Fitch Ratings has affirmed 13 classes of
The Negative Rating Outlook is maintained on class F.
RATING ACTIONS
Entity / Debt
Rating
Prior
A-3 61766CAD1
LT
AAAsf
Affirmed
AAAsf
A-4 61766CAE9
LT
AAAsf
Affirmed
AAAsf
A-S 61766CAG4
LT
AAAsf
Affirmed
AAAsf
A-SB 61766CAF6
LT
AAAsf
Affirmed
AAAsf
B 61766CAK5
LT
AA-sf
Affirmed
AA-sf
C 61766CAL3
LT
A-sf
Affirmed
A-sf
D 61766CAV1
LT
BBB-sf
Affirmed
BBB-sf
E 61766CAX7
LT
BB-sf
Affirmed
BB-sf
F 61766CAZ2
LT
B-sf
Affirmed
B-sf
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased Loss Expectations: Fitch's expected losses have increased since the prior rating action driven by continued declining performance of the outlet malls in the pool. The pool has exposure to three outlet malls which in total represent 12.4% of the pool. While imminent losses are not expected as there are no specially serviced loans, the Negative Outlook reflects the potential for downgrade should occupancy and cashflow of outlet malls and underperforming office properties in the top 15 deteriorate further, elevating the risk for term default.
Fitch's ratings reflect a base case loss of 5.2% Fitch has identified seven loans (27.7%) as Fitch loans of concern (FLOCs), including five (25.0%) loans among the top 15 loans. No loans are in special servicing.
Fitch Loans of Concern - Outlet Malls: The pool has exposure to three Simon-owned outlet malls (
Approximately 37% of leases expire by the end of 2023. A substantial portion of tenants with prior lease expirations did not renew and the tenants that have remained extended for abbreviated lease terms and reduced rates. Fitch's base case loss of 37% reflects a 15% cap rate and a 5% stress to YE 2021 NOI to reflect downward-trending occupancy and cash flow.
Fitch's base case loss of 7% reflects a cap rate of 10% applying a 15% stress to the YE 2021 NOI to reflect near-term lease rollover concerns and declining occupancy.
Fitch's base case loss of 16% reflects a 15% cap rate and 10% stress to the YE 2021 NOI to address near-term rollover concerns and declining occupancy.
Office Loans of Concern: Two office properties identified as FLOC include 2100 Ross (9.7% of pool balance) and the
Change in Credit Enhancement: As of the
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Downgrades would occur with an increase in pool level losses from underperforming or specially serviced loans. Downgrades of the 'AA-sf' and 'AAAsf' categories are not considered likely due to the position in the capital structure and the relatively stable performance of the pool, but may occur should interest shortfalls affect these classes. Downgrades of the 'A-sf' and 'BBB-sf' categories could occur if expected losses increase significantly or the performance of the FLOCs continue to decline further and/or fail to stabilize. Downgrades to the 'B-sf' and 'BB-sf' categories would occur should overall pool performance decline and/or loans of concern, in particular outlet malls and underperforming office loans, continue to deteriorate.
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 would occur with stable to improved asset performance coupled with paydown and/or defeasance. Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur with significant improvement in credit enhancement (CE) and/or defeasance; however, adverse selection, increased concentrations and further underperformance of the FLOCs and/or loans considered to be negatively impacted by the coronavirus pandemic could cause this trend to reverse.
An upgrade to the 'BBB-sf' category is considered unlikely and would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. Upgrades to the 'B-sf' and 'BB-sf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and there is sufficient CE to the classes.
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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