Fitch Ratings has affirmed 15 classes of
Fitch has also revised the Rating Outlook to Negative from Stable on two classes.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
WFCM 2016-NXS6
A-1 95000KAY1
LT AAAsf Affirmed AAAsf
A-2 95000KAZ8
LT AAAsf Affirmed AAAsf
A-3 95000KBA2
LT AAAsf Affirmed AAAsf
A-4 95000KBB0
LT AAAsf Affirmed AAAsf
A-S 95000KBD6
LT AAAsf Affirmed AAAsf
A-SB 95000KBC8
LT AAAsf Affirmed AAAsf
B 95000KBG9
LT AA-sf Affirmed AA-sf
C 95000KBH7
LT A-sf Affirmed A-sf
D 95000KAJ4
LT BBB-sf Affirmed BBB-sf
E 95000KAL9
LT BB-sf Affirmed BB-sf
F 95000KAN5
LT B-sf Affirmed B-sf
X-A 95000KBE4
LT AAAsf Affirmed AAAsf
X-B 95000KBF1
LT AA-sf Affirmed AA-sf
X-D 95000KAA3
LT BBB-sf Affirmed BBB-sf
X-E 95000KAC9
LT BB-sf Affirmed BB-sf
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased Loss Expectations: Although overall pool performance remains generally stable, loss expectations have increased due to several Fitch Loans of Concern (FLOC). Fitch has identified 12 FLOCs (22.8%) due to deteriorating performance or expected performance declines from the coronavirus pandemic. Five (16.1%) are within the top 15. There are four loans (7.5%) in special servicing, all of which are recent transfers and have cited hardships stemming from the coronavirus pandemic and associated economic shutdown.
Fitch Loans of Concern: The largest FLOC, The Falls (4.7%), is secured by an 840,000-sf regional mall/lifestyle center located in
Cassa Times Square Mixed Use (4.6%) is the sixth largest loan and the largest specially serviced loan. The loan is secured by an 86-key independent boutique hotel with 11,500 sf of retail on the lower level located in
Sixty Soho (3.6%) is the ninth largest loan in the pool. The loan is secured by a 97-key, full-service hotel located in the Soho neighborhood of
Hyatt House Philadelphia/
The final FLOC in the top 15 is
The remaining FLOCs were flagged for expected performance declines given the increased pressure on property performance from the coronavirus pandemic. Three specially serviced loans (2.8%) are all secured by hotel properties and have all transferred between June and
Limited Improvement in Credit Enhancement (CE): There have been limited increases in CE since Fitch's last rating action. As of the
Alternative Loss Considerations: Fitch's analysis included an additional stressed scenario whereby a 25% loss was applied to the maturity balance of the
Coronavirus Exposure: Significant economic impact to certain hotels, retail, and multifamily properties have materialized as a result of reductions in travel and tourism, temporary property closures and lack of clarity on the potential duration of the pandemic. The pandemic has prompted the closure of several hotel properties in gateway cities as well as malls, entertainment venues, and individual stores. In the current pool, there are 18 loans (26.7%) that are secured by retail properties and nine loans (12.9%) that are secured by hotel properties. Fitch's base case analysis applied an additional NOI stress to nine retail loans (10%) and eight hotel loans (12.2%) that did not meet certain performance thresholds.
RATING SENSITIVITIES
The Negative Outlook on classes E, X-E, and F reflect the potential for downgrades given an increase in loss expectations driven by the heightened number of specially serviced loans and FLOCs. Additionally, property-level cash flow concerns, particularly for hotel and retail properties, as a result of the economic slowdown related to the coronavirus have also been factored into Fitch's analysis. Retail and lodging represent 26.7% and 12.9%, respectively. The Stable Rating Outlooks on classes A-1 through D reflect increasing CE, continued amortization and generally stable loss expectations, despite the increase in FLOCs.
Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade:
Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. Upgrades to classes B and C would likely occur with significant improvement in CE and/or defeasance. However, adverse selection, increased concentrations or the underperformance of a particular loan(s) may limit the potential for future upgrades. An upgrade to class D is considered unlikely and would be limited based on the sensitivity to concentrations or the potential for future concentrations. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls. Upgrades to classes E and F are not likely until the later years of the transaction, and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient CE to the class.
Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade:
Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the senior A-1, A-2, A-3, A-4, A-SB and A-S classes, along with class B are not expected given the position in the capital structure and sufficient CE, but may occur if interest shortfalls occur or losses increase considerably. A downgrade to classes C and D may occur should several loans transfer to special servicing and/or as pool losses significantly increase. A downgrade to classes E and F is likely should the performance of the FLOCs fail to stabilize and/or as losses materialize and CE becomes eroded.
In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Rating Outlook or those with Negative Rating Outlooks will be downgraded one or more categories.
For more information on Fitch's original rating sensitivity on the transaction, please refer to the new issuance report.
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
No third-party due diligence was provided or reviewed in relation to this rating action. 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
The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). 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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