Fitch Ratings has downgraded four and affirmed 11 classes of
Fitch has also maintained the Negative Outlooks on three classes and revised the Outlooks on five classes to Negative from Stable.
Rating ActionsENTITY/DEBT RATING PRIOR
SGCMS 2016-C5
A-1 78419CAA2
LT AAAsf Affirmed AAAsf
A-2 78419CAB0
LT AAAsf Affirmed AAAsf
A-3 78419CAC8
LT AAAsf Affirmed AAAsf
A-4 78419CAD6
LT AAAsf Affirmed AAAsf
A-M 78419CAF1
LT AAAsf Affirmed AAAsf
A-SB 78419CAE4
LT AAAsf Affirmed AAAsf
B 78419CAK0
LT AA-sf Affirmed AA-sf
C 78419CAL8
LT A-sf Affirmed A-sf
D 78419CAV6
LT BBB-sf Affirmed BBB-sf
E 78419CAX2
LT B-sf Downgrade BB-sf
F 78419CAZ7
LT CCCsf Downgrade B-sf
X-A 78419CAG9
LT AAAsf Affirmed AAAsf
X-B 78419CAH7
LT AA-sf Affirmed AA-sf
X-E 78419CAP9
LT B-sf Downgrade BB-sf
X-F 78419CAR5
LT CCCsf Downgrade B-sf
View additional rating details
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and Negative Outlooks reflect increased loss expectations and performance deterioration on a greater number of Fitch Loans of Concerns (FLOCs) that have been impacted by the slowdown in economic activity amid the coronavirus pandemic. Twenty-seven loans (56.4% of pool), including two loans in the top 15 secured by regional malls (8.6%) and 11 loans in special servicing (21.9%), were designated as FLOCs. Fitch's current ratings incorporate a base case loss of 7.10%. The Negative Outlooks reflect losses, which could reach 9.30%, if additional coronavirus specific stresses materialize.
Fitch Loans of Concern: The largest contributor in loss expectation and largest increase since Fitch's prior review, the
Per the
The collateral anchors are
The second largest contributor to Fitch's loss expectation,
Occupancy was 30% as of the TTM ended
The largest loan in the pool,
Per the
The loan is sponsored by
The largest hotel loan,
Occupancy and servicer-reported NOI DSCR for this amortizing loan were 36% and 0.32x as of YTD
Exposure to Coronavirus Pandemic: Twelve loans (20.2%) are secured by hotel properties. The weighted average NOI DSCR for the hotel loans is 1.85x. These hotel loans could sustain a weighted average decline in NOI of 46% before DSCR falls below 1.00x. Twelve loans (31.8%) are secured by retail properties. The weighted average NOI DSCR for the retail loans is 1.96x. These retail loans could sustain a weighted average decline in NOI of 49% before DSCR falls below 1.00x. Additional coronavirus specific stresses were applied to all 12 hotel loans (20.2%), seven retail loans (14.7%), one multifamily loan (3.4%) and one office loan (0.2%). These additional stresses contributed to the Negative Outlooks on classes A-M, B, C, D, E, X-A, X-B and X-E.
Minimal Change to Credit Enhancement: There has been minimal change to credit enhancement (CE) since issuance. As of the
Pool Concentration: The top 10 loans comprise 44.5% of the pool. Loan maturities are concentrated in 2026 (66.1%). Six loans (12.7%) mature in 2021 and 10 loans (21.2%) in 2025. Based on property type, the largest concentrations are retail at 31.8%, office at 31.4% and hotel at 20.2%.
RATING SENSITIVITIES
The Negative Outlooks on classes A-M, B, C, D, E, X-A, X-B and X-E reflects the potential for downgrades due to concerns on the FLOCs and concerns surrounding the ultimate impact of the coronavirus pandemic with additional loan transfers to special servicing and potentially higher than expected losses. The Stable Outlooks on classes A-1, A-2, A-3, A-4 and A-SB reflect overall stable performance for the majority of the pool, and the expectation of continued paydown from scheduled amortization.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Sensitivity factors that lead to Upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. The Negative Outlooks on classes A-M and X-A, could be revised if non-delinquent loans maturing in 2021 (11%) pay in full, including
Upgrades of classes C and D are not likely until the later years in the transaction and only if the performance of the remaining pool is stable and/or properties vulnerable to coronavirus return to pre-pandemic levels and there is sufficient CE to the classes. Classes E, F, X-E and X-F are unlikely to be upgraded absent significant performance improvement on the FLOCs, primarily the regional malls and loans expected to be impacted by the coronavirus pandemic in the near term but could occur if performance of the FLOCs improves significantly and/or if there is sufficient CE. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Sensitivity factors that may lead to downgrades include an increase in pool level expected losses from underperforming or specially serviced loans. Downgrades of classes A-1 through A-SB are not likely due to the expected receipt of continued amortization. A downgrade of classes A-M, B, C, D and X-A, X-B could occur should loss expectations increase and if performance and valuations of the FLOCs or loans vulnerable to the coronavirus pandemic fail to stabilize or additional loans default and/or transfer to the special servicer. Classes E, F, X-E and X-F would be downgraded further if performance of FLOCs declines and/or losses are realized.
In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects further negative rating actions, including additional downgrades and/or Negative Outlook revisions.
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
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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