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Rating Action:

Moody's places 26 notes issued by Bayview Commercial Asset Trust on review for possible downgrade

05 May 2020

Approximately $300 million asset-backed securities affected

New York, May 05, 2020 -- Moody's Investors Service, ("Moody's") has placed 15 notes on review for possible downgrade from 4 transactions issued by Bayview Commercial Asset Trusts. In addition, Moody's has downgraded the ratings of 12 notes out of which 11 notes remain on review for further possible downgrade from 2 transactions issued by Bayview Commercial Asset Trusts. The loans are secured primarily by small commercial real estate properties in the U.S. owned by small businesses and investors.

The complete rating actions are as follow:

Issuer: Bayview Commercial Asset Trust 2006-1

Cl. A-1, Downgraded to Ba2 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba1 (sf)

Cl. A-2, Downgraded to Ba2 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba1 (sf)

Cl. M-1, Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba2 (sf)

Cl. M-2, Downgraded to B1 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Ba3 (sf)

Cl. M-3, Downgraded to B2 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to B1 (sf)

Cl. M-4, Downgraded to B3 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to B2 (sf)

Cl. M-5, Downgraded to Caa1 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to B3 (sf)

Cl. M-6, Downgraded to Caa2 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Caa1 (sf)

Cl. B-1, Downgraded to Caa3 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 18, 2019 Downgraded to Caa2 (sf)

Cl. B-2, Downgraded to C (sf); previously on Jan 18, 2019 Downgraded to Ca (sf)

Issuer: Bayview Commercial Asset Trust 2006-3

Cl. A-1, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on May 31, 2012 Downgraded to Ba3 (sf)

Cl. A-2, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on May 31, 2012 Downgraded to Ba3 (sf)

M-1, B3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to B3 (sf)

Cl. M-2, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to Caa2 (sf)

Cl. M-3, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to Caa3 (sf)

Issuer: Bayview Commercial Asset Trust 2006-4

Cl. A-1, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 22, 2016 Downgraded to Baa1 (sf)

Cl. A-2, B1 (sf) Placed Under Review for Possible Downgrade; previously on Nov 22, 2016 Downgraded to B1 (sf)

Cl. M-1, B3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to B3 (sf)

Cl. M-2, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to Caa2 (sf)

Issuer: Bayview Commercial Asset Trust 2007-1

Cl. A-1, A3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 22, 2016 Downgraded to A3 (sf)

Cl. A-2, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 23, 2015 Downgraded to Ba2 (sf)

Cl. M-1, B2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 23, 2015 Downgraded to B2 (sf)

Cl. M-2, B3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 23, 2015 Downgraded to B3 (sf)

Cl. M-3, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 23, 2015 Downgraded to Caa1 (sf)

Issuer: Bayview Commercial Asset Trust 2007-2

Cl. A-1, Downgraded to Ba2 (sf) and Placed Under Review for Possible Downgrade; previously on Jun 7, 2019 Downgraded to Ba1 (sf)

Cl. A-2, Downgraded to B3 (sf) and Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to B2 (sf)

Cl. M-1, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded to Caa2 (sf)

RATINGS RATIONALE

The rating actions take into account interest shortfalls, as well as the existing pool and credit enhancement deterioration such as increase in the delinquency pipeline and decline in overcollateralization. Additionally, the rating actions also reflect an increased likelihood of further deterioration in the performance of the underlying small businesses and commercial real estate as a result of a slowdown in US economic activity in 2020 due to the coronavirus outbreak. We have considered up to a 20% increase in our expected loss on the underlying pools to evaluate the resiliency of the ratings amid the uncertainty surrounding the pools' performance.

During the review period, we will evaluate effects of ongoing and projected macroeconomic conditions, as well as impact of various parties including the government, servicers and issuers on the performance of underlying pools to update our expected loss projection on the pools and decide on the final rating action on the notes. Rating actions on the notes, due to the revised expected loss projections, will reflect individual transaction considerations.

Our analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of small businesses and commercial real estate. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to our forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was "Moody's Global Approach to Rating SME Balance Sheet Securitizations" published in July 2019 and available at https://www.moodys.com/research/Moodys-Global-Approach-to-Rating-SME-Balance-Sheet-Securitizations--PBS_1177587. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Up

Levels of credit protection that are higher than necessary to protect investors against expected losses could drive the ratings up. Moody's expectation of pool losses could decline as a result of a decrease in seriously delinquent loans or lower severities than expected on liquidated loans. As a primary driver of performance, positive changes in the US macro economy could also affect the ratings, as can changes in servicing practices.

Down

Levels of credit protection that are insufficient to protect investors against expected losses could drive the ratings down. Moody's expectation of pool losses could increase as a result of an increase in seriously delinquent loans and higher severities than expected on liquidated loans. As a primary driver of performance, negative changes in the US macro economy could also affect the ratings. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance, and fraud.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating actions announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Chaitali Bharucha
Analyst
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

Inga Smolyar
VP - Senior Credit Officer
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

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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