Approximately $713.335 million of Structured Securities Affected
New York, February 27, 2015 -- Moody's Investors Service has assigned definitive ratings to 9 classes
of CMBS securities, issued by Morgan Stanley Bank of America Merrill
Lynch Trust 2015-C21 Commercial Mortgage Pass-Through Certificates.
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. X-A, Definitive Rating Assigned Aa1 (sf)*
Cl. A-S, Definitive Rating Assigned Aa1 (sf)**
Cl. X-B, Definitive Rating Assigned Aa3 (sf)*
Cl. B, Definitive Rating Assigned Aa3 (sf)**
*Reflects Interest-Only Class
** Reflects Exchangeable Certificates
RATINGS RATIONALE
The Certificates are collateralized by 64 fixed rate loans secured by
99 properties. The ratings are based on the collateral, the
structure of the transaction and the assigned Structured Credit Assessment
of baa2 (sca.pd) to the 555 11th Street NW Loan.
Moody's CMBS ratings methodology combines both commercial real estate
and structured finance analysis. Based on commercial real estate
analysis, Moody's determines the credit quality of each mortgage
loan and calculates an expected loss on a loan specific basis.
Under structured finance, the credit enhancement for each certificate
typically depends on the expected frequency, severity, and
timing of future losses. Moody's also considers a range of qualitative
issues as well as the transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the severity
of loss upon a default, which is largely driven by each loan's LTV
ratio.
The Moody's Actual DSCR of 1.86X (1.64X excluding credit
assessed loan) is higher than the 2007 conduit/fusion transaction average
of 1.31X. The Moody's Stressed DSCR of 1.02X (0.97X
excluding credit assessed loan) is in-line with the 2007 conduit/fusion
transaction average of 0.92X.
The pooled Trust loan balance of $871.2 million represents
a Moody's LTV ratio of 109.2%, which is lower than
the 2007 conduit/fusion transaction average of 110.6% and
lower than many pools securitized during 2014. Excluding the Structured
Credit Assessment loan, the Trust loan balance of $871.2
million represents a Moody's LTV ratio of 112.8%.
Moody's also considers subordinate financing outside of the Trust when
assigning ratings. Three loans (14.8% of the pool
balance) are structured with subordinate debt held outside the trust.
The 555 11th Street NW pari passu loan (6.9% of the pool
balance) is structured with a subordinate debt of $30 million in
the trust as a non-pooled ("rake") class, as well as additional
subordinate debt of $57 million and mezzanine debt of $50
million held outside the trust. The Cumberland Cove Apartments
Loan (5.1% of the pool balance) and Briarwood Office Loan
(2.9% of the pool balance) are structured with a mezzanine
loan of $7.0 million and $4.5 million,
respectively. Moody's LTV ratio for the pool, including the
aforementioned debt, is 117.1% (114.5%
excluding credit assessed loan).
Moody's also considers both loan level diversity and property level diversity
when selecting a ratings approach. With respect to loan level diversity,
the pool's loan level Herfindahl score is 29.0 (28.9 excluding
credit assessed loan) which is in higher than the scores calculated for
most multi-borrower pools that Moody's has rated since 2009.
With respect to property level diversity, the pool's property level
Herfindahl score is 33.8 (32.9 excluding credit assessed
loan).
Moody's also grades properties on a scale of 1 to 5 (best to worst) and
considers those grades when assessing the likelihood of debt payment.
The factors considered include property age, quality of construction,
location, market, and tenancy. The pool's weighted
average property quality grade is 2.40, which is higher than
the indices calculated in most multi-borrower transactions since
2009.
This deal has a super-senior Aaa class with 30% credit enhancement.
Although the additional enhancement offered to the senior most certificate
holders provides additional protection against pool loss, the super-senior
structure is credit negative for the certificate that supports the super-senior
class. If the support certificate were to take a loss, the
loss would have the potential to be quite large on a percentage basis.
Thin tranches need more subordination to reduce the probability of default
in recognition that their loss-given default is higher.
This adjustment helps keep expected loss in balance and consistent across
deals. The transaction was structured with additional subordination
at Class A-S to mitigate the potential increased severity to Class
A-S.
Given the composition of the subject pool, Moody's is unable to
assign a Aaa (sf) rating for a support certificate having a credit enhancement
of 22.625% and 7.375% certificate thickness
(30.000% detachment). Although the severity profile
reflected by the certificate thickness is worse than Moody's idealized
target for structured ratings, the default profile reflected by
the stated credit enhancement level ) is commensurate with a Aa1 (sf)
rating. The profile of each loss component in tandem is not strong
enough to uplift Class A-S to a Aaa (sf) grade.
The principal methodology used in this rating was "Approach to Rating
US and Canadian Conduit/Fusion CMBS" published in December 2014.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's analysis employs the excel-based CMBS Conduit Model v3.00
which derives credit enhancement levels based on an aggregation of adjusted
loan level proceeds derived from Moody's loan level DSCR and LTV ratios.
Major adjustments to determining proceeds include loan structure,
property type, sponsorship, and diversity. Moody's
analysis also uses the CMBS IO calculator ver1.1, which references
the following inputs to calculate the proposed IO rating based on the
published methodology: original and current bond ratings and credit
assessments; original and current bond balances grossed up for losses
for all bonds the IO(s) reference(s) within the transaction; and
IO type corresponding to an IO type as defined in the published methodology.
Moody's Parameter Sensitivities: If Moody's value of the collateral
used in determining the initial rating were decreased by 5%,
14%, and 23%, the model-indicated rating
for the currently rated Aaa (sf) Super Senior class would be Aaa,
Aa1, and Aaa3, respectively; for the Aa1 (sf) rated Class
A-S the ratings would be Aa2, A1, and A3, respectively.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time; rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter Sensitivities
only reflect the ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
Sensitivity analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at the
date it was prepared and such information has not been independently verified
by Moody's; (b) must be construed solely as a statement of opinion
and not a statement of fact or an offer, invitation, inducement
or recommendation to purchase, sell or hold any securities or otherwise
act in relation to the issuer or any other entity or in connection with
any other matter. Moody's does not guarantee or make any representation
or warranty as to the correctness of any information, rating or
communication relating to the issuer. Moody's shall not be liable
in contract, tort, statutory duty or otherwise to the issuer
or any other third party for any loss, injury or cost caused to
the issuer or any other third party, in whole or in part,
including by any negligence (but excluding fraud, dishonesty and/or
willful misconduct or any other type of liability that by law cannot be
excluded) on the part of, or any contingency beyond the control
of Moody's, or any of its employees or agents, including any
losses arising from or in connection with the procurement, compilation,
analysis, interpretation, communication, dissemination,
or delivery of any information or rating relating to the issuer.
Factors that would lead to an upgrade or downgrade of the rating:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range may indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously anticipated.
Factors that may cause an upgrade of the ratings include significant loan
paydowns or amortization, an increase in the pool's share of defeasance
or overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall performance
of the pool, loan concentration, increased expected losses
from specially serviced and troubled loans or interest shortfalls.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF397985.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Karen Ramallo
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Joseph Baksic
Senior Vice President
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Assigns Definitive Ratings to 9 CMBS Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21
