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Announcement:

Moody's weighs impact of hurricanes Irma, Harvey on US CMBS, CRE-CLOs, RMBS, and auto and rental car ABS

Global Credit Research - 12 Sep 2017

New York, September 12, 2017 -- Moody's Investors Service has today published three new reports on the effects of recent hurricanes on the US CMBS, CRE-CLO, RMBS, and auto and rental car ABS sectors.

Though still too early to determine the credit effects of hurricanes Irma and Harvey on CMBS transactions, several factors will help minimize the effects of storm damage, Moody's says. While not all properties in affected areas were or will be damaged, property-level insurance coverage, including property and casualty, business interruption and windstorm and flood coverage, should help mitigate losses. And for CRE CLOs, servicer advancing to the senior notes and cash flow diversion tests should help offset short-term disruptions due to higher delinquencies.

Close to two-thirds of Moody's-rated CMBS transactions, and 5.7% of rated CMBS collateral, have exposure to Hurricane Irma-affected regions, the rating agency reports. For individual transactions, deal-level exposure can be as high as 100%. Meanwhile, nearly half of Moody's-rated CRE CLO transactions have exposure to regions hit by Hurricane Irma, as does 4.9% of CRE CLO collateral. For individual transactions, deal-level exposure can reach 22.6%.

Combined Harvey and Irma exposures stand at 8.9% for CMBS and 8.0% for CRE CLOs, Moody's says, and at 3.2% for CMBS collateral and 3.1% for CRE CLO collateral.

Moody's-rated RMBS, including single-family rental (SFR) transactions, have on average moderate to large exposure to Florida, hit by Hurricane Irma this past weekend. Several factors, including insurance coverage, servicer responses and deal structures, will however mitigate many of the potential negative effects of the storm on rated deals. But where damage from Irma isn't covered by, or exceeds the maximum insurance coverage, transactions may not be fully protected from increased losses.

Meanwhile, SFR deals include additional protections, since operators will be required to buy out properties disqualified by material damage that are not being restored from insurance proceeds. And for new RMBS and SFR transactions going to market or closing in the near term, Moody's expects that many, though not all, issuers will inspect properties and remove those with significant damage from loan pools, as occurred following Hurricane Harvey in Texas.

In the auto ABS sector, cash flows into securitization trusts of auto dealer floorplan, loan and lease ABS will temporarily decline as servicers work through payment arrangements with dealers and customers whose vehicles were damaged or destroyed in the hurricanes, Moody's says.

Concurrently, vehicle sales will increase as consumers look to replace damaged or destroyed vehicles, which could help maintain payment rates in auto floorplan ABS. Also, many dealers moved their inventory out of the hurricane zones before the storms hit, limiting their impact on the sector.

For auto loan and lease ABS, higher vehicle recovery rates due to increased demand will offset a portion of credit and residual value losses, while rental car ABS transactions will likely incur minimal direct impact from the hurricanes, with issuers reporting they relocated vehicles to less-exposed areas.

Moody's research subscribers can access "Large exposures to Florida raise risks for RMBS from Hurricane Irma" at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1091543, "Hurricane damage will temporarily cut auto ABS cash flows; demand for replacement vehicles will support rental car ABS" at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1091578 and "Hurricane Irma adds to CMBS exposure in hurricane-affected areas" at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1091516.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Keith Banhazl
MD - Structured Finance
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

Linda Stesney
MD - Structured Finance
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.
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