Fitch Ratings has affirmed five classes of
The Rating Outlook on class D remains Stable.
RATING ACTIONS
Entity / Debt
Rating
Prior
D 46635GAQ3
LT
Bsf
Affirmed
Bsf
E 46635GAS9
LT
CCsf
Affirmed
CCsf
F 46635GAU4
LT
CCsf
Affirmed
CCsf
G 46635GAW0
LT
Csf
Affirmed
Csf
H 46635GAY6
LT
Csf
Affirmed
Csf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Regional Mall Concentration; High Loss Expectations: Three loans remain in the pool, secured by two regional malls. Due to the concentrated nature of the pool, Fitch performed a paydown analysis that grouped these loans based on the likelihood of repayment and expected losses from the liquidation of these loans. Based on this scenario, loss expectations remain high due to the pool's reliance on proceeds from underperforming regional malls with uncertainty around timing/recovery and ultimate disposition of these loans.
Target (ground lease; 11.7% NRA; exp.
Fitch's loss expectation on this loan is approximately 56%; the loss considers a discount to the most recent servicer reported appraisal value. Fitch's loss implies a 27% cap rate on the YE 2019 NOI and is consistent with Fitch stressed values on similar mall properties.
A non-collateral Sears closed in
Fitch's loss expectation on this loan is approximately 77%; the loss considers a discount to the most recent servicer reported appraisal value. Fitch's loss implies a 34% cap rate on the YE 2019 NOI and is consistent with Fitch stressed values on similar defaulted mall properties.
Minimal Change in Credit Enhancement: There has been minimal change to credit enhancement since Fitch's prior rating action. As of the
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade to class D could occur with increased loss expectations from continued performance declines and/or lower valuations on the remaining regional mall properties. Downgrades to the distressed rated classes E through H would occur as losses are realized or with greater certainty of losses.
Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upgrades are considered unlikely due to the regional mall concentration but could occur if one of the regional malls disposes with better than expected recoveries.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Additional information is available on www.fitchratings.com
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