New York, June 09, 2017 -- Moody's Investors Service ("Moody's") has upgraded the
ratings on eight interest-only (IO) classes from seven US and Canadian
commercial mortgage-backed securitizations (CMBS) deals,
downgraded the ratings on 243 IO classes from 236 CMBS deals and withdrawn
51 interest-only classes from 51 CMBS deals issued by multiple
issuers. As further described below, the rating actions result
from the adoption of an updated approach to the rating of structured finance
interest-only (IO) securities.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF453781
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF453781
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
-Principal Methodologies
The upgrades of eight CMBS IO classes and the downgrades of 243 CMBS IO
classes follow the publication of "Moody's Approach to Rating
Structured Finance Interest-Only (IO) Securities" published
on 8 June 2017 (the "updated IO Methodology") and reflect
the rating impact of our updated approach incorporating performance information
as of the May 2017 remittance dates.
The updated methodology modifies Moody's approach to rating IO securities
referencing multiple bonds and single or multiple collateral pools with
realized losses. References made to the exclusion of certain IO
securities in the previous methodology were removed. In addition,
a description was added to explain when an IO bond is viewed as having
effectively matured and results in the withdrawal of the rating.
The updated methodology explains that Moody's will limit the rating
of an IO security to no more than five notches above the rating of the
lowest credit quality reference bond or the rating that would be assigned
based on an assessment of the default probability of the reference pool(s),
as applicable, and clarifies that the collateral pool's default
probability typically will be treated as equivalent to Ca(sf) if a loss
is expected on the pool. The methodology also explains how Moody's
10-year Idealised Cumulative Loss Rates table will be used to determine
the rating of IOs referencing multiple bonds and IOs backed by single
or multiple pools, as well as how the table is used when the loss
falls between two rating categories.
This press release is not intended to provide a summary of the methodology.
For a full explanation of the methodology, please consult the updated
report, now available on www.moodys.com and accessible
at: https://www.moodys.com/research/Moodys-updates-its-approach-for-rating-structured-finance-interest-only--PR_367970
Ratings on 51 of the interest-only classes from 51 deals were withdrawn
due to the excess spread due on the IO bond being reduced to zero and
are treated as having effectively matured.
The upgrades of eight CMBS IO classes were due to the modification of
Moody's approach to rating IO securities referencing multiple bonds (including
WAC IOs) to the weighted average of the current credit quality of all
referenced bonds based on current balances (grossed up for realized losses),
subject to the constraint of no more than five notches above the lowest
credit quality referenced bond.
The downgrades on 243 CMBS IO classes were due to (i) the rating limit
of an IO security to no more than five notches above the lowest credit
quality referenced bond, (ii) the use of Moody's 10-year
Idealised Cumulative Loss Rates table to determine the rating of IOs referencing
multiple bonds and the mapping to the next lower category when the loss
falls between two rating categories and (iii) principal paydowns of higher
quality reference classes as of the May 2017 remittance statements.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
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.
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.
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 did not use any stress scenario simulations in its analysis.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Deryk Meherik
Senior Vice President/Manager
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Matthew Halpern
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
