan also has participation interests in two other transactions,
which will be reviewed separately. While the loan had been
previously identified as a Fitch Loan of Concern (FLOC), loss
expectations have increased significantly and become more likely
over the last several months; a recent valuation of the property,
which was reported by the special servicer last week, indicated a
value well below the outstanding debt amount. The loan is now 90+
days delinquent.
The Negative Watch signals the heightened possibility for a
downgrade in the near term. The classes placed on Negative Watch
are expected to be resolved over the next few months in conjunction
with a full review of the transaction. The downgrade of the
distressed class D to 'Csf' from 'CCCsf', reflects a greater
certainty of loss to this class.
The affirmations to classes A-3 and A-SB reflect the significant
defeased collateral at 23.2% of the pool, and the anticipation that
the A-SB scheduled balance class will be paid off by its expected
maturity of July 2023.
The 175 West Jackson loan is secured by a 22-story 1.45 million-sf
office building located in downtown Chicago, IL. The property was
built in 1912 and last renovated in 2020. The loan returned to
special servicing in November 2021 due to the sponsor having
substantial difficulty remaining current on the loan.
Occupancy continues to be challenged with reported occupancy of 65%
as of September 2021, 63% at YE 2020, 67% at YE 2019 and 61% at YE
2018. The servicer-reported NOI DSCR was 0.67x as of September 2021
which was in line with YE 2020.
The loan was previously in special servicing in 2018 when
Brookfield Property Group purchased the property and assumed the
loan. The loan returned to master servicing in August 2018 with the
expectation that new sponsorship and fresh capital would accelerate
improvement. However, leasing activity has remained persistently
sluggish since acquisition and has only been exacerbated by the
pandemic. The sponsor and special servicer continue workout
discussions, but a deed-in-lieu is considered a probable outcome.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades of one category or more are expected on the classes
placed on Negative Watch, given the significantly higher loss
expectation on the 175 West Jackson loan, coupled with overall
performance concerns over much of the remainder of the pool,
including four additional specially serviced loans/assets
(8.6% of the pool) and another 13 FLOC's (31%). All remaining
performing loans are scheduled to mature by November 2023.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades are not expected on any of the classes considering
the expected losses and near-term maturity of the loans in the
pool. Upgrades would be possible with significantly better
than expected recoveries on the specially serviced loans.
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.
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.
DBUBS 2011-LC1: Moody's Lowers Rating on Cl. X-B Certs to Ca
------------------------------------------------------------
Moody's Investors Service has downgraded the rating on one interest
only (IO) class in DBUBS 2011-LC1 Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2011-LC1 as
follows:
Cl. X-B, Downgraded to Ca (sf); previously on Oct 12, 2021
Downgraded to Caa2 (sf)
RATINGS RATIONALE
The rating on the IO class, Cl. X-B, was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes. The IO
class is the only outstanding Moody's-rated class in this
transaction. The IO class references Class H, which is not rated by
Moody's.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Large Loan and Single
Asset/Single Borrower Commercial Mortgage-Backed Securitizations
Methodology" published in November 2021.
DEAL PERFORMANCE
As of the March 11, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 98.4% to $35.6
million from $2.18 billion at securitization. The certificates are
collateralized by one remaining mortgage loan which is currently in
special servicing.
The specially serviced loan is the Westgate I Corporate Center Loan
($35.6 million - 100% of the pool), which is secured by a 230,518
square foot (SF) office building located in Basking Ridge, New
Jersey. The property is currently vacant after former tenant
Everest Reinsurance vacated upon lease expiration in December 2020.
The borrower has agreed to a receivership order and the servicer
has engaged counsel and filed for foreclosure on May 5, 2021. The
receiver has listed the property for sale and is accepting bids for
the property. Moody's anticipates a significant loss on this loan.
DEEPHAVEN 2022-2: S&P Assigns B- (sf) Rating on Class B-2 Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Deephaven
Residential Mortgage Trust 2022-2's mortgage-backed pass-through
notes series 2022-2.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate mortgage loans secured by single-family
residences, planned-unit developments, condominiums, two- to
four-family homes, and one townhouse. The pool consists of 587
loans backed by 609 properties that are primarily non-qualified
mortgage loans and ability-to-repay exempt loans; of the 587 loans,
seven are cross collateralized, which were broken down to their
constituents at the property level (making up 29 properties).
The preliminary ratings are based on information as of March 23,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The mortgage aggregator, Deephaven Mortgage LLC (Deephaven);
-- The transaction's representation and warranty framework;
-- The geographic concentration;
-- The 100% due diligence results consistent with represented loan
characteristics; 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.
Preliminary Ratings Assigned
Deephaven Residential Mortgage Trust 2022-2
Class A-1, $182,322,000: AAA (sf)
Class A-2, $23,583,000: AA (sf)
Class A-3, $37,880,000: A (sf)
Class M-1, $16,507,000: BBB (sf)
Class B-1, $12,971,000: BB (sf)
Class B-2, $12,528,000: B- (sf)
Class B-3, $8,991,473: NR
Class XS, Notional(i): NR
Class A-IO-S, Notional(i): NR
Class R: NR
(i)Notional amount equals the loans' aggregate stated principal
balance.
NR--Not rated.
DIAMETER CAPITAL 3: S&P Assigns BB- (sf) Rating on Class D Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Diameter Capital CLO 3
Ltd./Diameter Capital CLO 3 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 Diameter CLO Advisors LLC.
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.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Diameter Capital CLO 3 Ltd./Diameter Capital CLO 3 LLC
Class A-1A, $240.00 million: AAA (sf)
Class A-1B, $12.00 million: AAA (sf)
Class A-2, $50.00 million: AA (sf)
Class B (deferrable), $26.00 million: A (sf)
Class C (deferrable), $24.00 million: BBB- (sf)
Class D (deferrable), $16.00 million: BB- (sf)
Subordinated notes, $33.25 million: Not rated
DRYDEN 98: S&P Assigns BB- (sf) Rating on $20.63MM Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Dryden 98 CLO
Ltd./Dryden 98 CLO LLC's fixed- and 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 PGIM Inc., a subsidiary of Prudential
Financial Inc.
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
Dryden 98 CLO Ltd./Dryden 98 CLO LLC
Class A, $352.00 million: AAA (sf)
Class B-1, $58.50 million: AA (sf)
Class B-2, $7.50 million: AA (sf)
Class C (deferrable), $33.00 million: A (sf)
Class D (deferrable), $33.00 million: BBB- (sf)
Class E (deferrable), $20.63 million: BB- (sf)
Subordinated notes, $52.50 million: Not rated
ELMWOOD CLO 14: S&P Assigns B- (sf) Rating on Class F Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to Elmwood CLO 14
Ltd./Elmwood CLO 14 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 Elmwood Asset Management LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- 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
Elmwood CLO 14 Ltd./Elmwood CLO 14 LLC
Class A, $416.00 million: AAA (sf)
Class B, $78.00 million: AA (sf)
Class C (deferrable), $39.00 million: A+ (sf)
Class D (deferrable), $39.00 million: BBB- (sf)
Class E (deferrable), $26.00 million: BB- (sf)
Class F (deferrable), $9.75 million: B- (sf)
Subordinated notes, $52.20 million: Not rated
ELMWOOD CLO 15: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
15 Ltd./Elmwood CLO 15 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 Elmwood RR CLO LLC.
The preliminary ratings are based on information as of March 23,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- 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
Elmwood CLO 15 Ltd./Elmwood CLO 15 LLC
Class X, $2.40 million: AAA (sf)
Class A-1, $248.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B, $48.00 million: AA (sf)
Class C, $24.00 million: A (sf)
Class D, $23.00 million: BBB- (sf)
Class E, $17.00 million: BB- (sf)
Subordinated notes, $35.20 million: Not rated
FANNIE MAE 2022-R03: S&P Assigns Prelim 'BB-' Rating on 1B-1 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fannie Mae
Connecticut Avenue Securities Trust 2022-R03's (CAS 2022-R03)
notes.
The note issuance is an RMBS transaction in which the payments are
determined by a reference pool of residential mortgage loans, deeds
of trust, or similar security instruments encumbering mortgaged
properties acquired by Fannie Mae.
The preliminary ratings are based on information as of March 17,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings assigned to CAS 2022-R03's notes reflect
S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The real estate mortgage investment conduit (REMIC) structure,
which reduces the counterparty exposure to Fannie Mae for periodic
principal and interest payments, but also pledges the support of
Fannie Mae (as a highly rated counterparty) to cover any shortfalls
on interest payments and make up for any investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which enhances the notes' strength, in S&P's view;
-- The enhanced credit risk management and quality control
processes Fannie Mae uses in conjunction with the underlying
representations and warranties framework; and
-- The further impact that the COVID-19 pandemic is likely to have
on the U.S. economy and housing market, and the additional
structural provisions included to address corresponding forbearance
and subsequent defaults.
Preliminary Ratings Assigned
FANNIE MAE CONNECTICUT AVENUE SECURITIES TRUST 2022-R03
CLASS PRELIMINARY RATINGS PRELIMINARY AMOUNT ($)
1A-H(i) NR 42,918,240,709
1M-1 A- (sf) 484,882,000
1M-1H(i) NR 25,521,069
1M-2A(ii) BBB+ (sf) 126,491,000
1M-AH(i) NR 6,657,627
1M-2B(ii) BBB (sf) 126,491,000
1M-BH(i) NR 6,657,627
1M-2C(ii) BBB- (sf) 126,491,000
1M-CH(i) NR 6,657,627
1M-2(ii) BBB- (sf) 379,473,000
1B-1A(ii) BB+ (sf) 105,409,000
1B-AH(i) NR 5,548,189
1B-1B(ii) BB- (sf) 105,409,000
1B-BH(i) NR 5,548,189
1B-1(ii) BB- (sf) 210,818,000
1B-2(ii) NR 166,435,000
1B-2H(i) NR 55,479,378
1B-3H(i)(iii) NR 110,957,189
(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. The holders of the class 1M-2A, class 1M-2B, class
1M-2C, class 1B-1A, class 1B-1B, and class 1B-2 notes may exchange
all or part of those classes for proportionate interests in the
classes of RCR notes as specified in the offering documents.
(iii)For the purposes of calculating modification gain or
modification loss amounts, class 1B-3H is deemed to bear interest
at SOFR + 15%.
NR--Not rated.
N/A--Not applicable.
SOFR--Secured overnight financing rate.
RCR Exchangeable Classes(i)
FANNIE MAE CONNECTICUT AVENUE SECURITIES TRUST 2022-R03
RCR NOTE PRELIM RATING INTEREST TYPE AMOUNT (MIL. $)
1M-2 BBB- (sf) Floating 379.473
1E-A1 BBB+ (sf) Floating 126.491
1A-I1 BBB+ (sf) Fixed/IO 126.491
1E-A2 BBB+ (sf) Floating 126.491
1A-I2 BBB+ (sf) Fixed/IO 126.491
1E-A3 BBB+ (sf) Floating 126.491
1A-I3 BBB+ (sf) Fixed/IO 126.491
1E-A4 BBB+ (sf) Floating 126.491
1A-I4 BBB+ (sf) Fixed/IO 126.491
1E-B1 BBB (sf) Floating 126.491
1B-I1 BBB (sf) Fixed/IO 126.491
1E-B2 BBB (sf) Floating 126.491
1B-I2 BBB (sf) Fixed/IO 126.491
1E-B3 BBB (sf) Floating 126.491
1B-I3 BBB (sf) Fixed/IO 126.491
1E-B4 BBB (sf) Floating 126.491
1B-I4 BBB (sf) Fixed/IO 126.491
1E-C1 BBB- (sf) Floating 126.491
1C-I1 BBB- (sf) Fixed/IO 126.491
1E-C2 BBB- (sf) Floating 126.491
1C-I2 BBB- (sf) Fixed/IO 126.491
1E-C3 BBB-(sf) Floating 126.491
1C-I3 BBB- (sf) Fixed/IO 126.491
1E-C4 BBB- (sf) Floating 126.491
1C-I4 BBB- (sf) Fixed/IO 126.491
1E-D1 BBB (sf) Floating 252.982
1E-D2 BBB (sf) Floating 252.982
1E-D3 BBB (sf) Floating 252.982
1E-D4 BBB (sf) Floating 252.982
1E-D5 BBB (sf) Floating 252.982
1E-F1 BBB- (sf) Floating 252.982
1E-F2 BBB-(sf) Floating 252.982
1E-F3 BBB- (sf) Floating 252.982
1E-F4 BBB- (sf) Floating 252.982
1E-F5 BBB- (sf) Floating 252.982
1-X1 BBB (sf) Fixed/IO 252.982
1-X2 BBB (sf) Fixed/IO 252.982
1-X3 BBB (sf) Fixed/IO 252.982
1-X4 BBB (sf) Fixed/IO 252.982
1-Y1 BBB- (sf) Fixed/IO 252.982
1-Y2 BBB- (sf) Fixed/IO 252.982
1-Y3 BBB- (sf) Fixed/IO 252.982
1-Y4 BBB- (sf) Fixed/IO 252.982
1-J1 BBB- (sf) Floating 126.491
1-J2 BBB- (sf) Floating 126.491
1-J3 BBB- (sf) Floating 126.491
1-J4 BBB- (sf) Floating 126.491
1-K1 BBB- (sf) Floating 252.982
1-K2 BBB- (sf) Floating 252.982
1-K3 BBB- (sf) Floating 252.982
1-K4 BBB- (sf) Floating 252.982
1M-2Y BBB- (sf) Floating 379.473
1M-2X BBB- (sf) Fixed/IO 379.473
1B-1 BB- (sf) Floating 210.818
1B-1Y BB- (sf) Floating 210.818
1B-1X BB- (sf) Fixed/IO 210.818
1B-2Y NR Floating 166.435
1B-2X NR Fixed/IO 166.435
(i)Refer to the offering documents for more detail on possible
combinations.
RCR--Related combinable and recombinable notes.
IO--Interest only.
NR--Not rated.
FREDDIE MAC 2022-HQA1: S&P Assigns B- (sf) Rating on B-1I Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Freddie Mac STACR REMIC
Trust 2022-HQA1's notes.
The note issuance is an RMBS securitization backed by fully
amortizing, high loan-to-value, first-lien, fixed-rate residential
mortgage loans secured by one- to four-family residences,
planned-unit developments, condominiums, cooperatives, and
manufactured housing to mostly prime borrowers.
The ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches, as well as the associated structural deal mechanics;
-- The credit quality of the collateral included in the reference
pool--a majority of this collateral is covered by mortgage
insurance backstopped by Freddie Mac;
-- The REMIC structure that reduces the counterparty exposure to
Freddie Mac for periodic principal and interest payments, but, at
the same time, pledges the support of Freddie Mac (a highly rated
counterparty) to cover shortfalls, if any, on interest payments and
to make up for any investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which, in S&P's view, enhances the notes' strength;
-- The enhanced credit risk management and quality control
processes Freddie Mac uses in conjunction with the underlying
representations and warranties framework; and
-- The further impact that the COVID-19 pandemic is likely to have
on the U.S. economy and the U.S. housing market and the additional
structural provisions included to address corresponding forbearance
and subsequent defaults.
Since the publication of the presale, Freddie Mac upsized classes
M-1A and M-1B while downsizing the corresponding reference tranche
classes M-1AH and M-1BH, effectively reducing the risk retention on
each respective class. This change did not impact credit support
levels and did not impact the ratings assigned.
Ratings Assigned
Freddie Mac STACR REMIC Trust 2022-HQA1
Class A-H(i), $42,775,860,240: NR
Class M-1A, $534,000,000(ii): BBB+ (sf)
Class M-1AH(i), $28,840,266(ii): NR
Class M-1B, $491,000,000(ii): BBB- (sf)
Class M-1BH(i), $26,813,045(ii): NR
Class M-2, $455,000,000: B+ (sf)
Class M-2A, $227,500,000: BB (sf)
Class M-2AH(i), $76,433,744: NR
Class M-2B, $227,500,000: B+ (sf)
Class M-2BH(i), $76,433,744: NR
Class M-2R, $455,000,000: B+ (sf)
Class M-2S, $455,000,000: B+ (sf)
Class M-2T, $455,000,000: B+ (sf)
Class M-2U, $455,000,000: B+ (sf)
Class M-2I, $455,000,000: B+ (sf)
Class M-2AR, $227,500,000: BB (sf)
Class M-2AS, $227,500,000: BB (sf)
Class M-2AT, $227,500,000: BB (sf)
Class M-2AU, $227,500,000: BB (sf)
Class M-2AI, $227,500,000: BB (sf)
Class M-2BR, $227,500,000: B+ (sf)
Class M-2BS, $227,500,000: B+ (sf)
Class M-2BU, $227,500,000: B+ (sf)
Class M-2BI, $227,500,000: B+ (sf)
Class M-2RB, $227,500,000: B+ (sf)
Class M-2SB, $227,500,000: B+ (sf)
Class M-2TB, $227,500,000: B+ (sf)
Class M-2UB, $227,500,000: B+ (sf)
Class B-1, $168,000,000: B- (sf)
Class B-1A, $84,000,000: B (sf)
Class B-1AR, $84,000,000: B (sf)
Class B-1AI, $84,000,000: B (sf)
Class B-1AH(i), $28,568,053: NR
Class B-1B, $84,000,000: B- (sf)
Class B-1BH(i), $28,568,053: NR
Class B-1R, $168,000,000: B- (sf)
Class B-1S, $168,000,000: B- (sf)
Class B-1T, $168,000,000: B- (sf)
Class B-1U, $168,000,000: B- (sf)
Class B-1I, $168,000,000: B- (sf)
Class B-2, $168,000,000: NR
Class B-2A, $84,000,000: NR
Class B-2AR, $84,000,000: NR
Class B-2AI, $84,000,000: NR
Class B-2AH(i), $28,568,053: NR
Class B-2B, $84,000,000: NR
Class B-2BH(i), $28,568,053: NR
Class B-2R, $168,000,000: NR
Class B-2S, $168,000,000: NR
Class B-2T, $168,000,000: NR
Class B-2U, $168,000,000: NR
Class B-2I, $168,000,000: NR
Class B-3H(i), $112,568,054: NR
(i)Reference tranche only and will not have corresponding notes.
Freddie Mac retains the risk of these tranches.
(ii)Since S&P published its presale, the class M-1A and M-1B
balances were upsized, and the corresponding reference tranche
classes M-1AH and M-1BH balances were downsized.
NR--Not rated.
GS MORTGAGE 2022-GR2: Moody's Gives (P)B3 Rating to Cl. B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 21
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust (GSMBS) 2022-GR2. The ratings
range from (P)Aaa (sf) to (P)B3 (sf).
GS Mortgage-Backed Securities Trust 2022-GR2 (GSMBS 2022-GR2) is
the second investment property transaction in 2022 backed by
Guaranteed Rate collateral issued by Goldman Sachs Mortgage Company
(GSMC), the sponsor and the mortgage loan seller. GSMC is a wholly
owned subsidiary of Goldman Sachs Bank USA and Goldman Sachs. The
certificates are backed by 2,324 first lien, primarily 30-year,
fully-amortizing fixed-rate, conforming mortgage loans on
residential investment properties with an aggregate unpaid
principal balance (UPB) of $690,095,702 as of the March1, 2022
cut-off date. All loans in the pool are originated by Guaranteed
Rate, Inc. (72.9%), Guaranteed Rate Affinity, LLC (11.4%),
collectively, Guaranteed Rate parties, and Stearns Lending, LLC
(15.7%), which is wholly owned by Guaranteed Rate, Inc. Overall,
pool strengths include the high credit quality of the underlying
borrowers, indicated by high FICO scores, strong reserves, loans
with fixed interest rates and no interest-only loans. As of the
cut-off date, all of the mortgage loans are current, and no
borrower has entered into a COVID-19 related forbearance plan with
the servicer.
Approximately 1.5% of the mortgage loans by stated principal
balance as of the cut-off date were subject to debt consolidation
in which the related funds were used by the related mortgagor for
consumer, family or household purposes (personal-use loans). Vast
majority of the personal-use loans are "qualified mortgages" under
Regulation Z as a result of the temporary provision allowing
qualified mortgage status for loans eligible for purchase,
guaranty, or insurance by Fannie Mae and Freddie Mac (and certain
other federal agencies). With the exception of personal-use loans,
all other mortgage loans in the pool are not subject to the federal
Truth-in-Lending Act (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. As of the closing date, the sponsor or a majority-
owned affiliate of the sponsor will retain at least 5% of the
initial certificate principal balance or notional amount of each
class of certificates (other than Class A-R certificates) issued by
the trust to satisfy U.S. risk retention rules.
NewRez LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint) will
service all of the loans in the pool. Computershare Trust Company,
N.A. will be the master servicer and securities administrator. U.S.
Bank Trust National Association will be the trustee. Pentalpha
Surveillance LLC will be the representations and warranties (R&W)
breach reviewer.
Evolve Mortgage Services (Evolve) is the third-party reviewer and
verified the accuracy of the loan level information. Evolve
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 30.6% (by loan count) of the mortgage loans
in the collateral pool.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. In addition, Moody's
adjusted its losses 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 2022-GR2
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aa1 (sf)
Cl. A-4, Assigned (P)Aa1 (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-X-1*, Assigned (P)Aa1 (sf)
Cl. A-X-2*, Assigned (P)Aaa (sf)
Cl. A-X-3*, Assigned (P)Aa1 (sf)
Cl. A-X-5*, Assigned (P)Aaa (sf)
Cl. A-X-7*, Assigned (P)Aaa (sf)
Cl. A-X-10*, 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-mean is
1.04%, in a baseline scenario-median is 0.78%, and reaches 5.79% at
stress level consistent with Moody's Aaa rating.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, strength of the TPR and the R&W framework of the
transaction.
Collateral Description
Moody's assessed the collateral pool as of March 1, 2022, the
cut-off date. The aggregate collateral pool as of the cut-off date
consists of 2,324 first lien, primarily 30-year, fully-amortizing
fixed-rate, conforming mortgage loans on residential investment
properties with an aggregate unpaid principal balance (UPB) of
$690,095,702 and a weighted average mortgage rate of 3.6%.
All of the mortgage loans are secured by first liens on one-to-four
family residential properties, planned unit developments,
condominiums and townhouses. 2,281 mortgage loans have original
terms to maturity of 30 years, one loan has maturity of 29 years,
seven loans have maturity of 25 years, one loan has maturity of 22
years, and 34 loans have maturity of 20 years.
The WA current FICO score of the borrowers in the pool is 771. The
WA Original LTV ratio of the mortgage pool is 66.7%, which is in
line with that of comparable transactions.
The mortgage loans in the pool were originated mostly in California
(27.9% by loan balance) and Massachusetts(10.6% by loan balance),
and in high cost metropolitan statistical areas (MSAs) of Boston
(9.7%), Los Angeles (8.8%), Chicago (8.4%), San Francisco (5.4%)
and New York (3.9%). The high geographic concentration in high cost
MSAs is reflected in the high average balance of the pool
($296,943). Moody's made adjustments to its losses to account for
this geographic concentration risk. Top 10 MSAs comprise 48.9% of
the pool, by loan balance. Approximately 18.0% of the pool balance
is related to borrowers with two or more mortgages in the pool.
Aggregator/Origination Quality
GSMC is the loan aggregator and the 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 mortgage loan seller from Guaranteed Rate, Inc
,Guaranteed Rate Affinity, LLC and Stearns Lending, LLC. The
mortgage loan seller does not originate any mortgage loans,
including the mortgage loans included in the mortgage pool.
Instead, the mortgage loan seller acquired the mortgage loans
pursuant to contracts with the originators.
Overall, Moody's 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.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate, and as a result Moody's did not make any adjustments
to its base case and Aaa stress loss assumptions based on the
servicing arrangement.
Shellpoint will be the named primary servicer for this transaction
and will service 100% of the pool. Shellpoint is an approved
servicer in good standing with Ginnie Mae, Fannie Mae and Freddie
Mac. Shellpoint's primary servicing location is in Greenville,
South Carolina. Shellpoint services residential mortgage assets for
investors that include banks, financial services companies, GSEs
and government agencies. Computershare Trust Company, N.A.
(Computershare) will act as master servicer and securities
administrator under the sale and servicing agreement and as
custodian under the custodial agreement. 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
Evolve Mortgage Services (Evolve), the TPR firm, reviewed 30.6% (by
loan count) of the loans for regulatory compliance, credit,
property valuation and data accuracy. The due diligence results
confirm compliance with the originators' underwriting guidelines
for many mortgage loans, no material compliance issues, and no
material valuation defects. The mortgage loans that had exceptions
to the originators' underwriting guidelines had significant
compensating factors that were documented.
Representations & Warranties
GSMBS 2022-GR2's R&W framework is in line with that of prior GSMBS
transactions Moody's have 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 have identified for US RMBS. R&W
breaches are evaluated by an independent third-party using a set of
objective criteria. The transaction requires mandatory independent
reviews of 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 providers 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 analyze the impact of less
creditworthy R&W providers case by case, in conjunction with other
aspects of the transaction. Here, because 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.
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 0.65% of the cut-off date pool
balance, and a subordination lock-out amount of 0.65% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
HERTZ VEHICLE III: Moody's Assigns (P)Ba2 Rating to 3 Tranches
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
Series 2022-3, Series 2022-4 and Series 2022-5 Rental Car Asset
Backed Notes to be issued by Hertz Vehicle Financing III LLC (HVF
III or the Issuer), Hertz's rental car ABS facility.
The Series 2022-3 Notes, the Series 2022-4 Notes and the Series
2022-5 Notes (the notes) will have legal final maturity dates in
March 2025, September 2026, and September 2028, respectively. The
Issuer is a Delaware limited liability company, which is a
bankruptcy-remote special purpose entity and direct subsidiary of
The Hertz Corporation (Hertz; B2 stable). The collateral backing
the notes will be a fleet of vehicles and a single operating lease
of the fleet to Hertz for use in its rental car business, as well
as certain manufacturer and incentive rebate receivables owed to
the issuer by the original equipment manufacturers (OEMs).
The complete rating actions are as follows:
Issuer: Hertz Vehicle Financing III LLC
Series 2022-3 Rental Car Asset Backed Notes, Class A, Assigned
(P)Aaa (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class B, Assigned
(P)A2 (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class C, Assigned
(P)Baa2 (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class D, Assigned
(P)Ba2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class A, Assigned
(P)Aaa (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class B, Assigned
(P)A2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class C, Assigned
(P)Baa2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class D, Assigned
(P)Ba2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class A, Assigned
(P)Aaa (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class B, Assigned
(P)A2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class C, Assigned
(P)Baa2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class D, Assigned
(P)Ba2 (sf)
RATINGS RATIONALE
The provisional ratings are based on (1) the credit quality of the
collateral in the form of rental fleet vehicles, which Hertz uses
in its rental car business, (2) the credit quality of Hertz as the
primary lessee and guarantor under the operating lease, (3) the
experience and expertise of Hertz as sponsor and administrator, (4)
credit enhancement, which will consist of subordination and
over-collateralization, (5) a required liquidity amount in the form
of cash and/or a letter of credit, (6) the transaction's legal
structure, including standard bankruptcy remoteness and security
interest provisions, and (7) vastly improved rental car market
conditions, owing to the tight supply and increasing demand.
The Series 2022-3, Series 2022-4 and Series 2022-5 Class A, Class
B, and Class C Notes will benefit from subordination of 32.5%,
22.0%, and 13.0% of the outstanding balance of the Series 2022-3,
Series 2022-4 and Series 2022-5 Notes, respectively. Additionally,
the Series 2022-3, Series 2022-4 and Series 2022-5 Notes will
benefit from overcollateralization and a liquidity reserve to cover
at least six months of interest on the notes, plus 50 basis points
of expenses.
As in prior issuances, the transaction documents stipulate that the
required credit enhancement for the Series 2022-3, Series 2022-4
and Series 2022-5 Notes, sized as a percentage of the total assets,
will be a blended rate, which is a function of Moody's ratings on
the OEMs and defined asset categories as described below:
5.00% for eligible program vehicle and receivable amount from
investment grade manufacturers (any manufacturer that (i) has a
Moody's long-term senior unsecured rating or long-term corporate
family rating of at least Baa3 and (ii) does not have a Moody's
long-term corporate family rating and has a Moody's senior
unsecured rating of at least Ba1)
8.00% for eligible program vehicle amount from non-investment
grade manufacturers
15.00% for eligible non-program vehicle amount from investment
grade manufacturers
15.00% for eligible non-program vehicle amount from non-investment
grade manufacturers
8.00% for eligible program receivable amount from non-investment
grade (high) manufacturers (any manufacturer that (i) is not an
investment grade manufacturer and (ii) has a long-term senior
unsecured rating or long-term corporate family rating of at least
Ba3)
100.00% for eligible program receivable amount from non-investment
grade (low) manufacturers (any manufacturer that has a long-term
senior unsecured rating or long-term corporate family rating of
less than Ba3)
35.0% for medium-duty truck amount
0.00% for cash amount
100% for remainder Aaa amount
Consequently, the actual required amount of credit enhancement will
fluctuate based on the mix of vehicles and receivables in the
securitized fleet. Furthermore, the transaction documents dictate
that the total enhancement should include a minimum portion which
is liquid (in cash and/or letter of credit), sized as a percentage
of the aggregate Class A, B, C, and D principal amount, net of
cash.
Assumptions Moody's applied in the analysis of this transaction:
Risk of sponsor default: Moody's assumed a 60% decrease in the
probability of default (from Moody's idealized default probability
tables) implied by the B2 rating of the sponsor. This reduction
reflects Moody's view that, in the event of a bankruptcy, Hertz
would be more likely to reorganize under a Chapter 11 bankruptcy
filing, as it would likely realize more value as an ongoing
business concern than it would if it were to liquidate its assets
under a Chapter 7 filing. Furthermore, given the sponsor's
competitive position within the rental car industry and the size of
its securitized fleet relative to its overall fleet, the sponsor is
likely to affirm its lease payment obligations in order to retain
the use of the fleet and stay in business. Moody's arrive at the
60% decrease assuming a 80% probability Hertz would reorganize
under a Chapter 11 bankruptcy and a 75% probability Hertz would
affirm its lease payment obligations in the event of a Chapter 11
bankruptcy.
Disposal value of the fleet: Moody's assumed the following haircuts
to the net book value (NBV) of the vehicle fleet:
Non-Program Haircut upon Sponsor Default (Car): Mean: 19%
Non-Program Haircut upon Sponsor Default (Car): Standard Deviation:
6%
Non-Program Haircut upon Sponsor Default (Truck): Mean: 35%
Non-Program Haircut upon Sponsor Default (Truck): Standard
Deviation: 8%
Non-Program Haircut upon Sponsor Default (Tesla): Mean: 24%
Non-Program Haircut upon Sponsor Default (Tesla): Standard
Deviation: 10%
Fixed Program Haircut upon Sponsor Default: 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Car): 20%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Truck): 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Tesla): 50%
Fleet composition -- Moody's assumed the following fleet
composition (based on NBV of vehicle fleet):
Non-program Vehicles: 95%
Program Vehicles: 5%
Non-program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 10.0%, 2, A3
Baa Profile: 45.0%, 2, Baa3
Ba/B Profile: 20.0%, 1, Ba3; 25.0%, 1, Ba1
Program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 0.0%, 0, A3
Baa Profile: 50.0%, 1, Baa3
Ba/B Profile: 50.0%, 1, Ba3
Manufacturer Receivables: 10%; receivables distributed in the same
proportion as the program fleet (Program Manufacturer Concentration
and Manufacturer Receivables together should add up to 100%)
Correlation: Moody's applied the following correlation
assumptions:
Correlation among the sponsor and the vehicle manufacturers: 10%
Correlation among all vehicle manufacturers: 25%
Default risk horizon -- Moody's assumed the following default risk
horizon:
Sponsor: 5 years
Manufacturers: 1 year
A fixed set of time horizon assumptions, regardless of the
remaining term of the transaction, is used when considering sponsor
and manufacturer default probabilities and the expected loss of the
related liabilities, which simplifies Moody's modeling approach
using a standard set of benchmark horizons.
Detailed application of the assumptions are provided in the
methodology.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Rental Vehicle
Securitizations Methodology" published in October 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the Series 2022-3, 2022-4 and
2022-5 Notes if (1) the credit quality of the lessee improves, (2)
assumptions of the credit quality of the pool of vehicles
collateralizing the transaction were to improve, as reflected by a
stronger mix of program and non-program vehicles and stronger
credit quality of vehicle manufacturers, (3) the residual values of
the non-program vehicles collateralizing the transaction were to
increase materially relative to Moody's expectations.
Down
Moody's could downgrade the ratings of the Series 2022-3, 2022-4
and 2022-5 Notes if (1) the credit quality of the lessee
deteriorates or a corporate liquidation of the lessee were to occur
and introduce operational complexity in the liquidation of the
fleet, (2) assumptions of the credit quality of the pool of
vehicles collateralizing the transaction were to weaken, as
reflected by a weaker mix of program and non-program vehicles and
weaker credit quality of vehicle manufacturers, (3) reduced demand
for used vehicles results in lower sales volumes and sharp declines
in used vehicle prices above Moody's assumed depreciation, or (4)
the residual values of the non-program vehicles collateralizing the
transaction were to decrease materially relative to Moody's
expectations.
IMSCI 2013-4: Fitch Affirms CC Rating on Class G Certs
------------------------------------------------------
Fitch Ratings has affirmed eight classes of Institutional Mortgage
Securities Canada Inc.'s (IMSCI) Commercial Mortgage Pass-Through
Certificates series 2013-4. In addition, Fitch has revised the
Rating Outlook on three classes to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
IMSCI 2013-4
A-1 45779BBT5 LT AAAsf Affirmed AAAsf
A-2 45779BBU2 LT AAAsf Affirmed AAAsf
B 45779BBW8 LT AAsf Affirmed AAsf
C 45779BBX6 LT Asf Affirmed Asf
D 45779BBY4 LT BBsf Affirmed BBsf
E 45779BBZ1 LT Bsf Affirmed Bsf
F 45779BBH1 LT CCCsf Affirmed CCCsf
G 45779BBJ7 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Improved Loss Expectations: The Outlook revisions on classes C, D,
and E are due to the increasing collateral performance from the
Fitch Loans of Concern (FLOCs) and improved loss expectations
compared to the prior rating action. Four loans (45.3%) have been
designated FLOCs compared to six loans (45.9%) at the prior rating
action. Additionally, three of the FLOCs are structured with
recourse, and the sponsors have continued to fund debt service
shortfalls.
Canadian Loan Attributes and Historical Performance: The
affirmations reflect strong historical Canadian commercial real
estate loan performance, as well as positive loan attributes, such
as short amortization schedules, recourse to the borrower and
additional guarantors. Approximately 56.4% of the loans in the pool
reflect full or partial recourse.
The largest FLOC is Burnhamthorpe Square (15.3% of the pool), an
office park in Etobicoke, ON in the Toronto metro, where the
largest tenant (Canada Bread Company - 18.4% NRA) vacated in April
2020, prior to their December 2020 lease expiration. In addition,
tenants accounting for approximately 22% of NRA have leases
scheduled to expire in 2022 and 2023. As of the December 2021 rent
roll, the property was 65% occupied. According to the borrower,
they are still marketing the vacant Canada Bread Company space, but
interest has been slow due to the pandemic. The concerns over the
recent decline in performance are mitigated by the loan's low
leverage. This loan is scheduled to mature in April 2023.
The largest FLOC, Franklin Suites (5.9%), a 75-key extended stay
hotel built in 2006 and located in Fort McMurray, AB. As of
September 2021, the hotel is not open to the public. The entire
property has been converted to a COVID-19 recovery center for one
of the First Nations Groups close to Fort McMurray. Forty of the
hotel's 75 rooms are occupied by housing staff tasked with
assisting the local First Nations community. While the loan has
remained current since issuance, YE 2020 NOI DSCR was reported as
-0.01x. No credit was given to the recourse provision.
The second largest FLOC is Nelson Ridge (9.7%), secured by a
225-unit multifamily property in Fort McMurray, AB, which
transferred to special servicing in early 2016 due to a decline in
operating performance. The property was affected by the decline in
oil prices, and occupancy declined to a low of only 45% in 2015.
Subsequently, the property was affected by the area wildfires in
May 2016; however, the loan returned to master servicing in January
2017. The loan was scheduled to mature in December 2018 and is
currently in forbearance through May 2023. Per the terms of the
most recent modification, the borrower will make four scheduled
curtailment payments between December 2021 and May 2023.According
to the servicer, the property was 84% occupied in July 2021 and
reported a YE 2020 NOI DSCR of 0.58x. No credit was given to the
recourse due to concerns over the sponsor's ability to continue to
fund debt service shortfalls.
Improved Credit Enhancement: Credit enhancement has improved since
issuance due to loan amortization and payoffs. As of the March 2022
distribution date, the pool's aggregate principal balance has been
reduced by 59.3% to $134.4 million from $330.4 million at issuance.
There are no specially serviced or delinquent loans, and one loan
(11.4%) is defeased.
Pool Concentration: The pool has become concentrated, with only 11
of the original 30 loans remaining when accounting for
cross-collateralized and cross-defaulted loans. Due to the
concentrated nature of the pool, Fitch performed a sensitivity
analysis that grouped the remaining loans based on the timing and
likelihood of repayment, and potential loss; the ratings and
Outlooks reflect this analysis. Fitch anticipates that the non-FLOC
loans will repay in full at their respective maturities in 2023.
Energy Market Concentration: Two loans, Nelson Ridge (9.7%) and
Franklin Suites (5.9%), totaling 15.6% of the pool, have
experienced substantial performance declines as a result of a
sustained decline in oil and gas prices. These loans are located in
Fort McMurray, and both have exhibited DSCRs at or below 1.00x
since YE 2016.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming loans.
Downgrades to the super-senior classes, A-1 and A-2, are not
likely due to the high credit enhancement but could occur if
interest shortfalls occur or if a high proportion of the pool
defaults and expected losses increase significantly.
-- Downgrades to class E may occur should overall pool losses
increase, if several large loans have an outsized loss, or if
FLOCs transfer to special servicing. Further downgrades to
class E would occur should loss expectations increase due to
an increase in specially serviced loans, the disposition of a
specially serviced loan/asset at a high loss, or an increased
certainty of losses on the FLOCs. Further downgrades to the
distressed classes F and G will occur if losses are considered
probable or inevitable or if losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Upgrades of classes B and C may occur with
significant improvement in credit enhancement and/or if
Burnhamthorpe Square loan pays in full at its scheduled
maturity. An upgrade to class D would also consider these
factors but would be limited based on sensitivity to
concentrations.
-- Classes would not be upgraded above 'Asf' if there is a
likelihood of interest shortfalls. An upgrade to classes E, F,
and G is not likely and would only occur if there are better
than expected recoveries on FLOCS and if there is sufficient
credit enhancement, which would likely occur when the non
rated class is not eroded and the senior classes payoff. While
high expected losses on FLOCs continue to impact the pool,
upgrades are extremely unlikely due to the pool concentration.
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.
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.
IMSCI 2014-5: Fitch Affirms B Rating on Class G Debt
----------------------------------------------------
Fitch Ratings has affirmed the ratings of Institutional Mortgage
Securities Canada Inc. (IMSI) 2014-5. Additionally, Fitch has
revised the Rating Outlooks on classes F and G to Stable from
Negative, and to Positive from Stable for class C. All currencies
are denominated in Canadian dollars (CAD).
DEBT RATING PRIOR
---- ------ -----
Institutional Mortgage Securities Canada Inc. 2014-5
A-2 45779BCB3 LT AAAsf Affirmed AAAsf
B 45779BCC1 LT AAAsf Affirmed AAAsf
C 45779BCD9 LT Asf Affirmed Asf
D 45779BCE7 LT BBBsf Affirmed BBBsf
E 45779BCF4 LT BBB-sf Affirmed BBB-sf
F 45779BCG2 LT BBsf Affirmed BBsf
G 45779BCH0 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Improved Loss Expectations, Nelson Ridge: The Rating Outlook
revisions on classes C,F and G reflect the lower loss expectations
on the pool overall; in particular, the Fitch Loan of Concern
(FLOC) Nelson Ridge Pooled Loan (8.0%). Subject YE 2020 NOI has
improved to $1.3 million from -$1.9 million as of YE 2019 and $1.1
million as of YE 2018. While performance is still below issuance
expectations, the recent improvement reflects increased occupancy
as the property recovers from the effects of the coronavirus
pandemic and nearby wildfires in 2015.
Subject occupancy has improved to 82% as of April 2021 from 76% as
of March 2020, 60% as of February 2019 and a historical low of 45%
in 2015. However, the loan's NOI DSCR remains well below 1.0x, as
March 2020 in-place rents were approximately 40% below underwritten
in-place rents at issuance.
The Nelson Ridge Pooled Loan was specially serviced between
February 2016 and 2017 due to underperformance resulting from the
decline in demand for Fort McMurray oil sands development beginning
in 2014. The loan's original maturity was in December 2018;
however, the loan has been granted multiple maturity date
extensions, most recently to December 2023. Per the terms of the
most recent modification, the borrower will make four scheduled
curtailment payments between December 2021 and May 2023.
The loan has full recourse to the sponsor, Lanesborough Real Estate
Investment Trust (LREIT). Fitch did not give credit to the recourse
provision as LREIT's YE 2020 balance sheet shows negative equity,
and the company fully reliant on a revolving credit facility from
its parent entity, Shelter, to fund current operations.
The largest FLOC is the Burnhamthorpe Square Pooled Loan (FLOC,
9.4%), which is secured by a participation interest in an office
complex located in Etobicoke, ON. Subject March 2021 occupancy has
fallen to 66% from 91% as of March 2020 due to the subject's
largest tenant, Canada Bread Company (NRA 20.8%), vacating at lease
expiration in December 2020. According to the borrower, they are
still marketing the vacant Canada Bread Company space, but interest
has been slow due to the pandemic. The concerns over the recent
decline in performance are mitigated by the loan's low leverage.
This loan is scheduled to mature in April 2023.
Improved Credit Enhancement: Credit enhancement has increased due
to scheduled amortization and loan payoffs. As of the March 2022
distribution date, the pool's aggregate principal balance has been
reduced 81.8% to $56.8 million from $311.8 million at issuance.
Since Fitch's last rating action in 2021, four loans comprising
approximately $25.9 million were paid in full at maturity. There
are no full or partial interest-only loans in the pool.
Pool Concentration: The pool is concentrated with only seven of the
original 41 loans remaining. The top three and top five loans
account for 74.5% and 89.8% of the pool, respectively. Due to the
concentrated nature of the pool, Fitch performed a look-through
analysis that grouped the remaining loans based on the likelihood
and timing of repayment.
In this scenario, Fitch's expected losses on the Nelson Ridge
Pooled Loan would be fully absorbed by the non-rated Fitch class H.
Additionally, the class C balance would be paid in full from the
proceeds received at maturity from the pool's performing loans and
assuming Burnhamthorpe Square Pooled Loan (9.4%) pays in full at
maturity. The ratings and Outlooks reflect this analysis.
Canadian Loan Attributes: The ratings reflect strong Canadian
commercial real estate loan performance, including a low
delinquency rate and low historical losses of less than 0.1%, as
well as positive loan attributes such as short amortization
schedules, additional guarantors and recourse to the borrowers.
There are seven loans remaining, of which four loans comprising
approximately 80.5% of total pool balance have full or partial
recourse provisions.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to classes A-2 and 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 E are possible if there is an increase in
FLOCs and/or should loans transfer to special servicing.
Classes F and G could be downgraded should loss expectations
from FLOCs grow more certain.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to the 'Asf' rated class would likely occur with
significant improvement in credit enhancement and/or if
Burnhamthorpe Square Pooled Loan pays in full at its scheduled
maturity. An upgrade of the 'BBBsf' and 'BBB-sf' class is
considered unlikely, and would be limited based on the
sensitivity to concentrations.
-- Classes would not be upgraded above 'Asf' if there is a
likelihood of interest shortfalls. An upgrade to the 'Bsf' and
'BBsf' rated classes is not likely unless the performance of
the remaining pool stabilizes and the senior classes pay off.
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.
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.
JFIN CLO 2015-II: Moody's Ups Rating on $20MM Cl. E-R Notes to Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by JFIN 2015-II Ltd. ("Apex Credit CLO 2015-II
LTD."):
US$24,500,000 Class C-R Secured Deferrable Floating Rate Notes due
2026 (the "Class C-R Notes"), Upgraded to Aaa (sf); previously on
September 9, 2021 Upgraded to Aa1 (sf)
US$22,000,000 Class D-R Secured Deferrable Floating Rate Notes due
2026 (the "Class D-R Notes"), Upgraded to Aa3 (sf); previously on
September 9, 2021 Upgraded to A2 (sf)
US$20,000,000 Class E-R Secured Deferrable Floating Rate Notes due
2026 (the "Class E-R Notes"), Upgraded to Ba1 (sf); previously on
September 9, 2021 Upgraded to Ba3 (sf)
Apex Credit CLO 2015-II LTD. (the Issuer), originally issued in
October 2015 and refinanced in May 2018, is a managed cashflow CLO.
The notes are collateralized primarily by a portfolio of broadly
syndicated senior secured corporate loans. The transaction's
reinvestment period ended in October 2019.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since September 2021. The Class
A-R notes have been paid down by approximately 69.3% or $52.8
million since then. Based on the trustee's February 2022 report[1],
the OC ratios for the Class C, Class D and Class E notes are
reported at 158.45%, 132.13% and 114.80%, respectively, versus
September 2021[2] levels of 139.45%, 122.89% and 110.92%,
respectively.
The deal has also benefited from an improvement in the credit
quality of the portfolio since September 2021. Based on the
trustee's February 2022 report[3], the weighted average rating
factor is currently 3457 compared to 3673 in September 2021[4].
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, weighted average spread, diversity
score and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $179,145,745
Defaulted par: $4,193,179
Diversity Score: 59
Weighted Average Rating Factor (WARF): 3238
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.69%
Weighted Average Coupon (WAC): 6.11%
Weighted Average Recovery Rate (WARR): 46.87%
Weighted Average Life (WAL): 3.26 years
Par haircut in OC tests and interest diversion test: 2.8%
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, near term defaults by
companies facing liquidity pressure, deterioration in credit
quality of the portfolio, decrease in overall WAS and lower
recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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 2014-C21: Fitch Affirms CC Rating on Class F Debt
-----------------------------------------------------------
Fitch Ratings has downgraded three and affirmed 10 classes of J.P.
Morgan Chase Commercial Mortgage Securities Trust, series 2014-C21
(JPMBB 2014-C21).
DEBT RATING PRIOR
---- ------ -----
JPMBB 2014-C21
A-4 46642EAX4 LT AAAsf Affirmed AAAsf
A-5 46642EAY2 LT AAAsf Affirmed AAAsf
A-S 46642EBC9 LT AAAsf Affirmed AAAsf
A-SB 46642EAZ9 LT AAAsf Affirmed AAAsf
B 46642EBD7 LT AA-sf Affirmed AA-sf
C 46642EBE5 LT BBBsf Downgrade A-sf
D 46642EAJ5 LT Bsf Downgrade BBsf
E 46642EAL0 LT CCCsf Affirmed CCCsf
EC 46642EBF2 LT BBBsf Downgrade A-sf
F 46642EAN6 LT CCsf Affirmed CCsf
X-A 46642EBA3 LT AAAsf Affirmed AAAsf
X-B 46642EBB1 LT AA-sf Affirmed AA-sf
X-C 46642EAE6 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Mall Refinance Concerns: The downgrades reflect Fitch's concern
with the ultimate refinancability of two mall loans in the pool, as
well as greater certainty of losses and increasing exposure for the
specially serviced asset, Charlottesville Fashion Square. Eight
loans (24.2% of the pool) have been flagged as Fitch Loans of
Concern (FLOC), including two specially serviced loans (3.1% of the
pool).
Fitch's current ratings incorporate a base case loss of 9.0%.
Losses could reach as high as 11.3% when factoring in the potential
for outsized losses on the Westminster Mall and The Shops at
Wiregrass loans.
Regional Mall Exposure: There are five assets secured by regional
malls, four of which (16.3% of the pool) have been designated as
FLOCs including one asset (2.6% of the pool) in special servicing.
The rating actions reflect the reliance on these four FLOCs to
repay; the downgrade of classes C and D considered the reliance on
the malls to repay. Conversely, the affirmation of class B
considered no reliance on these malls to repay.
Charlottesville Fashion Center (1.9% of the pool), secured by a
362,332-sf portion of a 576,749-sf regional mall located in
Charlottesville, VA is the largest contributor to losses and the
largest specially serviced asset. The original loan was sponsored
by Washington Prime Group and transferred to special servicing in
October 2019 due to imminent default as a result of the closure of
JCPenney and co-tenancy triggers upon the Sears closure. is the
asset became REO in January 2022. The property is anchored by a
Belk's Men (16.8% of the NRA) and a dark Sears and dark JCPenney.
Collateral occupancy increased to 69.1% as of April 2021 from 49.8%
as of September 2020 and 58.9% at YE 2019, but remains well below
93.4% at YE 2018. Fitch expects a full loss on the asset given a
recent valuation significantly below the debt and a growing
exposure.
Westminster Mall (4.70% of the pool) is the second largest
contributor to losses and the second largest FLOC. The loan is
secured by a 771,844-sf portion of a 1.4 million-sf regional mall
located in Westminster, CA. The loan is sponsored by Washington
Prime Group. Collateral occupancy as of September 2021 was 93%
compared with 90% at YE 2020 and 95% at YE 2019.
Total mall occupancy fell to 79.6% at YE 2019 from 95.5% at YE 2018
after the non-collateral Sears vacated in April 2018.
Property-level NOI for the annualized September 2021 period
declined 60% from YE 2020 and 70% from YE 2019. The
servicer-reported NOI debt service coverage ratio (DSCR) decreased
to 0.41x as of September 2021 from 1.02x as of YE 2020 and 1.34x as
of YE 2019. Fitch modeled a base case loss of 40% and applied an
additional sensitivity loss of 50% to the current balance.
The Shops at Wiregrass (3.1% of the pool), the third largest
contributor to losses is secured by a 456,637-sf portion of a
759,880-sf outdoor shopping center located in Wesley Chapel, FL.
The property suffered declining cash flow during the pandemic, but
is recovering to pre-pandemic levels; collateral occupancy
increased to 89% as of September 2021 compared with 76% as of YE
2020, 87% as of YE 2019, and 93.7% as of YE 2018.
Servicer-reported NOI DSCR increased to 1.17x as of September 2021
compared with 0.42x as of YE 2020 and 1.15x as of YE 2019. Fitch
modeled a base case loss of 32% and applied an additional
sensitivity loss of 50%.
Increasing Credit Enhancement: As of the February 2022 distribution
date, the pool's aggregate principal balance was paid down by 20.3%
to 1.008 billion from $1.265 billion at issuance. Twelve loans
(11.7% of the pool) are fully defeased. Since Fitch's last rating
action, three loans previously in Special Servicing have disposed
with cumulative losses generally in-line with Fitch's expectations
and a fourth loan repaid at maturity.
Six loans (25.1%) are full term interest-only and all loans
originally structured with a partial interest-only period have
begun to amortize. All of the remaining non-defeased loans mature
in 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans/assets. Downgrades to classes rated
'AAAsf' and 'AA-sf' may occur should interest shortfalls
affect these classes or additional loans become FLOCs.
-- Further downgrades to classes C and D are possible if losses
to the malls are greater than expected. Downgrades to classes
E and F will occur as losses are realized or become more
imminent.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the
FLOCs, coupled with additional paydown and/or defeasance.
Upgrades to classes B and C would only occur with significant
improvement in credit enhancement and/or defeasance and with
the stabilization of performance on the FLOCs. Classes would
not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls.
-- An upgrade of class D is not likely unless one or more of the
regional malls have significantly improved performance.
Classes E and F are unlikely to be upgraded.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2022-3: Fitch Gives B(EXP) Rating to Class B-5 Debt
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings to J.P. Morgan Mortgage
Trust 2022-3 (JPMMT 2022-3).
DEBT RATING
---- ------
JPMMT 2022-3
A-1 LT AA+(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-A LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-A LT AAA(EXP)sf Expected Rating
A-5-B LT AAA(EXP)sf Expected Rating
A-5-C LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-6-A LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-A LT AAA(EXP)sf Expected Rating
A-7-B LT AAA(EXP)sf Expected Rating
A-7-C LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-8-A LT AAA(EXP)sf Expected Rating
A-9-A LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-11-A LT AAA(EXP)sf Expected Rating
A-11-AI LT AAA(EXP)sf Expected Rating
A-11-B LT AAA(EXP)sf Expected Rating
A-11-BI LT AAA(EXP)sf Expected Rating
A-11-C LT AAA(EXP)sf Expected Rating
A-11-CI LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-12-A LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-13-A LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-14-A LT AAA(EXP)sf Expected Rating
A-15-A LT AAA(EXP)sf Expected Rating
A-16-A LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-17-X LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-18-X LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-19-X LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-20-X LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-21-X LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-22-X LT AAA(EXP)sf Expected Rating
A-23 LT AAA(EXP)sf Expected Rating
A-23-X LT AAA(EXP)sf Expected Rating
A-24 LT AAA(EXP)sf Expected Rating
A-24-X LT AAA(EXP)sf Expected Rating
A-25 LT AA+(EXP)sf Expected Rating
A-25-A LT AA+(EXP)sf Expected Rating
A-26 LT AA+(EXP)sf Expected Rating
A-26-A LT AA+(EXP)sf Expected Rating
A-27 LT AA+(EXP)sf Expected Rating
A-27-A LT AA+(EXP)sf Expected Rating
A-27-B LT AA+(EXP)sf Expected Rating
A-X-1 LT AA+(EXP)sf Expected Rating
A-X-4 LT AA+(EXP)sf Expected Rating
A-X-4-A LT AA+(EXP)sf Expected Rating
A-X-4-B LT AA+(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-1-A LT AA-(EXP)sf Expected Rating
B-1-X LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-2-A LT A-(EXP)sf Expected Rating
B-2-X LT A-(EXP)sf Expected Rating
B-3 LT BBB-(EXP)sf Expected Rating
B-4 LT BB-(EXP)sf Expected Rating
B-5 LT B(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
issued by J.P. Morgan Mortgage Trust 2022-3 (JPMMT 2022-3) as
indicated above. The certificates are supported by 891 loans with a
total balance of approximately $1.003 billion as of the cutoff
date. The pool consists of prime-quality fixed-rate mortgages from
various mortgage originators.
NewRez LLC (f/k/a New Penn Financial, LLC), d/b/a Shellpoint
Mortgage Servicing (Shellpoint), will act as interim servicer for
approximately 31.3% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
July 1, 2022. After the servicing transfer date, these mortgage
loans will be serviced by JPMorgan Chase Bank, National Association
(JPMCB). Since JPMCB will service these loans after the transfer
date, Fitch performed its analysis assuming JPMCB is the servicer
for these loans. Other servicers in the transaction include United
Wholesale Mortgage, LLC and loanDepot.com, LLC. Nationstar Mortgage
LLC (Nationstar) will be the master servicer.
All the loans qualify as safe-harbor qualified mortgage (SHQM),
agency SHQM or QM safe-harbor (average prime offer rate [APOR])
loans.
There is no exposure to Libor in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are fixed
rate based off the net weighted average coupon (WAC) or
floating/inverse floating rate based off the SOFR index, and capped
at the net WAC. This is the 11th Fitch-rated JPMMT transaction
using SOFR as the index rate for floating/inverse floating-rate
certificates.
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 11.0% above a long-term sustainable level (versus
10.6% on a national level). Underlying fundamentals are not keeping
pace with the 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 19.7% YoY nationally as of September 2021.
High-Quality Mortgage Pool (Positive): The pool consists of very
high-quality, fixed-rate fully amortizing loans with maturities of
30 years. All the loans qualify as SHQM, agency SHQM or QM
safe-harbor (APOR) loans. The loans were made to borrowers with
strong credit profiles, relatively low leverage and large liquid
reserves. The loans are seasoned at an average of five months,
according to Fitch (three months per the transaction documents).
The pool has a weighted average (WA) original FICO score of 764 (as
determined by Fitch), which is indicative of very high
credit-quality borrowers. Approximately 70.0% (as determined by
Fitch) of the loans have a borrower with an original FICO score
equal to or above 750. In addition, the original WA combined loan
to value (CLTV) ratio of 71.0%, translating to a sustainable loan
to value (sLTV) ratio of 78.6%, represents substantial borrower
equity in the property and reduced default risk.
A 96.8% portion of the pool comprises non-conforming loans, while
the remaining 3.2% represents conforming loans. All the loans are
designated as QM loans, with 46.9% of the pool being originated by
a retail and correspondent channel.
The pool is comprised of 90.2% of loans where the borrower
maintains a primary residence, while 9.8% of the loans represent
second homes. Single-family homes and planned unit developments
(PUDs), townhouses, and single-family attached constitute 91.7% of
the pool, condominiums/cooperatives make up 6.8% and multifamily
homes make up 1.5%. The pool consists of loans with the following
loan purposes: purchases 46.4%), cash-out refinances (33.6%) and
rate-term refinances (19.9%).
A total of 453 loans in the pool are over $1 million, and the
largest loan is $2.99 million. Fitch determined that 19 of the
loans were made to nonpermanent residents.
Geographic Concentration (Negative): Of the loans, 49.1% of the
pool is concentrated in California. The largest MSA concentration
is in the Los Angeles-Long Beach-Santa Ana, CA MSA (20.8%),
followed by the San Francisco-Oakland-Fremont, CA MSA (9.9%) and
the Phoenix-Mesa-Scottsdale, AZ MSA (5.5%). The top three MSAs
account for 36% of the pool. As a result, there was a 1.2x PD
penalty applied for geographic concentration, which increased the
'AAAsf' loss by 0.09%.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the deal.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained.
The servicers will provide full advancing for the life of the
transaction (each servicer is expected to advance delinquent P&I on
loans that enter into a coronavirus forbearance plan). Although
full P&I advancing will provide liquidity to the certificates, it
will also increase the loan-level loss severity (LS) since the
servicer looks to recoup P&I advances from liquidation proceeds,
which results in less recoveries.
Nationstar is the master servicer and will advance if the servicer
is unable to do so. If the master servicer is unable to advance,
then the securities administrator (Citibank) will advance.
CE Floor (Positive): A CE or senior subordination floor of 0.90%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.60% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
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 42.1% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
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 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.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, Digital Risk, IngletBlair and Opus were engaged
to perform the review. However, none of the loans included in the
final population were reviewed by IngletBlair. Loans reviewed under
this engagement were given compliance, credit and valuation grades
and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2022-INV3: Fitch Gives B-(EXP) Rating to Class B-5 Debt
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to J.P. Morgan Mortgage
Trust 2022-INV3 (JPMMT 2022-INV3).
DEBT RATING
---- ------
JPMMT 2022-INV3
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-A LT AAA(EXP)sf Expected Rating
A-3-B LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-A LT AAA(EXP)sf Expected Rating
A-4-B LT AAA(EXP)sf Expected Rating
A-4-X LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-A LT AAA(EXP)sf Expected Rating
A-5-B LT AAA(EXP)sf Expected Rating
A-5-X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-6-A LT AAA(EXP)sf Expected Rating
A-6-B LT AAA(EXP)sf Expected Rating
A-6-X LT AAA(EXP)sf Expected Rating
A-X-1 LT AAA(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-3 LT BBB(EXP)sf Expected Rating
B-4 LT BB-(EXP)sf Expected Rating
B-5 LT B-(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
FB LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by J.P. Morgan Mortgage Trust 2022-INV3 (JPMMT
2022-INV3), as indicated. The certificates are supported by 1,024
loans with a total interest-bearing balance of approximately $622.0
million as of the cutoff date. The pool consists of prime-quality
fixed-rate mortgages (FRMs) on investor properties that were
originated by various mortgage originators.
NewRez LLC, f/k/a New Penn Financial, LLC d/b/a Shellpoint Mortgage
Servicing (Shellpoint), will act as interim servicer for
approximately 55.7% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
July 1, 2022. After the servicing transfer date, these mortgage
loans will be serviced by JPMorgan Chase Bank, National Association
(JPMCB). Since JPMCB will be servicing these loans after the
transfer date, Fitch performed its analysis assuming JPMCB as the
servicer for these loans. Other servicers in the transaction
include United Wholesale Mortgage, LLC and loanDepot.com, LLC.
Nationstar Mortgage LLC (Nationstar) will be the master servicer.
The majority of the loans (85.5%) are exempt from qualified
mortgage (QM) rule standards, as they are investment property
mortgage loans that are for business purposes. The remaining 14.5%
are able to qualify as safe harbor qualified mortgage (SHQM),
agency SHQM, QM Agency Rebuttable Presumption or QM safe harbor
(Average Prime Offer Rate [APOR]) loans.
There is no exposure to LIBOR in this transaction. The collateral
comprises 100.0% fixed-rate loans, and the certificates are either
fixed rate or based off the net weighted average coupon (WAC).
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 11.1% above a long-term sustainable level (versus
10.6% 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
19.7% yoy nationally as of September 2021.
High Quality Mortgage Pool (Positive): The pool consists of high
quality, fixed-rate fully amortizing loans with maturities of up to
30 years. All (100.0%) of the loans are on non-owner-occupied
properties. The loans were made to borrowers with strong credit
profiles, relatively low leverage and large liquid reserves. The
loans are seasoned at an average of six months, according to Fitch
(five months per the transaction documents). The pool has a
weighted average (WA) original FICO score of 768 (as determined by
Fitch), which is indicative of very high credit quality borrowers.
Approximately 75.8% (as determined by Fitch) of the loans have a
borrower with an original FICO score equal to or above 750.
In addition, the original WA combined loan-to-value (CLTV) ratio of
approximately 67.2% as determined by Fitch, translating to a
sustainable loan-to-value (sLTV) ratio of 73.7%, represents
substantial borrower equity in the property and reduced default
risk.
Nine loans in the pool had a COVID-19 deferred balance, which
totaled $201,865.66. The deferred balances are being allocated to a
non-rated class (Class FB). As such any deferred balances were
treated as a junior loan amount in Fitch's analysis and the CLTV
was increased for the loans with deferred balances. This resulted
in a higher loss severity for these loans.
A 63.5% portion of the pool comprises nonconforming loans, while
the remaining 36.5% represents conforming loans. The majority of
the loans (85.5%) are exempt from the QM rule standards, as they
are investment property mortgage loans that are for business
purposes. The remaining 14.5% are able to qualify as SHQM, agency
SHQM, QM Agency Rebuttable Presumption or QM safe harbor (APOR)
loans. A 45.0% portion of the pool were originated by a retail and
correspondent channel.
The pool consists of 100.0% investor properties. Single-family
homes (attached and detached), planned unit developments (PUDs),
and townhouses constitute 71.8% of the pool, condominiums make up
8.4% and multifamily homes make up 19.8%. The pool consists of
purchase loans (51.7%), cashout refinance loans (27.5%) and
rate-term refinance loans (20.9%).
A total of 184 loans in the pool are over $1 million, and the
largest loan is $2.04 million. Fitch determined that twenty-nine of
the loans were made to nonpermanent residents. There are no loans
made to foreign nationals in the pool.
Roughly 48.9% of the pool is concentrated in California. The
largest MSA concentration is in the Los Angeles-Long Beach-Santa
Ana, CA MSA (15.1%), followed by the San Diego-Carlsbad-San Marcos,
CA MSA (9.6%) and the San Francisco-Oakland-Fremont, CA MSA (9.2%).
The top three MSAs account for 34% of the pool. As a result, there
was no PD penalty for geographic concentration.
Non-Owner-Occupied Loans (Negative): All (100.0%) of the loans in
the pool are investment property mortgage loans, and 36.5% of the
loans in the pool are conforming loans that were underwritten to
Fannie Mae's and Freddie Mac's guidelines and approved per Desktop
Underwriter (DU) or Loan Product Advisor (LPA), Fannie Mae's and
Freddie Mac's automated underwriting systems, respectively.
The remaining 63.5% of the loans were underwritten to the
underlying sellers' guidelines and were full documentation loans.
All loans were underwritten to the borrower's credit risk, unlike
investor cash flow loans, which are underwritten to the property's
income. Additionally, eight borrowers in the pool have multiple
loans in the pool. Fitch applies a 1.25x probability of default
(PD) penalty for agency investor loans and a 1.60x PD penalty for
investor loans underwritten to the borrower's credit risk.
Multifamily Loans (Negative): Approximately 19.8% of the loans in
the pool are multifamily homes, which Fitch views as riskier than
single-family homes since the borrower may be relying upon the
rental income to cover the mortgage payment on the property. To
account for this risk, Fitch adjusts the PD upwards by 25% from the
baseline for multifamily homes.
Shifting Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the deal.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained. Due to the
leakage to the subordinate bonds, the shifting interest structure
requires more CE.
The servicers will provide full advancing for the life of the
transaction. While this helps the liquidity of the structure, it
also increases the expected loss due to unpaid servicer advances.
If the servicers are unable to advance, the master servicer will
provide advancing. If the master servicer is unable to advance, the
securities administrator will ultimately be responsible for
advancing.
CE Floor (Positive): A CE or senior subordination floor of 1.40%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 1.00% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
For the loss analysis of this pool, Fitch used a customized version
of the U.S. RMBS Loan Loss model that has a 1.25x PD penalty for
agency investor loans and a 1.60x PD penalty for investor loans
underwritten to the borrower's credit risk. The 1.25x PD penalty
was used only for the agency eligible loans (36.5%), with the
remaining loans receiving a 1.60x PD penalty for being investor
occupied. Post-crisis performance indicates that loans underwritten
to DU/LP guidelines have relatively lower default rates compared to
normal investor loans used in regression data with all other
attributes controlled. The implied penalty has been reduced to
approximately 25% for investor agency loans in the customized model
from approximately 60% for regular investor loans in production
model.
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 42.2% 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 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 SitusAMC, Clayton, Digital Risk, Inglet Blair,
Consolidated Analytics and Opus. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.36% at the 'AAAsf' stress due
to 100% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, Digital Risk, Consolidated Analytics, Inglet
Blair and Opus were engaged to perform the review. Loans reviewed
under this engagement were given compliance, credit and valuation
grades and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MADISON PARK XXXVI: Moody's Assigns Ba3 Rating to $24MM E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes issued by Madison Park Funding XXXVI, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$2,000,000 Class X Floating Rate Senior Notes due 2035, Assigned
Aaa (sf)
US$504,000,000 Class A-1-R Floating Rate Senior Notes due 2035,
Assigned Aaa (sf)
US$24,000,000 Class E-R Deferrable Floating Rate Mezzanine 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
90.0% 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, senior unsecured loans, senior secured notes,
and senior secured bonds.
Credit Suisse 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, the Issuer
also issued seven 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; changes to Libor replacement
provisions; additions to the CLO's ability to hold workout and
restructured assets; changes to the definition of "Moody's Adjusted
Weighted Average Rating Factor" and changes to the base matrix and
modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 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: $800,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3091
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 46.50%
Weighted Average Life (WAL): 8.075
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 2021.
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.
MAGNETITE XXXII: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Magnetite
XXXII Ltd./Magnetite XXXII 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 BlackRock Financial Management Inc.,
a subsidiary of Blackrock Inc.
The preliminary ratings are based on information as of March 17,
2022. 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
Magnetite XXXII Ltd./Magnetite XXXII LLC
Class A, $310.00 million: AAA (sf)
Class B, $70.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $48.40 million: Not rated
MARTIN MIDSTREAM: S&P Affirms 'B-' ICR, Outlook Stable
------------------------------------------------------
S&P Global Ratings affirmed its 'B-' issuer credit rating on Martin
Midstream Partners L.P., a Texas-based master limited partnership.
S&P said, "At the same time, we affirmed our 'B+' issue-level
rating on Martin's $53.8 million 1.5-lien notes due in 2024. Our
'1' recovery rating indicates very high (90%-100%; rounded
estimate: 95%) recovery in the event of default.
"We also affirmed our 'B-' issue-level rating on the $292 million
second-lien notes due in 2025. Our '3' recovery rating indicates
meaningful (50%-70%; rounded estimate: 50%) recovery.
"The stable outlook reflects our expectation that Martin Midstream
will maintain its leverage below 5x in 2022 given its adequate
liquidity and improved cash flow generation ability.
"In fiscal 2021, Martin Midstream saw an improvement in most of its
business segments, resulting in EBITDA of $114 million, which was
above our expected EBITDA range of $95 million-$100 million.
Martin's natural gas liquids segment's EBITDA more than doubled
compared with the previous year and amounted to $28.4 million due
to an increase in butane margin and volumes in the fourth quarter
of 2021 compared with 2020. Its transportation segment saw an
EBITDA increase of about 20% to $24 million while sulfur grew by
5.5% to $34 million.
"As a result, Martin's adjusted leverage declined to 4.3x in 2021
from 4.7x in the previous year. While we expect lower EBITDA
contribution from the butane business in 2022, we project the
partnership to maintain leverage in the range of 4.5x-4.9x during
the next 24 months.
While Martin's credit ratios and financial risk profile improved,
its corporate credit rating is negatively impacted by its contract
concentration with parent Martin Resource Management Corp.(MRMC)
which accounts for 10%-15% of Martin's EBITDA. Due to their
substantial business interactions, S&P links its issuer credit
rating on Martin to MRMC's credit quality. However, Martin benefits
from structural protections that allow its credit quality to be
stronger.
The stable outlook reflects S&P's view that Martin Midstream will
maintain leverage below 5x in 2022 given its adequate liquidity and
improved cash flow generation driven by the reduction of
distributions implemented in 2021. S&P anticipates that the
favorable commodity price environment will support Martin's credit
profile.
S&P could revise its outlook to negative if:
-- Lower-than-expected EBITDA led to unsustainable leverage, or
-- S&P expected the partnership could breach its financial
covenants.
S&P could take a positive rating action if:
-- Martin's leverage trended toward 4x while it maintained sizable
headroom under its financial covenants,
-- Martin refinanced its revolving credit facility (RCF) due in
August 2023 before it became current,
-- It increased its scale and scope of operations, or
-- The credit quality of parent company MRMC improved.
ESG credit indicators: E-3, S-2, G-3
S&P said, "Environmental factors are a moderately negative
consideration in our credit rating analysis of Martin Midstream
Partners L.P. Martin's terminalling and storage, transportation,
and natural gas services are exposed to climate transition risk,
which could affect long-term oil and gas drilling activity and lead
to a decline in demand for Martin's services (although unlikely
before 2030 in our view). Governance factors also are a moderately
negative consideration, as we continue to monitor the company's
ability to execute its strategy. In 2019 and 2020, the company
experienced volatile profitability in some of its business segments
and difficulty in refinancing its capital structure. Martin had to
sell some of its noncore assets to reduce the debt quantum before
it initiated a distressed debt exchange. We also believe the
company relies on a small number of key managers and a potential
loss of one could affect the execution of its strategy."
MCAP CMBS 2014-1: Fitch Affirms B Rating on Class G Certs
---------------------------------------------------------
Fitch Ratings has upgraded three classes and affirmed one class of
MCAP CMBS Issuer Corporation's commercial mortgage pass-through
certificates, series 2014-1. The Rating Outlook for the affirmed
class G has been revised to Stable from Negative. All currencies
are denominated in Canadian dollars (CAD).
DEBT RATING PRIOR
---- ------ -----
MCAP CMBS Issuer Corporation 2014-1
D 55280LAJ7 LT AAAsf Upgrade Asf
E 55280LAE8 LT Asf Upgrade BBB-sf
F 55280LAF5 LT BBBsf Upgrade BBsf
G 55280LAG3 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Increased Credit Enhancement: The upgrades to classes D, E and F
and the Outlook revision to Stable from Negative on class G reflect
increased credit enhancement (CE) since Fitch's last rating action
from the repayment of the 8565 McCowan Road loan ($2.7 million) in
December 2021, ahead of its scheduled 2024 maturity date, along
with improved performance on the former Fitch Loan of Concern
(FLOC), the 3571-3609 Sheppard Ave East loan and continued
scheduled amortization.
As of the March 2022 distribution date, the pool's aggregate
principal balance had paid down by 92.9% to $15.9 million from $224
million at issuance. Excluding the specially serviced loan, the
pool has a weighted average amortization term of 25 years, which
represents faster amortization than U.S. conduit loans. The three
non-specially serviced loans (79.7%) have scheduled maturities
between August and October 2024.
Stable Performance; Pool Concentration: Overall pool performance
and loss expectations have remained generally stable since the last
rating action. The pool is highly concentrated with four loans
remaining. Due to the concentrated nature of the pool, Fitch
performed a sensitivity analysis that grouped the remaining loans
based on their perceived likelihood of repayment and expected
losses from the specially serviced loan.
The upgrades and Stable Outlook revision reflect this sensitivity
analysis. The upgrades of classes D and E reflects their reliance
on two full recourse, amortizing balloon loans maturing in 2024 for
repayment, both of which are secured by single tenant properties
with stable performance and leases that extend beyond the loan
term. Supporting the upgrade of class F and Outlook revision to
Stable from Negative on class G, repayment of classes F and G is
reliant on a partial recourse, low leveraged, performing balloon
loan (3571-3609 Sheppard Ave East; 40.4%) that matures in 2024 and
is no longer designated a FLOC due to improved performance since
the prior rating action.
The collateral property securing the specially serviced 1121 Centre
Street NW loan (20.3%) was sold for $6.8 million in October 2020,
with $5.4 million in proceeds used to pay down the loan balance.
Fitch assumed a full loss on the remaining $3.2 million balance of
the loan in its analysis; losses from this would be contained to
the non-rated class H. At issuance, the loan carried a full
recourse guarantee from two entities on a joint and several basis.
The largest loan, 3571-3609 Sheppard Ave East, which is secured by
a 37,890-sf mixed use property with retail and office space in
Scarborough, ON, has reported improved occupancy and NOI since the
prior rating action. The TTM October 2020 NOI improved 32% from TTM
October 2019 and occupancy rose to 96.4% in June 2021 from 83.9% in
March 2020. The property is anchored by Rexall Pharma Plus (30.4%
of NRA leased through May 2026). At issuance, the loan carried a
partial recourse (50%) guarantee from the sponsors, Grand Alms
Future Ltd. & Accessible Lifestyle Consultants Inc.
The other two non-specially serviced loans in the pool include the
175 rue de Rotterdam loan (31.6%), which is backed by a
warehouse/office building in Saint Augustin de Desmaures, QC that
is fully leased to single tenant Strongco Limited Partnership
through August 2029, and the 5498 Boulevard Henri-Bourassa Est loan
(7.7%), which is secured by a single-tenant bank on a long-term
lease in Montreal, QC.
Canadian Loan Attributes: The ratings reflect strong Canadian
commercial real estate loan performance, including a low
delinquency rate and low historical losses of less than 0.1%, as
well as positive loan attributes, such as short amortization
schedules, recourse to the borrower and additional guarantors. All
of the remaining loans feature full or partial recourse to the
borrowers and/or sponsors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans. However, any potential losses could
be mitigated by loan recourse provisions.
-- Downgrades of classes D and E are not likely due to the
position in the capital structure, high CE and reliance on low
leverage, performing balloon loans, but may occur should
overall pool losses increase significantly and/or performance
of any of the three non-specially serviced loans worsens and
any of the loans incur an outsized loss, which would erode CE.
-- Downgrades to classes F and G would occur should loss
expectations increase due to additional loan defaults or
transfers to special servicing.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Upgrades to classes D and E may occur with
significant improvement in CE and/or defeasance, but would be
limited based on pool concentration. Classes would not be
upgraded above 'Asf' if there is a likelihood for interest
shortfalls.
-- Upgrades to class F may occur should CE and/or defeasance
increase significantly and/or the specially serviced loan is
resolved with a lower loss than expected. Class G is not
expected to be upgraded as Fitch does not ultimately expect a
full recovery of the remaining balance of the specially
serviced 1121 Centre Street NW loan; however, any losses from
the loan would be contained to the non-rated class. Future
upgrades may be limited due to the small remaining class size
of the junior certificates and the pool concentration.
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.
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.
MIDOCEAN CREDIT VIII: Fitch Raises Rating on Class F Notes to 'B+'
------------------------------------------------------------------
Fitch Ratings has upgraded the class F notes in MidOcean Credit CLO
VIII (MidOcean VIII). Additionally, Fitch affirmed the class A-1-R
and A-2 notes at their current ratings. The class F notes have been
assigned a Positive Rating Outlook, while the Outlooks for both
class A-1-R and A-2 notes remain Stable.
DEBT RATING PRIOR
---- ------ -----
MidOcean Credit CLO VIII
A-1-R 59801MAL2 LT AAAsf Affirmed AAAsf
A-2 59801MAC2 LT AAAsf Affirmed AAAsf
F 59801NAC0 LT B+sf Upgrade B-sf
TRANSACTION SUMMARY
MidOcean VIII is broadly syndicated collateralized loan obligation
(CLO) that is managed by MidOcean Credit Fund Management LP. The
CLO closed in February 2018, refinanced in April 2021 and will exit
its reinvestment period in February 2023. MidOcean VIII is secured
primarily by first-lien senior secured leveraged loans.
KEY RATING DRIVERS
Cash Flow Analysis
The analysis considered cash flow modelling (CFM) results for the
current portfolio and newly run Fitch Stressed Portfolio (FSP)
based on the February 2022 trustee report. The upgrade on class F
notes mainly reflects the robust CFM results at 'B+sf' rating level
based on the FSP analysis.
The FSP analysis adjusts the current portfolio from the latest
trustee report to create a stressed portfolio to account for
permissible concentration limits and collateral quality tests
(CQTs). Among these assumptions, the FSP weighted average life
(WAL) was five years, and the FSP exposure to 'CCC' assets was
7.5%. In addition, the weighted average spread level (WAS) was
modelled at the current WAS of 3.41%, without the benefit from
LIBOR floors. Other FSP assumptions include 10% second lien assets
and 5% fixed-rate assets.
The assigned ratings are in line with their model-implied ratings
(MIRs) based on FSP. The Positive Outlook on class F notes reflects
Fitch's expectation that the notes' credit enhancement (CE) will
increase when the deal exits its reinvestment period in February
2023.
The Stable Outlooks on class A-1-R and A-2 notes reflect Fitch's
expectation that the notes have sufficient levels of credit
protection to withstand potential deterioration in the credit
quality of the portfolio in stress scenarios commensurate with the
class's ratings.
Credit Quality, Asset Security, Portfolio Composition and Portfolio
Management
As of the March trustee report, the aggregate portfolio par amount,
when adjusted for trustee-reported recovery amounts on defaulted
assets, was approximately 0.3% below the original target par
amount. The portfolio has a 4.6-year WAL and is composed of 276
obligors, with the largest 10 obligors comprising approximately
10.9% of the portfolio. Fitch considered 0.4% of the portfolio to
be defaulted. Additionally, all coverage tests, CQTs and
concentration limitations are in compliance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A 25% increase of the mean default rate across all ratings,
along with a 25% decrease of the recovery rate at all rating
levels, would lead to downgrades (based on the MIR) of one
rating category for class A-2 notes, at least one rating
category for class F notes.
-- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' CE do not compensate for the higher loss expectation
than initially anticipated.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating
levels, would lead to an upgrade of the class F notes to 'BBB-
sf' (based on the MIR), whereas the class A-1-R and A-2 notes
are already at the highest level on Fitch's scale and cannot
be upgraded.
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.
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 or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
MONROE CAPITAL 2014-1: Moody's Hikes Rating on Class E Notes to Ba1
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Monroe Capital CLO 2014-1, Ltd.:
US$27,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2026 (the "Class D-R Notes"), Upgraded to Aa3 (sf); previously
on August 23, 2021 Upgraded to A3 (sf)
US$20,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2026 (the "Class E Notes"), Upgraded to Ba1 (sf); previously on
September 22, 2020 Downgraded to Ba3 (sf)
Monroe Capital CLO 2014-1, Ltd., originally issued in September
2014 and partially refinanced in October 2017, is a managed
cashflow CLO. The notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans with a
significant exposure to a portfolio of small and medium enterprise
loans. The transaction's reinvestment period ended in October
2018.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since August 2021. The Class B-R
notes have been paid down completely and the Class C-R notes have
been paid down by approximately 49.6% or $17.1 million since then.
Based on the trustee's January 2022 report [1], the OC ratios for
the Class C-R, Class D-R, and Class E notes are reported at
510.91%, 200.13%, and 137.97%, respectively, versus August 2021
trustee [2] levels of 250.79%, 158.56%, and 124.61% respectively.
The deal has benefited from an improvement in the credit quality of
the portfolio since August 2021. Based on Moody's calculations, the
weighted average rating factor is currently 5315 compared to
Moody's August 2021 calculation of 5416.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $91,945,245
Defaulted par: $6,774,241
Diversity Score: 21
Weighted Average Rating Factor (WARF): 5315
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
5.02%
Weighted Average Recovery Rate (WARR): 46.72%
Weighted Average Life (WAL): 2.17 years
Par haircut in OC tests and interest diversion test: 5.16%
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, deterioration in credit
quality of the underlying portfolio, decrease in overall WAS and
lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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.
MONROE CAPITAL XIII: Moody's Assigns Ba3 Rating to $27MM E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued and two classes of loans incurred by Monroe Capital
MML CLO XIII, LLC (the "Issuer" or "Monroe XIII").
Moody's rating action is as follows:
US$40,000,000 Class A-1 Senior Floating Rate Loans maturing 2034,
Assigned Aaa (sf)
US$25,000,000 Class A-2 Senior Floating Rate Loans maturing 2034,
Assigned Aaa (sf)
US$130,000,000 Class A-1 Senior Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$68,250,000 Class A-2 Senior Fixed Rate Notes due 2034, Assigned
Aaa (sf)
US$40,500,000 Class B Floating Rate Notes due 2034, Assigned Aa2
(sf)
US$30,500,000 Class C Deferrable Mezzanine Floating Rate Notes due
2034, Assigned A2 (sf)
US$34,750,000 Class D Deferrable Mezzanine Floating Rate Notes due
2034, Assigned Baa3 (sf)
US$27,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2034, Assigned Ba3 (sf)
The notes and loans listed 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 $40,000,000 and $130,000,000,
respectively. At any time, the Class A-1 Loans may be converted in
whole 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 $170,000,000, less the amount of any principal
repayments.
The Class A-2 Loans may not be exchanged or converted into notes at
any time.
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.
Monroe XIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by middle market and broadly syndicated
senior secured corporate loans. At least 95.0% of the portfolio
must consist of senior secured loans and eligible investments, and
up to 5.0% of the portfolio may consist of second lien loans,
permitted non-loan assets and senior unsecured loans. The portfolio
is approximately 75% ramped as of the closing date.
Monroe Capital CLO Manager 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 four year
reinvestment period. Thereafter, the manager may not reinvest and
all proceeds received will be used to amortize the Rated Debt in
sequential order.
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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $450,000,000
Diversity Score: 40
Weighted Average Rating Factor (WARF): 3692
Weighted Average Spread (WAS): SOFR + 4.75%
Weighted Average Recovery Rate (WARR): 45.50%
Weighted Average Life (WAL): 7.0 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 2021.
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.
MORGAN STANLEY 2016-UBS11: Fitch Affirms CCC Rating on 2 Tranches
-----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Morgan Stanley Capital I
Trust 2016-UBS11 commercial mortgage pass-through certificates. The
Rating Outlooks for four classes have been revised to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
MSC 2016-UBS11
A-2 61767FAX9 LT AAAsf Affirmed AAAsf
A-3 61767FAZ4 LT AAAsf Affirmed AAAsf
A-4 61767FBA8 LT AAAsf Affirmed AAAsf
A-S 61767FBD2 LT AAAsf Affirmed AAAsf
A-SB 61767FAY7 LT AAAsf Affirmed AAAsf
B 61767FBE0 LT AA-sf Affirmed AA-sf
C 61767FBF7 LT A-sf Affirmed A-sf
D 61767FAJ0 LT BBB-sf Affirmed BBB-sf
E 61767FAL5 LT Bsf Affirmed Bsf
F 61767FAN1 LT CCCsf Affirmed CCCsf
X-A 61767FBB6 LT AAAsf Affirmed AAAsf
X-B 61767FBC4 LT A-sf Affirmed A-sf
X-D 61767FAA9 LT BBB-sf Affirmed BBB-sf
X-E 61767FAC5 LT Bsf Affirmed Bsf
X-F 61767FAE1 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Improved Loss Expectations: Overall pool performance remains stable
and loss expectations have improved for the transaction. The
Outlook revisions to Stable from Negative reflect a decline in
expected losses due to improved performance of loans in the top 15.
Fitch's current ratings are based on a base case loss expectation
of 1.9%, which reflects the overall stable performance of the
pool.
Increased Credit Enhancement (CE): Credit enhancement has improved
since the prior rating action due to the payoff of one loan and
scheduled amortization. Class G has $19.8 million in realized
losses, and is experiencing interest shortfalls. As of the February
2022 remittance report, the pool has been paid down by 12.9% to
$626.8 billion from $719.8 billion at issuance. Of the 38 loans in
the transaction at issuance, 34 loans remain. Two loan (1.5%) have
been defeased. Four loans (27.3%) are full-term interest-only and
six loans (18%) are partial-term interest-only, five (6.9%) of
which have begun amortizing. All of the loans in pool mature in
2026.
Specially Serviced Loan: Plaza Mexico - Los Angeles (6.4%) is a
403,232-sf shopping center in Lynwood, CA anchored by a Food 4
Less, La Curacao and a flea-market style retail space. The loan
transferred to special servicing in October 2020 for payment
default. The borrower filed chapter 11 bankruptcy in April 2021,
and the loan did not pay off at maturity in July 2021. In January
2021, the judge approved the borrower's request to market the asset
for sale. The special servicer expects to be repaid in full as a
result of the sale. As the loan is expected to pay in full at
maturity, Fitch modeled a minimal loss to account for fees.
Fitch Loans of Concern (FLOC): There are four Fitch Loans of
Concern, three of which are in the Top 15. The largest
non-specially serviced FLOC is Sixty Soho (1.9%), a 97-key
full-service hotel built in 2000, renovated in 2015, located in the
Soho neighborhood of Manhattan, NY. The loan returned to master
servicing in January 2022 after previously transferring to special
servicing in October 2020 due to borrower requested relief. A
forbearance agreement was executed on March 24, 2021, which
included short-term deferral of P&I payments expected to be repaid
through January 2023.
An updated STR report was unavailable, but the December 2020 STR
reported a TTM occupancy rate of 61.9%, ADR of $225, and RevPAR of
$139, with the respective penetration rates of 163.2%, 95.4%, and
155.8%. Fitch modeled a minimal loss given the recent return to
master servicing and a servicer provided appraisal value well above
the loan's current balance. The hotel is well-located and exhibits
strong asset quality featuring high-end interior finishes and
design.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in expected losses from underperforming or
specially serviced loans. Downgrades to the super-senior
classes, A-1 through A-4 and X-A, are not likely due to high
CE, but possible if interest shortfalls occur or if a high
proportion of the pool defaults and expected losses increase
significantly.
-- Downgrades to classes A-S, B, C, D, X-B and X-D may occur
should overall pool losses increase or if several large loan
have an outsized loss, and/or losses on the specially serviced
loans are higher than expected.
-- Further downgrades to classes E and X-E would occur should
loss expectations increase due to an increase in specially
serviced loans, the disposition of a specially serviced
loan/asset at a high loss, or a decline in the FLOCs'
performance. Further downgrades to the 'CCCsf' rated classes F
and X-F will occur if losses are considered probable or
inevitable or as additional losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Upgrades of classes B, X-B, and C may occur
with significant improvement in CE or defeasance, but would be
limited due to the transaction's concentration, whereby the
deterioration in performance of a larger asset would have a
large impact on loss expectations.
-- An upgrade to classes D and X-D would also consider these
factors, but would be limited based on sensitivity to
concentrations or the potential for future concentration.
Classes would not be upgraded above 'Asf' if there were
likelihood for interest shortfalls.
-- An upgrade to classes E, X-E, F, and X-F is not likely until
the later years in a transaction, and only if there are better
than expected recoveries on specially serviced loans and the
performance of the remaining pool is stable, and if there is
sufficient credit enhancement, which would likely occur when
the non-rated class is not eroded and the senior classes
payoff.
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.
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.
MORGAN STANLEY I 2022-L8: Fitch to Rate 2 Tranches 'B-'
-------------------------------------------------------
Fitch Ratings has issued a presale report on Morgan Stanley Capital
I Trust 2022-L8, commercial mortgage pass-through certificates,
series 2022-L8.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
MSC 2022-L8
-- $9,100,000 class A-1 'AAAsf'; Outlook Stable;
-- $30,000,000 class A-2 'AAAsf'; Outlook Stable;
-- $20,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $16,400,000 class A-SB 'AAAsf'; Outlook Stable;
-- $92,500,000a class A-4 'AAAsf'; Outlook Stable;
-- $0b class A-4-1 'AAAsf'; Outlook Stable;
-- $0bc class A-4-X1 'AAAsf'; Outlook Stable;
-- $0b class A-4-2 'AAAsf'; Outlook Stable;
-- $0bc class A-4-X2 'AAAsf'; Outlook Stable;
-- $311,775,000a class A-5 'AAAsf'; Outlook Stable;
-- $0b class A-5-1 'AAAsf'; Outlook Stable;
-- $0bc class A-5-X1 'AAAsf'; Outlook Stable;
-- $0b class A-5-2 'AAAsf'; Outlook Stable;
-- $0bc class A-5-X2 'AAAsf'; Outlook Stable;
-- $479,775,000c class X-A 'AAAsf'; Outlook Stable;
-- $107,093,000c class X-B 'AA-sf'; Outlook Stable;
-- $78,821,000 class A-S 'AAAsf'; Outlook Stable;
-- $0b class A-S-1 'AAAsf'; Outlook Stable;
-- $0bc class A-S-X1 'AAAsf'; Outlook Stable;
-- $0b class A-S-2 'AAAsf'; Outlook Stable;
-- $0bc class A-S-X2 'AAAsf'; Outlook Stable;
-- $28,272,000 class B 'AA-sf'; Outlook Stable;
-- $0b class B-1 'AA-sf'; Outlook Stable;
-- $0bc class B-X1 'AA-sf'; Outlook Stable;
-- $0b class B-2 'AA-sf'; Outlook Stable;
-- $0bc class B-X2 'AA-sf'; Outlook Stable;
-- $28,273,000 class C 'A-sf'; Outlook Stable;
-- $0b class C-1 'A-sf'; Outlook Stable;
-- $0bc class C-X1 'A-sf'; Outlook Stable;
-- $0b class C-2 'A-sf'; Outlook Stable;
-- $0bc class C-X2 'A-sf'; Outlook Stable;
-- $25,702,000cd class X-D 'BBB-sf'; Outlook Stable;
-- $15,421,000cd class X-F 'BB-sf'; Outlook Stable;
-- $6,854,000cd class X-G 'B-sf'; Outlook Stable;
-- $14,564,000d class D 'BBBsf'; Outlook Stable;
-- $11,138,000d class E 'BBB-sf'; Outlook Stable;
-- $15,421,000d class F 'BB-sf'; Outlook Stable;
-- $6,854,000d class G 'B-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
-- $22,276,176e class H-RR.
(a) The initial certificate balances of class A-4 and class A-5 are
not yet known but expected to be $404,275,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-4 balance range is $0-$185,000,000, and the expected class
A-5 balance range is $219,275,000-$404,275,000. The balances of
classes A-4 and A-5 shown above reflect the midpoints of these
ranges.
(b) 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 received classes of exchangeable certificates. Class A-4 may be
surrendered (or received) for the received (or surrendered) classes
A-4-1 and A-4-X1. Class A-4 may be surrendered (or received) for
the received (or surrendered) classes A-4-2 and A-4-X2. Class A-5
may be surrendered (or received) for the received (or surrendered)
classes A-5-1 and A-5-X1. Class A-5 may be surrendered (or
received) for the received (or surrendered) classes A-5-2 and
A-5-X2. Class A-S may be surrendered (or received) for the received
(or surrendered) classes A-S-1 and A-S-X1. Class A-S may be
surrendered (or received) for the received (or surrendered) classes
A-S-2 and A-S-X2. Class B may be surrendered (or received) for the
received (or surrendered) classes B-1 and B-X1. Class B may be
surrendered (or received) for the received (or surrendered) classes
B-2 and B-X2. Class C may be surrendered (or received) for the
received (or surrendered) classes C-1 and C-X1. Class C may be
surrendered (or received) for the received (or surrendered) classes
C-2 and C-X2.
(c) Notional amount and interest only.
(d) Privately placed and pursuant to Rule 144A.
(e) Horizontal Risk Retention Interest.
TRANSACTION SUMMARY
The certificates represent the beneficial interest in the trust,
primary assets of which are 39 loans secured by 125 commercial
properties having an aggregate principal balance of $685,394,176 as
of the cutoff date. The loans were contributed to the trust by
Morgan Stanley Mortgage Capital Holdings LLC, Starwood Mortgage
Capital LLC, Bank of Montreal, and Argentic Real Estate Finance
LLC. Midland Loan Services, a division of PNC Bank, National
Association, is expected to be the master servicer and LNR Partners
LLC is expected to be the special servicer.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 19.8% of the properties
by balance, cash flow analyses on 88.6% of the pool, and asset
summary reviews on 100% of the pool.
KEY RATING DRIVERS
Lower Fitch Trust Leverage; Higher Total Debt: The pool's Fitch
stressed loan to value ratio (LTV) of 97.3% on the trust debt is
lower than the 2022 and 2021 averages for Fitch-rated U.S.
private-label multiborrower transactions of 100.1% and 103.3%,
respectively. Fitch's stressed debt service coverage ratio (DSCR)
of 1.27x is lower than the 2022 and 2021 respective averages of
1.44x and 1.38x. However, five loans, representing 28.8% of the
pool, have subordinate secured debt, mezzanine financing or
Delaware Statutory Trust (DST)-related bridge preferred equity. The
pool's Fitch total debt LTV and DSCR of 111.7% and 1.13x,
respectively, are worse than the respective 2022 averages of 108.2%
and 1.34x.
Investment-Grade Credit Opinion Loans: Five loans, representing
28.8% of the pool, received an investment-grade credit opinion.
Constitution Center (9.9% of pool), received a standalone credit
opinion of 'A-sf*', 601 Lexington Avenue (6.0% of pool), 26
Broadway (4.9% of pool) and ILPT Logistics Portfolio (3.5% of pool)
each received a standalone credit opinion of 'BBB-sf*'. Coleman
Highline Phase IV (4.4% of pool), received a standalone credit
opinion of 'BBBsf*'. The investment-grade credit opinion loan
concentration is greater than the 2022 average of 18.8% and the
2021 average of 13.3%.
Pool Concentration: The pool's 10 largest loans represent 60.1% of
its cutoff balance. This is higher than the 2022 and 2021 averages
of 51.8% and 51.2%, respectively. The pool's Loan Concentration
Index (LCI) of 488 is higher than the 2022 and 2021 averages of 376
and 381, respectively.
Limited Amortization: The pool contains 26 loans, totaling 77.1% of
the cutoff balance, that are full-term interest only (IO). This
concentration of full-term IO loans is lower than the 2022 average
of 79.4% but higher than the 2021 average of 70.5%. In addition,
four loans totaling 10.5% of the pool have a partial IO period.
This results in a low scheduled principal paydown of 3.8% of the
pool balance by maturity, which is in line with the average pool
paydown of 3.7% for YTD 2022 and below the 2021 average of 4.8%.
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: 'A+sf'/'BBB+sf'/'BBB-sf'/'BB+sf'/'BB-
sf'/'CCCsf'/'CCCsf'
-- 20% NCF Decline: 'A-sf'/'BBB-
sf'/'BBsf'/'Bsf'/'CCCsf'/'CCCsf'/'CCCsf'
-- 30% NCF Decline:
'BBBsf'/'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'/'Asf'/'A+sf'/'A-sf'/'BBB-
sf'/'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.
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.
NATIONAL COLLEGIATE 2007-A: Fitch Affirms B Rating on Cl. C Notes
-----------------------------------------------------------------
Fitch Ratings has taken various rating actions on the National
Collegiate Trust (NCT) 2006-A, NCT 2007-A and NCT 2005-GATE notes.
The upgrade on NCT 2006-A's class B bonds, NCT 2007-A's class A
bonds, and NCT 2005-GATE's class B bonds reflects the stable asset
performance and the increased credit enhancement (CE) available to
the bonds from the ongoing pro rata amortization of the capital
structure. Continued pro rata amortization between the class A and
B bonds, which increases relative credit protection to the B notes,
could result in additional upgrades, as reflected by the Positive
Outlook on the class B notes.
The affirmation of NCT 2006-A's class A-2 bonds, NCT 2007-A's class
B and C bonds incorporates the stable underlying asset performance
coupled with CE levels commensurate to Fitch's stresses.
DEBT RATING PRIOR
---- ------ -----
National Collegiate Trust 2005-GATE
B 63544AAQ1 LT Asf Upgrade BBBsf
The National Collegiate Trust 2006-A
A-2 63544JAB5 LT AAAsf Affirmed AAAsf
B 63544JAC3 LT Asf Upgrade BBBsf
The National Collegiate Trust 2007-A
A 63543YAA5 LT AAAsf Upgrade AAsf
B 63543YAB3 LT BBBsf Affirmed BBBsf
C 63543YAC1 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Collateral Performance:
NCT 2006-A, 2007-A and 2005-GATE trusts are collateralized by
private student loans originated by Bank of America
(AA-/F1+/Stable) under First Marblehead Corp's GATE Program. NCT
2006-A and 2007-A also include originations by CHELA Funding II,
LLC.
Fitch has maintained its assumption of a constant default rate at
3.50%. A base-case recovery rate of 30% was assumed for National
Collegiate Trust 2006-A and 2007-A, and 14% for National Collegiate
Trust 2005-GATE, which was determined to be appropriate based on
data previously provided by the issuer and reflects the guarantee
provided by Bank of America on loans originated pursuant to the
GATE Program.
Payment Structure:
CE is provided by overcollateralization (the excess of the trust's
asset balance over the bond balance) and excess spread. For NCT
2006-A, cash may be released from the trust at the greater of (i)
104% total parity; and (ii) the percentage equivalent of
(outstanding notes + $5.3 million)/ (outstanding notes), currently
at 169%. No cash is currently being released from NCT 2006-A or
2005-GATE. For NCT 2007-A, cash is currently being released from
the trusts as the 104% parity level required is currently met.
Liquidity support is provided to NCT 2006-A, NCT 2007-A and NCT
2005-GATE by a reserve account sized at about USD1 million. In
Fitch's view, the available reserve accounts are able to cover for
at least one quarter of senior costs and interest payments.
Operational Capabilities:
Pennsylvania Higher Education Assistance Agency services 100% of
NCT 2005-GATE and NCT 2007-A, and 88% of NCT 2006-A. FirstMark
services the remaining 12% of NCT 2006-A. Fitch believes all
servicers are acceptable servicers of private student loans.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
NCT 2006-A
Current Ratings: 'AAAsf'/'Asf'
Expected impact on the note rating of increased defaults (class
A-2/B):
-- Increase base case defaults by 10%: 'AAAsf'/'AAAsf';
-- Increase base case defaults by 25%: 'AAAsf'/'AAAsf';
-- Increase base case defaults by 50%: 'AAAsf'/'AAAsf'.
Expected impact on the note rating of reduced recoveries (class
A-2/B):
-- Reduce base case recoveries by 10%: 'AAAsf'/'AAAsf';
-- Reduce base case recoveries by 20%: 'AAAsf'/'AAAsf';
-- Reduce base case recoveries by 30%: 'AAAsf'/'AAAsf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class A-2/B):
-- Increase base case defaults and reduce base case recoveries
each by 10%: 'AAAsf'/'AAAsf';
-- Increase base case defaults and reduce base case recoveries
each by 25%: 'AAAsf'/'AAAsf';
-- Increase base case defaults and reduce base case recoveries
each by 50%: 'AAAsf'/'AAAsf'.
NCT 2007-A
Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'
Expected impact on the note rating of increased defaults (class
A/B/C):
-- Increase base case defaults by 10%: 'AAAsf'/'A-sf'/'BB-sf';
-- Increase base case defaults by 25%: 'AAAsf'/'BBB+sf'/'Bsf';
-- Increase base case defaults by 50%: 'AA+sf'/'BBB-sf'/'CCCsf'.
Expected impact on the note rating of reduced recoveries (class
A/B/C):
-- Reduce base case recoveries by 10%: 'AAAsf'/'Asf'/'BBsf';
-- Reduce base case recoveries by 20%: 'AAAsf'/'A-sf'/'BB-sf';
-- Reduce base case recoveries by 30%: 'AAAsf'/'A-sf'/'BB-sf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class A/B/C):
-- Increase base case defaults and reduce base case recoveries
each by 10%: 'AAAsf'/'A-sf'/'B+sf';
-- Increase base case defaults and reduce base case recoveries
each by 25%: 'AAAsf'/'BBBsf'/'CCCsf';
-- Increase base case defaults and reduce base case recoveries
each by 50%: 'AAsf'/'BB+sf'/'CCCsf'.
NCT 2005-GATE
Current Ratings: 'Asf'
Expected impact on the note rating of increased defaults (class
B):
-- Increase base case defaults by 10%: 'AAAsf';
-- Increase base case defaults by 25%: 'AAAsf';
-- Increase base case defaults by 50%: 'AAAsf'.
Expected impact on the note rating of reduced recoveries (class
B):
-- Reduce base case recoveries by 10%: 'AAAsf';
-- Reduce base case recoveries by 20%: 'AAAsf';
-- Reduce base case recoveries by 30%: 'AAAsf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class B):
-- Increase base case defaults and reduce base case recoveries
each by 10%: 'AAAsf';
-- Increase base case defaults and reduce base case recoveries
each by 25%: 'AAAsf';
-- Increase base case defaults and reduce base case recoveries
each by 50%: 'AA+sf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
NCT 2006-A
Current Ratings: 'AAAsf'/'Asf'
-- Decrease base case defaults by 50%: 'AAAsf'/'AAAsf';
-- Increase base case recoveries by 30%: 'AAAsf'/'AAAsf';
-- Decrease base case defaults and increase base case recoveries
each by 50%: 'AAAsf'/'AAAsf'.
NCT 2007-A
Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'
-- Decrease base case defaults by 50%: 'AAAsf'/'AAAsf'/'Asf';
-- Increase base case recoveries by 30%: 'AAAsf'/'A+sf'/'BB+sf';
-- Decrease base case defaults and increase base case recoveries
each by 50%: 'AAAsf'/'AAAsf'/'AA-sf'.
NCT 2005-GATE
Current Ratings: 'Asf'
-- Decrease base case defaults by 50%: 'AAAsf';
-- Increase base case recoveries by 30%: 'AAAsf';
-- Decrease base case defaults and increase base case recoveries
each by 50%: '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.
CRITERIA VARIATION
For this surveillance review, the ratings assigned to NCT 2006-A's
and 2005-GATE's class B notes are five notches below the
model-implied ratings, constituting a variation to the "U.S.
Private Student Loan ABS Rating Criteria". The rating action below
the model-implied rating primarily considers the subordinated
position of the Class B notes (2006-A) in the priority of payments
as well as the uncertainty in portfolio performance under the
current macroeconomic environment.
Continued strong asset performance, together with continued pro
rata amortization between the class A and B bonds, which increases
relative credit protection to the B notes, could result in
additional upgrades, as reflected by the one-category upgrades and
Positive Outlooks on the B notes. If Fitch were to not apply this
variation to its criteria, the class B notes could have been
upgraded to 'AAAsf'.
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.
NATIONAL COLLEGIATE: Fitch Affirms 37 Tranches From 12 Transactions
-------------------------------------------------------------------
Fitch Ratings has affirmed 37 notes and maintained the Rating Watch
Negative (RWN) on seven notes from 12 National Collegiate Student
Loan Trusts (NCSLTs).
DEBT RATING PRIOR
---- ------ -----
National Collegiate Student Loan Trust 2003-1
A-7 63543PAG1 LT BBsf Rating Watch Maintained BBsf
B-1 63543PAJ5 LT Csf Affirmed Csf
B-2 63543PAK2 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2004-1
A-4 63543PAP1 LT CCsf Affirmed CCsf
B-1 63543PAS5 LT Csf Affirmed Csf
B-2 63543PAT3 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2004-2/NCF Grantor Trust
2004-2
A-5 1 63543PAY2 LT BBsf Rating Watch Maintained BBsf
A-5 2 63543PBC9 LT BBsf Rating Watch Maintained BBsf
B 63543PBA3 LT CCsf Affirmed CCsf
C 63543PBB1 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2005-1/NCF Grantor Trust
2005-1
A-5 1 63543PBM7 LT BBsf Rating Watch Maintained BBsf
A-5 2 63543PBN5 LT BBsf Rating Watch Maintained BBsf
B 63543PBK1 LT CCsf Affirmed CCsf
C 63543PBL9 LT Dsf Affirmed Dsf
National Collegiate Student Loan Trust 2005-2/NCF Grantor Trust
2005-2
A-5-1 63543PBU9 LT CCCsf Affirmed CCCsf
A-5-2 63543PBY1 LT CCCsf Affirmed CCCsf
B 63543PBW5 LT Csf Affirmed Csf
C 63543PBX3 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2005-3/NCF Grantor Trust
2005-3
A-5-1 63543TAE8 LT Bsf Rating Watch Maintained Bsf
A-5-2 63543TAF5 LT Bsf Rating Watch Maintained Bsf
B 63543TAJ7 LT Csf Affirmed Csf
C 63543TAK4 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2006-1
A-5 63543PCD6 LT Csf Affirmed Csf
B 63543PCF1 LT Csf Affirmed Csf
C 63543PCG9 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2006-2
A-4 63543MAD5 LT Csf Affirmed Csf
B 63543MAF0 LT Csf Affirmed Csf
C 63543MAG8 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2006-3
A-5 63543VAE3 LT CCsf Affirmed CCsf
B 63543VAG8 LT Csf Affirmed Csf
C 63543VAH6 LT Csf Affirmed Csf
D 63543VAJ2 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2006-4
A-4 63543WAD3 LT Csf Affirmed Csf
B 63543WAF8 LT Csf Affirmed Csf
C 63543WAG6 LT Csf Affirmed Csf
D 63543WAH4 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2007-1
A-4 63543XAD1 LT Csf Affirmed Csf
B 63543XAF6 LT Csf Affirmed Csf
C 63543XAG4 LT Csf Affirmed Csf
D 63543XAH2 LT Csf Affirmed Csf
National Collegiate Student Loan Trust 2007-2
A-4 63543LAD7 LT Csf Affirmed Csf
B 63543LAF2 LT Csf Affirmed Csf
C 63543LAG0 LT Csf Affirmed Csf
D 63543LAH8 LT Csf Affirmed Csf
TRANSACTION SUMMARY
Fitch maintains a rating cap at 'BBBsf' for these NCSLT
transactions and a RWN on all non-distressed tranches as a
consequence of the pending litigation between the Consumer
Financial Protection Bureau (CFPB) and the trusts, which could have
a negative credit impact on the transactions. Fitch will resolve
the RWN as soon as additional clarity is available on the outcome
of the ongoing litigation, as well as any other pending litigation
involving the trusts and the transactions parties.
KEY RATING DRIVERS
Collateral Performance: The NCSLT trusts are collateralized by
private student loans originated by First Marblehead Corporation.
At deal inception, all loans were guaranteed by The Education
Resources Institute (TERI); however, no credit is given to the
guaranty since TERI filed for bankruptcy on April 7, 2008. Fitch
has maintained its assumption of constant default rate (CDR) at
4.00% for NCSLT 2003-1, 2004-2, 2005-1 and 2005-3. Recovery rate
was assumed to be 0% in light of recent lawsuit uncertainty between
the trusts and defaulted borrowers.
Payment Structure: All trusts are under-collateralized as total
parity is less than 100%. Senior reported parity as of Jan. 31,
2022 is 275.52%, 91.07%, 854.88%, 291.02%, 126.69%, 164.90%,
117.40%, 80.49%,149.34%, 125.48%, 112.60% and 105.60% for NCSLT
2003-1, 2004-1, 2004-2, 2005-1, 2005-2, 2005-3, 2006-1, 2006-2,
2006-3, 2006-4, 2007-1 and 2007-2, respectively. Senior notes
benefit from subordination provided by the junior notes.
Operational Capabilities:
Pennsylvania Higher Education Assistance Agency (PHEAA) services
roughly 98% of the trusts, with Nelnet servicing the rest. US Bank
N.A. acts as special servicer for the trusts. Fitch believes both
servicers are acceptable servicers of private student loans.
Nevertheless, Fitch understands that a lawsuit to call a servicer
default under the transaction documents against PHEAA was initiated
by some of the holders of the beneficial interest in the NCSLT
trusts. Despite the uncertainty on the outcome of pending
litigations between transaction parties, including PHEAA, Fitch
believes such risk is addressed by the rating cap at 'BBBsf' and
Fitch's conservative assumptions on defaults and recoveries.
Pending Litigation with the CFPB:
The CFPB filed an action on Sept. 18, 2017 and a proposed consent
order against the NCSLT issuers for illegal student loan debt
collection practices. According to the CFPB, consumers were sued
for collection on private student loan debt that the companies
could not prove was owed or which obligations were beyond the
statutes of limitation for legal action. As a result, on Sept. 22,
2017, Fitch placed all the notes with a rating of 'B-sf' or higher
on Rating Watch Negative (RWN) for all 12 Fitch-rated NCSLT issuers
involved in the proposed consent judgment. These tranches currently
remain on RWN and Fitch expects to resolve the Watches when
additional clarity is available on the outcome of the lawsuit.
Fitch will continue to monitor this litigation and comment further
on the implications of any court decision on the credit profile of
Fitch-rated structured finance transactions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch expects to resolve the RWN on the non-distressed notes
as soon as additional information is available on the outcome
of the ongoing litigation between the CFPB and the NCSLT
trusts. Should the litigation result in unforeseen monetary
expenses, this could result in negative rating actions,
depending on the type, timing and size of such expenses.
-- Fitch increased base case default rates by 10%, 25% and 50%,
in accordance with its U.S. Private Student Loan ABS Rating
Criteria, and there was no change to expected ratings due to
the rating cap on the trusts following the CFPB proposed
judgment.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive rating actions are not likely until there is
resolution of the outstanding litigation between the CFPB and
the NCSLT trusts. Fitch's base case default and recovery
assumptions are derived primarily from historical collateral
performance. Actual performance that is materially better than
these assumptions will increase CE and remaining loss coverage
levels available to the notes, which may result in positive
rating action up to the rating cap of 'BBBsf'.
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.
ESG CONSIDERATIONS
National Collegiate Student Loan Trust 2003-1, 2004-1, 2004-2,
2005-1, 2005-2, 2005-3, 2006-1, 2006-2, 2006-3, 2006-4, 2007-1 and
2007-2 have an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security. This is due to compliance
with consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on Rating Watch
Negative.
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.
OFSI FUND VI: S&P Corrects Class E Notes Rating to 'D (sf)'
-----------------------------------------------------------
S&P Global Ratings corrected an error in the rating records for its
ratings on class F from GLG Ore Hill CLO 2013-1 Ltd. and class E
from OFSI Fund VI Ltd., which it previously discontinued on May 10,
2021, and June 25, 2021, respectively, following their redemptions.
GLG Ore Hill CLO 2013- Ltd. is a broadly syndicated CLO that closed
in June 2013. The original rating on the class F notes was 'B
(sf)'. OFSI Fund VI Ltd. is a broadly syndicated CLO that closed in
March 2014. The original rating on the class E notes was 'B (sf)'.
The ratings on these two classes should have been downgraded to 'D
(sf)' from 'CCC (sf)' prior to their previous discontinuances
because the noteholders received less than the entire amount
promised when the debt was originally issued. Due to an error, S&P
discontinued the ratings without first reflecting that a breach of
the promise (for purposes of its rating definitions) had occurred
under our criteria.
S&P said, "Following these two classes' respective redemptions,
their ratings were discontinued during the course of our 2021
routine bulk ratings review process for CLOs that redeemed, paid
down, or matured. (The bulk ratings review process is where we
undertake a review of such CLOs and discontinue our ratings on
those classes with a zero balance.) Subsequently, we discovered
that although their respective trustee reports reflected a zero
balance for these two notes following the redemptions, these two
notes did not receive their entire outstanding balance. The
redemptions occurred after these noteholders unanimously consented
to receive less than their outstanding balance.
"Accordingly, we determined that we should have downgraded the
ratings to 'D (sf)' from 'CCC (sf)' before discontinuing them.
Today's rating actions correct this error, and the rating histories
have been revised to reflect the assignment of 'D (sf)' ratings
prior to their discontinuances."
Failure to repay the outstanding principal when due (by legal final
maturity or sooner in case of an optional redemption or liquidation
due to an event of default) is a breach of the promise for purposes
of its rating definitions. When an instrument breaches the promise,
the issue credit rating should fall to 'D (sf)' as it is a
defaulted instrument per its rating definitions.
S&P said, "Voluntary agreements by noteholders to receive less than
the outstanding amount due on their issuance do not affect how we
apply our rating definitions. Though the majority of collateralized
loan obligations (CLOs) provide noteholders the ability when voting
unanimously to accept less than the outstanding amount due to them
in case of an optional redemption--and this may not trigger an
event of default as defined in the CLO's indenture--exercise of
such an option would generally constitute a default under our
ratings definitions."
Ratings List
GLG Ore Hill CLO 2013-1 Ltd.
Class F: to 'D (sf)' from NR, and then subsequently to NR
OFSI Fund VI Ltd.
Class E: to 'D (sf)' from NR, and then subsequently to NR
NR--Not rated.
PARALLEL LTD 2015-1: Moody's Ups Rating on Class E Notes to Ba3
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Parallel 2015-1 Ltd. (the "CLO" or "Issuer"):
US$24,000,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes Due July 2027, Upgraded to Aa3 (sf); previously on August 9,
2021 Upgraded to A3 (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
Due July 2027, Upgraded to Ba3 (sf); previously on August 10, 2020
Downgraded to B1 (sf)
The CLO, originally issued in July 2015 and partially refinanced in
January 2018, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in October 2019.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since August 2021. The Class A-R
Senior Secured Floating Rate notes have been paid down by 100% or
approximately $37.3 million since August 2021. The Class B-R Senior
Secured Floating Rate notes have also been paid down by about 11.3%
or approximately $5.3 million since August 2021. Based on the
trustee's February 2022 report [1], the OC ratios for the Class
A/B, Class C, Class D and Class E notes are reported at 285.42%,
189.84%, 137.29% and 111.56%, respectively, versus the trustee's
July 2021 report [2] levels of 168.28%, 142.02%, 120.53% and
107.03%, respectively.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $121,387,382
Defaulted par: $422,972
Diversity Score: 41
Weighted Average Rating Factor (WARF): 3235
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.53%
Weighted Average Recovery Rate (WARR): 46.28%
Weighted Average Life (WAL): 3.15 years
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, near term defaults by
companies facing liquidity pressure, deterioration in credit
quality of the underlying portfolio, decrease in overall WAS and
lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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.
PARK AVENUE 2022-1: S&P Assigns BB- (sf) Rating on Class D Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Park Avenue
Institutional Advisers CLO Ltd. 2022-1's fixed- and floating-rate
notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade senior secured term loans.
The 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.
Ratings Assigned
Park Avenue Institutional Advisers CLO Ltd. 2022-1/
Park Avenue Institutional Advisers CLO LLC 2022-1
Class A-1, $256.00 million: AAA (sf)
Class A-2, $48.00 million: AA (sf)
Class B-1, $16.00 million: A (sf)
Class B-2, $8.00 million: A (sf)
Class C-1 (deferrable), $14.00 million: BBB+ (sf)
Class C-2 (deferrable), $10.00 million: BBB- (sf)
Class D (deferrable), $16.00 million: BB- (sf)
Subordinated notes, $40.00 million: Not rated
PMT LOAN 2022-INV1: Moody's Assigns (P)B2 Rating to Cl. B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 61
classes of residential mortgage-backed securities (RMBS) issued by
PMT Loan Trust 2022-INV1 (PMTLT 2022-INV1). The ratings range from
(P)Aaa (sf) to (P)B2 (sf).
PMTLT 2022-INV1 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 first
PennyMac-sponsored 100% GSE eligible investor property transaction
in 2022. Overall, the credit quality of the mortgage loans backing
this transaction is in-line with recently issued GSE eligible
investor property transactions Moody's have rated.
PennyMac Loan Services, LLC is the servicer and responsible for
making servicing and principal and interest (P&I) advances. There
is no master servicer in this transaction. Citibank, N.A., 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.
Two third-party review (TPR) firms 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 542 mortgage loans in the collateral
pool. 30 sampled mortgage loans were removed from the mortgage pool
by the Sponsor after the review, resulting in 512 sampled mortgage
loans being part of the final mortgage pool. The number of mortgage
loans that went through a full due diligence review meets Moody's
credit neutral threshold. However, certain weaknesses were
identified in the TPR.
Issuer: PMT Loan Trust 2022-INV1
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aaa (sf)
Cl. A-24, Assigned (P)Aaa (sf)
Cl. A-25, Assigned (P)Aaa (sf)
Cl. A-26, Assigned (P)Aaa (sf)
Cl. A-27, Assigned (P)Aaa (sf)
Cl. A-28, Assigned (P)Aa1 (sf)
Cl. A-29, Assigned (P)Aa1(sf)
Cl. A-30, Assigned (P)Aa1(sf)
Cl. A-31, Assigned (P)Aaa (sf)
Cl. A-32, Assigned (P)Aaa (sf)
Cl. A-33, Assigned (P)Aaa (sf)
Cl. A-X1*, Assigned (P)Aaa (sf)
Cl. A-X2*, Assigned (P)Aaa (sf)
Cl. A-X3*, Assigned (P)Aaa (sf)
Cl. A-X6*, Assigned (P)Aaa (sf)
Cl. A-X7*, Assigned (P)Aaa (sf)
Cl. A-X8*, Assigned (P)Aaa (sf)
Cl. A-X9*, Assigned (P)Aaa (sf)
Cl. A-X11*, Assigned (P)Aaa (sf)
Cl. A-X12*, Assigned (P)Aaa (sf)
Cl. A-X14*, Assigned (P)Aaa (sf)
Cl. A-X15*, Assigned (P)Aaa (sf)
Cl. A-X18*, Assigned (P)Aaa (sf)
Cl. A-X19*, Assigned (P)Aaa (sf)
Cl. A-X21*, Assigned (P)Aaa (sf)
Cl. A-X22*, Assigned (P)Aaa (sf)
Cl. A-X24*, Assigned (P)Aaa (sf)
Cl. A-X25*, Assigned (P)Aaa (sf)
Cl. A-X26*, Assigned (P)Aaa (sf)
Cl. A-X27*, Assigned (P)Aaa (sf)
Cl. A-X30*, Assigned (P)Aa1 (sf)
Cl. A-X31*, Assigned (P)Aa1 (sf)
Cl. A-X32*, Assigned (P)Aaa (sf)
Cl. A-X33*, 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
0.82%, in a baseline scenario-median is 0.58%, and reaches 5.43% at
a stress level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the representations &
warranties (R&W) framework of the transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 1,298
conforming mortgage loans secured by first lien investment property
with an aggregate stated principal balance (UPB) of approximately
$419,590,555, with an original term to maturity between 17 and 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 $296,026 with approximately 71.7% of the borrowers (by
UPB) having more than 60 months of liquid/cash reserves. The
weighted average (WA) FICO for the aggregate pool is 775 with a WA
LTV of 63.5% and WA CLTV of 63.6%. Approximately 36.5% of the
mortgage loans (by UPB) were originated in California and
approximately 1.7% of the mortgage loans (by UPB) have primary
mortgage insurance coverage. The pool has weighted average (WA)
seasoning of approximately three months and consists of 21 loans
(1.62% by loan count) which have been delinquent since origination,
however, are current as of cut-off date. No borrower under any
mortgage loan is currently in an active COVID-19 related
forbearance plan with the servicer.
Approximately 6.0% (by UPB) of the mortgage loans and 96 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. The
valuations for 4 loans had variances between -10% and -35%. 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 Moody's
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 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
considered qualitative factors during the ratings process including
Moody's review of the origination quality and servicing
arrangement, the results of the TPR, and the R&W framework. Moody's
consider PennyMac to be an adequate originator of conforming
mortgages. As a result, Moody's did not make any adjustments to
Moody's 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 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,
Moody's did not apply any adjustment to Moody's 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
Two TPR firms 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 542 loans. 30 sampled mortgage loans were removed from
the mortgage pool by the Sponsor on conclusion of the review,
resulting in 512 Sampled Mortgage Loans being part of the final
mortgage pool. 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, 13 mortgage loans had a final credit grade
C or D, 3 mortgage loans had a final compliance grade D, and 7
mortgage loans had a final valuation grade D. While these mortgage
loans were ultimately excluded from the final mortgage pool,
Moody's nevertheless made an adjustment to Moody's 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 Moody's
model analysis to account for certain weaknesses in the R&W
framework. 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.
Transaction Structure
PMTLT 2022-INV1 has one pool with a shifting interest structure
that benefits from a subordination floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 0.90% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
RUN TRUST 2022-NQM1: Fitch Gives 'B-(EXP)' Rating to Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by RUN 2022-NQM1 Trust (RUN 2022-NQM1). The
transaction is expected to close on March 31, 2022. The
certificates are supported by 525 nonprime residential mortgages
with a total balance of approximately $331 million, as of the
cutoff date.
DEBT RATING
---- ------
RUN 2022-NQM1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
B-1 LT BB-(EXP)sf Expected Rating
B-2 LT B-(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
M-1 LT BBB-(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Under Fitch's assumptions, classes rated 'AAAsf' or 'AAsf' received
timely interest while all other bonds received ultimate interest.
Only the A-3 bond took a writedown in its target rating stress. The
writedown was in one of the eighteen 'Asf' cashflow curves and was
less than one bps which Fitch deemed immaterial to the rating.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Positive): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.6% above a long-term sustainable level (versus
10.6% 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 18.8% yoy nationally as of December 2021.
Non-QM Credit Quality (Negative): The collateral consists of 525
loans, totaling $331 million and seasoned approximately five months
in aggregate (calculated as the difference between origination date
and cutoff date). The borrowers have a moderate credit profile —
739 model FICO and 43% model debt to income ratio (DTI) — and
leverage — 82% sustainable loan to value ratio (sLTV) and 73%
combined LTV (cLTV). The pool consists of 52% of loans where the
borrower maintains a primary residence, while 44% comprise an
investor property. Additionally, 56% are non-qualified mortgage
(non-QM), and the QM rule does not apply for the remainder.
Fitch's expected loss in the 'AAAsf' stress is 25%. This is mostly
driven by the non-QM collateral and the significant investor cash
flow product concentration.
Loan Documentation (Negative): Approximately 82% of the loans in
the pool were underwritten to less than full documentation, and 41%
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 Financial Protections Bureau's (CFPB) Ability to Repay
(ATR) Rule (ATR Rule, or the Rule), which reduces the risk of
borrower default arising from lack of affordability,
misrepresentation or other operational quality risks due to the
rigor of the Rule's mandates with respect to the underwriting and
documentation of the borrower's ATR.
Fitch's treatment of alternative loan documentation increased the
'AAAsf' expected loss by approximately 600bps relative to a fully
documented loan.
High Percentage of DSCR Loans (Negative): There is a 39%
concentration of debt service coverage ratio (DSCR) loans in the
pool. These loans are available to real estate investors that are
qualified on a property cash flow basis, rather than DTI, and
borrower income and employment are not verified. For DSCR loans,
Fitch converts the DSCR values to a DTI and treats as low
documentation.
Fitch's expected loss for these loans is 32% in the 'AAAsf' stress,
and this is driving the higher pool expected losses due to the 39%
concentration.
Sequential-Payment Structure with Limited Advancing (Mixed): The
structure distributes principal sequentially to all classes with
losses incurred reverse sequentially.
Advances of delinquent principal and interest (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, then the paying agent will
be obligated to make such advance.
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. However, the additional stress on the
structure is a downside, as there is limited liquidity in the event
of large and extended delinquencies.
Excess Cash Flow (Positive): Excess interest is available to
provide liquidity to the deal as well as to protect against losses
by structuring classes B2 and B3 as principal only (PO) bonds. In a
stressed environment, In a stressed environment, Fitch expects all
bonds to pay the net weighted average coupon (WAC), and excess
interest is only available to the extent that classes B2 and B3 are
still outstanding and have not been fully written off.
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. However, the WAC reduction
stress is based on historical modification rates.
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 due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded benchmark scenario.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model projected 41.9% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
CRITERIA VARIATION
There was one variation to Fitch's "U.S. RMBS Rating Criteria."
Approximately 65.2% of the loans in the deal were originated by
Oaktree Funding Corp. (Oaktree). Fitch's assessment of Oaktree is
seasoned more than 18 months. Given Oaktree's assessment has only
been expired a short period (less than 2 months) and the seasoning
on the loans, Fitch viewed the risk as immaterial.
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 adjustments to its analysis:
-- A 5% PD credit was applied at the loan level as all of the
grades were either 'A' or 'B'. This resulted in a 48bps
reduction to the 'AAAsf' expected loss.
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.
SIERRA TIMESHARE 2022-1: Fitch Gives BB Rating to Class D Notes
---------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to notes
issued by Sierra Timeshare 2022-1 Receivables Funding LLC
(2022-1).
DEBT RATING PRIOR
---- ------ -----
Sierra Timeshare 2022-1 Receivables Funding LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT BBBsf New Rating BBB(EXP)sf
D LT BBsf New Rating BB(EXP)sf
KEY RATING DRIVERS
Borrower Risk - Shifted Collateral Composition: Approximately 70.1%
of Sierra 2022-1 consists of WVRI originated loans; the remainder
of the pool comprises WRDC loans. Fitch has determined that, on a
like-for-like FICO basis, WRDC's receivables perform better than
WVRI's. The weighted average (WA) original FICO score of the pool
is 729. Compared with the prior transaction (2021-2), the 2022-1
pool is weaker, with an increase in WVRI loans and shift downward
in the FICO band concentrations for the WVRI platform.
Forward-Looking Approach on Cumulative Gross Default (CGD) Proxy -
Increasing CGD Performance: Similar to other timeshare originators,
T+L 's delinquency and default performance exhibited notable
increases in the 2007-2008 vintages, stabilizing in 2009 and
thereafter. However, more recent vintages, from 2014-2019, have
begun to show increasing gross defaults versus vintages dating to
2009, partially driven by increased paid product exits. Fitch's CGD
proxy for this pool is 22.25% (higher than 21.50% for 2021-2).
Given the current economic environment and consistent with the
prior transaction, Fitch used proxy vintages that reflect
recessionary periods along with recent worse performance,
specifically 2007-2009 and 2016-2018.
Structural Analysis - Deal-Over-Deal Lower CE Structure: Initial
hard CE for the class A, B, C and D notes is 71.0%, 42.2%, 19.0%
and 4.50%, respectively. CE is higher for the class A through C
notes relative to 2021-2 and remains above pre-pandemic
transactions. Hard CE comprises overcollateralization (OC), a
reserve account and subordination. Soft CE is also provided by
excess spread and is expected to be 10.0% per annum. Loss coverage
for all notes is able to support default multiples of 3.50x, 2.50x,
1.75x and 1.25x for 'AAAsf', 'Asf', 'BBBsf' and 'BBsf',
respectively.
Originator/Seller/Servicer Operational Review - Quality of
Origination/Servicing: T+L has demonstrated sufficient abilities as
an originator and servicer of timeshare loans. This is evidenced by
the historical delinquency and loss performance of securitized
trusts and of the managed portfolio.
Legal Structure Integrity: The legal structure of the transaction
should provide that a bankruptcy of T+L and Wyndham Consumer
Finance, Inc. (WCF) would not impair the timeliness of payments on
the securities.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Unanticipated increases in the frequency of defaults could
produce CGD levels higher than the base case and would likely
result in declines of CE and remaining default coverage levels
available to the notes. Additionally, unanticipated increases
in prepayment activity could also result in a decline in
coverage. Decreased default coverage may make certain note
ratings susceptible to potential negative rating actions,
depending on the extent of the decline in coverage.
-- Hence, Fitch conducts sensitivity analyses by stressing both a
transaction's initial base case CGD and prepayment assumptions
and examining the rating implications on all classes of issued
notes. The CGD sensitivity stresses the CGD proxy to the level
necessary to reduce each rating by one full category, to non
investment grade (BBsf) and to 'CCCsf' based on the break-even
loss coverage provided by the CE structure.
-- The prepayment sensitivity includes 1.5x and 2.0x increases to
the prepayment assumptions, representing moderate and severe
stresses, respectively. These analyses are intended to provide
an indication of the rating sensitivity of notes to unexpected
deterioration of a trust's performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance driven by stable
delinquencies and defaults would lead to increasing CE levels
and consideration for potential upgrades. If CGD is 20% less
than the projected proxy, the expected ratings would be
maintained for class A notes at stronger rating multiples.
-- For the class B, C and D notes, the multiples would increase
resulting for potential upgrade of one rating category, one
notch, and one rating category, respectively.
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.
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.
SIERRA TIMESHARE 2022-1: S&P Assigns BB (sf) Rating on D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sierra Timeshare 2022-1
Receivables Funding LLC's timeshare loan-backed, fixed-rate notes.
The note issuance is an ABS securitization backed by vacation
ownership interest loans.
The ratings reflect S&P's view of the credit enhancement available
in the form of subordination, overcollateralization, a reserve
account, and available excess spread. The ratings also reflect its
view of Wyndham Consumer Finance Inc.'s servicing ability and
experience in the timeshare market.
Ratings Assigned
Sierra Timeshare 2022-1 Receivables Funding LLC
Class A, $88.394 million: AAA (sf)
Class B, $80.816 million: A (sf)
Class C, $65.102 million: BBB (sf)
Class D, $40.688 million: BB (sf)
SLM STUDENT 2014-1: Fitch Affirm B Rating on 2 Tranches
-------------------------------------------------------
Fitch Ratings has affirmed the ratings of all outstanding classes
of SLM Student Loan Trust 2003-1 and 2014-1. The Rating Outlooks
remain Stable.
DEBT RATING PRIOR
---- ------ -----
SLM Student Loan Trust 2014-1
A-3 78448EAC9 LT Bsf Affirmed Bsf
B 78448EAD7 LT Bsf Affirmed Bsf
SLM Student Loan Trust 2003-1
A-5A 78442GFK7 LT Bsf Affirmed Bsf
A-5B 78442GFL5 LT Bsf Affirmed Bsf
A-5C 78442GFM3 LT Bsf Affirmed Bsf
B 78442GFJ0 LT Bsf Affirmed Bsf
The senior notes of both trusts and the class B notes of SLM 2003-1
do not pass Fitch's credit and maturity base case stresses. All
notes for both transactions are rated 'Bsf', one category higher
than their current model-implied ratings of 'CCCsf', supported by
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor and the revolving credit agreements
established by Navient, which allow the servicer to purchase loans
from the trusts.
The rating assigned to the class B notes of SLM 2014-1 is limited
to the rating of the class A-3 notes. An event of default (EOD)
caused by the senior class that is not paid in full by maturity
will cause the subordinate class to not receive principal or
interest payments. The legal final maturity dates of the senior
classes of SLM 2003-1 and SLM 2004-1 are more than 10 years and six
years away, respectively.
Navient has the option but not the obligation to lend to the
trusts; thus, Fitch does not give quantitative credit to these
agreements. However, they provide qualitative comfort that Navient
is committed to limiting investors' exposure to maturity risk.
Navient Corporation is currently rated 'BB-' with a Stable Outlook
by Fitch.
In the cash flow modeling analysis for SLM 2003-1, Fitch used
higher transaction-specific servicing fees rather than the standard
fees from Fitch's rating criteria.
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: Based on transaction-specific performance
to date, Fitch assumes a cumulative default rate of 21.75% and
17.50% under the base case scenario and a default rate of 65.25%
and 52.50% under the 'AAA' credit stress scenario for SLM 2003-1
and SLM 2014-1, respectively. Fitch is maintaining its sustainable
constant default rate (sCDR) at 2.9% for SLM 2003-1 and 2.7% for
SLM 2014-1 in cash flow modeling.
Fitch is also maintaining its sustainable constant prepayment rate
(sCPR; voluntary and involuntary prepayments) at 10.0% for SLM
2003-1 and revising the sCPR from 14.0% to 12.0% for SLM 2014-1.
Fitch applies the standard default timing curve in its credit
stress cash flow analysis. The claim reject rate is assumed to be
0.25% in the base case and 2.0% in the 'AAA' case for both
transactions.
The trailing 12-month (TTM) levels of deferment, forbearance and
income-based repayment (IBR; prior to adjustment) are 2.66%, 11.59%
and 36.51%, respectively, for SLM 2003-1. The TTM levels of
deferment, forbearance and IBR (prior to adjustment) are 5.45%,
16.94% and 29.68%, respectively, for SLM 2014-1. These assumptions
are used as the starting points in cash flow modeling, and
subsequent declines or increases are modeled as per criteria. The
borrower benefit is assumed to be approximately 0.02% and 0.10% for
SLM 2003-1 and SLM 2014-1, respectively, based on information
provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. For SLM 2003-1, as of the quarter ended February 2022,
approximately 86.13% of the student loans are indexed to LIBOR, and
13.87% are indexed to T-Bill. All notes are indexed to three-month
LIBOR. For SLM 2014-1, as of January 2022, approximately 99.75% of
the student loans are indexed to LIBOR, and 0.25% are indexed to
T-Bill. All notes are indexed to one-month LIBOR.
Payment Structure: Credit enhancement (CE) is provided by
overcollateralization (OC), excess spread and for the class A
notes, subordination. As of the most recent collection period,
senior parity ratios (including the reserve) are 105.84% (5.52% CE)
and 110.77% (9.72% CE) for SLM 2003-1 and 2014-1, respectively.
Total effective parity ratios (including the reserve) are 100.88%
(0.87% CE) and 101.32% (1.30% CE) for SLM 2003-1 and 2014-1,
respectively.
Liquidity support is provided by a reserve account initially sized
at 0.25% of the outstanding pool balance for SLM 2003-1 and at
0.50% of the outstanding pool balance for SLM 2014-1. The reserve
accounts are currently at their floors of $3,083,057 and $996,942
for SLM 2003-1 and 2014-1, respectively. SLM 2003-1 will continue
to release cash as long as 100.0% total parity is maintained. SLM
2014-1 will continue to release cash as long as 101.01% total
parity is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans. Fitch also confirmed with the servicer
the availability of a business continuity plan to minimize
disruptions in the collection process during the coronavirus
pandemic.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transactions face when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transactions
are exposed to multiple dynamic risk factors. It should not be used
as an indicator of possible future performance.
SLM Student Loan Trust 2003-1
Current Ratings: Class A 'Bsf', Class B 'Bsf' (Model-Implied
Ratings: Class A 'CCCsf', Class B 'CCCsf')
Credit Stress Rating Sensitivity:
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.50%: class A 'CCCsf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity:
-- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 50%: class A 'CCCsf; class B 'CCCsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2014-1
Current Ratings: Class A 'Bsf', Class B 'Bsf' (Model-Implied
Ratings: Class A 'CCCsf', Class B 'CCCsf')
Credit Stress Rating Sensitivity:
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.50%: class A 'CCCsf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity:
-- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 50%: class A 'CCCsf; class B 'CCCsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
SLM Student Loan Trust 2003-1
Credit Stress Sensitivity:
-- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread decrease 0.25%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Sensitivity:
-- CPR increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term decrease 25%: class A 'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2014-1
Credit Stress Sensitivity:
-- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread decrease 0.25%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Sensitivity:
-- CPR increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term decrease 25%: class A 'CCCsf'; class B 'CCCsf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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.
SYMPHONY CLO XXXI: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Symphony CLO XXXI
Ltd./Symphony CLO XXXI LLC's floating-rate notes.
The note issuance is a CLO transaction governed by collateral
quality tests and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
.
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 collateral
selection and ongoing portfolio management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Symphony CLO XXXI Ltd./Symphony CLO XXXI LLC
Class X, $1.25 million: AAA (sf)
Class A, $310.00 million: AAA (sf)
Class B, $70.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $45.20 million: Not rated
WEHLE PARK CLO: Moody's Assigns (P)Ba3 Rating to $21.6MM E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to two
classes of notes to be issued by Wehle Park CLO, Ltd. (the "Issuer"
or "Wehle Park").
Moody's rating action is as follows:
US$345,600,000 Class A Senior Secured Floating Rate Notes due 2035,
Assigned (P)Aaa (sf)
US$21,600,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned (P)Ba3 (sf)
The notes listed 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.
Wehle Park 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 senior secured
bonds, provided that not more than 5.0% of the portfolio may
consist of senior secured bonds. We expect the portfolio to be
approximately 90% ramped as of the closing date.
Blackstone 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 Notes, the Issuer will issue 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $540,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3136
Weighted Average Spread (WAS): 3mS + 3.50%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.0 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 2021.
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 2016-C35: Fitch Affirms CCC Rating on Class F Debt
--------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Wells Fargo Commercial
Mortgage Trust 2016-C35. The Rating Outlook for class E has been
revised to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
WFCM 2016-C35
A-3 95000FAS5 LT AAAsf Affirmed AAAsf
A-4 95000FAT3 LT AAAsf Affirmed AAAsf
A-4FL 95000FBA3 LT AAAsf Affirmed AAAsf
A-4FX 95000FBC9 LT AAAsf Affirmed AAAsf
A-S 95000FAV8 LT AAAsf Affirmed AAAsf
A-SB 95000FAU0 LT AAAsf Affirmed AAAsf
B 95000FAY2 LT AA-sf Affirmed AA-sf
C 95000FAZ9 LT A-sf Affirmed A-sf
D 95000FAC0 LT BBB-sf Affirmed BBB-sf
E 95000FAE6 LT Bsf Affirmed Bsf
F 95000FAG1 LT CCCsf Affirmed CCCsf
X-A 95000FAW6 LT AAAsf Affirmed AAAsf
X-D 95000FAA4 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Improved Loss Expectations: Fitch's loss expectations for the pool
have improved since the prior rating action. The Outlook revision
on class E reflects better than expected 2021 performance on some
of the Fitch Loans of Concern (FLOCs) and larger loans in the pool
that were expected to be adversely affected by the pandemic. Fitch
has designated 15 FLOCs (26.64% of pool), including eight loans
(11.8%) in special servicing.
Fitch's current ratings reflect a base case loss of 6.0%. Losses
could increase to 7.2% when factoring an outsized loss on the Mall
at Turtle Creek loan (4.2%) and an additional sensitivity on one
hotel loan (5.2%) to account for ongoing business disruption as a
result of the pandemic; despite the higher losses, the sensitivity
analysis further supports the Outlook revision for class E to
Stable from Negative.
The largest FLOC, The Mall at Rockingham Park (7.1%), is secured by
540,867 sf of an approximate one million sf regional mall in Salem,
NH. The loan was designated a FLOC due to low occupancy after
departure of collateral anchor, Lord and Taylor (29.3% NRA and 2.7%
of base rents), which closed this location in December 2020 after
filing for Chapter 11 Bankruptcy. As a result, collateral occupancy
declined to 55% as of June 2021 from 89% as of September 2020.
Servicer-reported NOI DSCR for this full-term IO loan was 1.89x as
of the YTD June 2021 compared with 1.98x at YE 2020, 2.11x at YE
2019 and 2.31x at issuance.
Per the September 2021 rent roll, near-term rollover includes 13.7%
NRA by 2022 spread across 34 tenants. In-line tenant sales continue
to remain strong at $1,361 psf ($518 psf excluding Apple) as of the
TTM ended November 2021 compared with $816 psf ($413 psf excluding
Apple) as of the TTM ended November 2020 and $1,020 psf at YE 2019
($542 psf excluding Apple) at YE 2019.
The loan is sponsored by Mayflower Realty (joint venture of Simon
Property Group and the Canadian Pension Plan Investment Board) and
Institutional Mall Investors. The remaining anchors are Macy's and
JCPenney, which are both non-collateral. Dicks Sporting Goods
subleases a portion of a non-collateral (Seritage owned) former
Sears space. A 12-screen Cinemark theater opened on the Seritage
parcel in December 2019. Fitch's base case loss of approximately 8%
reflects a 15% cap rate and 15% total haircut to the YE 2020 NOI.
The largest loan in special servicing and largest contributor to
expected losses is the Mall at Turtle Creek loan (4.2%). The loan,
sponsored by Brookfield Properties, is secured by 329,398sf of
inline space within an enclosed mall located in Jonesboro, AR
(approximately 60 miles northwest of Memphis). Non-collateral
anchor tenants include JCPenney, Dillard's and Target. The largest
collateral tenants include Barnes and Noble, Bed Bath & Beyond,
Best Buy and H&M.
In March 2020, a tornado went through the Jonesboro area and caused
significant damage to the mall, including collapsing the walls of
the Best Buy store. None of the non-collateral anchors suffered
major damage, and all have reopened. Some of the insurance proceeds
have been released to the borrower for the demolition of areas
deemed to be unsafe by local officials; according to the servicer,
the majority of the loan collateral has been demolished. The
servicer continues to work with the borrower to determine the best
strategy moving forward, including a possible deed in lieu of
foreclosure (DIL). Fitch's loss expectations are based on a haircut
to net insurance proceeds expected to be received by the borrower
and results in an approximate 25% loss severity. In addition to its
base case analysis, Fitch performed a sensitivity on the loan,
which assumed a 40% loss severity.
High Retail and Hotel Concentration: Non-defeased loans backed by
retail properties represent 34.2% of the pool, including six
(25/2%) in the top 15. Hotel loans represent 20.1% of the pool,
including two (7.6%) in the top 15.
The largest loan in the pool and second largest driver to losses is
the Epps Bridge Centre loan (7.1%), which is secured by a
336,554-sf retail property located in Athens, GA. Collateral
tenants include Dick's Sporting Goods (exp. 2024), Best Buy (exp.
2025), Marshall's (exp. August 2023), Ross (exp. 2027), and Bed
Bath & Beyond (exp. 2026). The property NOI declined in 2020 due to
the pandemic but has recovered in2021. As of YE 2021, the DSCR was
reported to be 1.70x compared to 1.50x at YE 2020. Occupancy has
fluctuated but remained above 90% since issuance. Fitch's loss
expectations of approximately 10% reflects an implied 10.5% cap
rate on the YE 2021 NOI.
Increased Credit Enhancement (CE): As of the March 2022
distribution date, the pool's principal balance has paid down by
11.5% to $905 million from $1.0 billion at issuance. Since Fitch's
prior rating action, four loans were repaid at or before their
respective maturity dates resulting in approximately $50 million in
paydown. Fifteen loans (12.5%) are defeased, up from six loans
(2.9%) at the prior rating action. Eight loans (21%) are full-term
interest-only, and the remainder of the pool is now amortizing.
Three loans (1.7%) mature in the fourth quarter of 2025, and the
remaining loans mature in 2026.
Undercollateralization: The transaction is undercollateralized by
approximately $109,000 due to a WODRA on Hilton Garden Inn W. I65
Airport Blvd loan, which was reflected in the March 2022 remittance
report.
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-3, A-4, A-FL, A-FX, A-SB, A-S and X-A are not
likely due to the position in the capital structure but may
occur should interest shortfalls affect these classes.
-- Downgrades to classes B and C 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 D, E and X-D are possible should loss
expectations increase from continued performance decline of
the FLOCs, additional loans default or transfer to special
servicing and/or higher realized losses than expected on the
specially serviced loans, in particular for the Mall at Turtle
Creek loan.
-- Further downgrades to class 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 and C would only occur with significant
improvement in CE, defeasance and/or performance stabilization
of FLOCs and other properties affected by the coronavirus
pandemic. Classes would not be upgraded above 'Asf' if there
were likelihood of interest shortfalls.
-- Upgrades to classes D, E and X-D may occur as the number of
FLOCs are reduced, there is higher than expected recoveries
from 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.
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.
[*] S&P Takes Actions on 52 Classes from 7 US RMBS Non-QM Deals
---------------------------------------------------------------
S&P Global Ratings completed its review of 52 classes from seven
U.S. RMBS non-qualified mortgage (non-QM) transactions issued
between 2020 and 2021. The review yielded 33 upgrades, 13
affirmations, and six discontinuance.
A list of Affected Ratings can be viewed at:
https://bit.ly/3IpbfLB
S&P said, "For each transaction, we performed a credit analysis
using updated loan-level information from which we determined
foreclosure frequency, loss severity, and loss coverage amounts
commensurate for each rating level. We also used the same mortgage
operational assessment, representation and warranty, and due
diligence factors that were applied at issuance. Our geographic
concentration and prior-credit-event adjustment factors reflect the
transactions' current pool composition."
The upgrades primarily reflect deleveraging because the related
transactions each benefit from low or zero accumulated losses to
date, high prepayment speeds, and a growing percentage of credit
support to the rated classes. In addition, transactions'
delinquency levels have generally been declining, partly due to
borrowers exiting COVID-19-related forbearance plans via deferrals
and/or loan modifications, or upon the completion of repayment
plans. However, delinquency levels remain relatively elevated in
some transactions because the borrowers who remain delinquent
represent a higher proportion of the pool as it pays down.
S&P said, "We discontinued our ratings on six classes from
Deephaven Residential Mortgage Trust 2020-1 because it was
terminated in the February 2022 distribution period.
"The affirmations reflect our view that the classes' projected
collateral performance relative to our projected credit support
remain relatively consistent with our previous projections."
Analytical Considerations
S&P said, "We incorporate various considerations into our decisions
to raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of our criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes." These considerations include:
-- Collateral performance or delinquency trends,
-- Priority of principal payments,
-- Priority of loss allocation,
-- Expected short duration,
-- Available subordination and/or credit enhancement floors, and
-- Potential excess spread.
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