Fitch Ratings has upgraded one and affirmed four classes of
Fitch has also assigned a Stable Outlook to the one class that was upgraded.
RATING ACTIONS
Entity / Debt
Rating
Prior
D 46635GAQ3
LT
Bsf
Upgrade
CCCsf
E 46635GAS9
LT
CCsf
Affirmed
CCsf
F 46635GAU4
LT
CCsf
Affirmed
CCsf
G 46635GAW0
LT
Csf
Affirmed
Csf
H 46635GAY6
LT
Csf
Affirmed
Csf
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Regional Mall Concentration: Two loans remain in the pool, both secured by regional malls in special servicing. 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, the upgrade for class D was capped at 'Bsf' due to its reliance on proceeds from underperforming regional malls in special servicing 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 59%; 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 defaulted mall properties.
A non-collateral Sears closed in
Fitch's loss expectation on this loan is approximately 79%; 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.
Lower Loss Expectations: The upgrade to class D reflects the improved loss expectations for the pool since Fitch's prior rating action due to better than expected recoveries on Arizona Mills and
Increased Credit Enhancement: Credit enhancement has increased since Fitch's prior rating action, primarily from the repayment of two loans (
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Sensitivity factors that could lead to a downgrade to class D include increased loss expectations from continued performance declines and/or lower valuations on the remaining two loans;
Downgrades to the distressed rated classes E through H will occur as losses are realized or with greater certainty of losses.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade to class D is not expected as the rating is capped due to the specially serviced, regional mall concentration;
Upgrades to the distressed rated classes E through H are not likely unless 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
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Global Structured Finance Rating Criteria (pub.
Structured Finance and Covered Bonds Counterparty Rating Criteria (pub.
ADDITIONAL DISCLOSURES
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy
ENDORSEMENT STATUS
J.P. Morgan Chase Commercial Mortgage Securities Trust 2010-C2 EU Endorsed,UK Endorsed
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