KEY RATING DRIVERS
The upgrade reflects the increased credit enhancement due to continued delevering of the senior notes. The affirmations reflect the delevering as well as concerns about several of the larger loans in the transaction which remain underperforming or have yet to stabilize.
Under Fitch's methodology, approximately 70.9% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. Fitch estimates that average recoveries will be 44.9% reflecting the recovery expectations upon default of the CMBS tranches and real estate loans.
The largest contributor to Fitch's base case loss is a whole loan (9.5%) secured by a multifamily property located in
The next largest contributor to Fitch's base case loss is an A note (6.3%) secured by a 5.5 acre fee simple parcel. The borrower planned to redevelop the property; however, the plans were not executed due to market conditions. Recently,
The next largest contributor to Fitch's base case loss is a whole loan (5.6%) secured by a 79,522 sf multi-tenant office property located in
This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies recoveries based on stressed cash flows and Fitch's long-term capitalization rates. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'.
The breakeven rates for classes A-1 through C are generally consistent with the ratings listed below. The Stable Outlook on the class A-1 through B notes reflects increased credit enhancement and the expectation that the transaction will continue to delever. The Negative Outlook on the class C notes reflect the junior position of the notes and uncertainty regarding future cash flows from several large assets.
The 'CCC' and 'CC' ratings for classes D through M are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern, factoring in anticipated recoveries relative to the credit enhancement of each class.
Fitch conducted additional sensitivity analysis on the larger unstabilized assets and expects that the ratings on the class A-1 through B notes to remain stable. The rating on the class C notes may be subject to further downgrades if collateral performance deteriorates. The ratings on the class D through M notes may be subject to further downgrades as losses are realized.
Fitch has upgraded the following class as indicated:
Fitch has affirmed the following classes as indicated:
Fitch previously withdrew its rating on class A-1R notes. Fitch does not rate the
Additional information is available at 'www.fitchratings.com'.
--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' (
--'Global Structured Finance Rating Criteria' (
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (
--'Global Rating Criteria for Structured Finance CDOs' (
Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Rating Criteria for Structured Finance CDOs
Source: Fitch Ratings
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