Fitch to Rate Morgan Stanley Bank of America Merrill Lynch Trust Series 2016-C30; Presale Issued
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$34,300,000 class A-1 'AAAsf'; Outlook Stable;
--$4,400,000 class A-2 'AAAsf'; Outlook Stable;
--$47,200,000 class A-SB 'AAAsf'; Outlook Stable;
--$13,000,000 class A-3 'AAAsf'; Outlook Stable;
--$230,000,000 class A-4 'AAAsf'; Outlook Stable;
--$293,517,000 class A-5 'AAAsf'; Outlook Stable;
--$622,417,000b class X-A 'AAAsf'; Outlook Stable;
--$163,385,000b class X-B 'A-sf'; Outlook Stable;
--$80,026,000 class A-S 'AAAsf'; Outlook Stable;
--$42,235,000 class B 'AA-sf'; Outlook Stable;
--$41,124,000 class C 'A-sf'; Outlook Stable;
--$38,901,000ab class X-D 'BBB-sf'; Outlook Stable;
--$24,452,000ab class X-E 'BB-sf'; Outlook Stable;
--$38,901,000a class D 'BBB-sf'; Outlook Stable;
--$24,452,000a class E 'BB-sf'; Outlook Stable;
The following classes are not expected to be rated:
--$10,004,000a class F 'NR';
--$30,009,448a class G 'NR';
--$10,004,000ab class X-F 'NR';
--$30,009,448ab class X-G 'NR'.
A - Privately placed pursuant to Rule 144A.
B - Notional amount and interest-only.
The expected ratings are based on information provided by the issuer as of Sept. 14, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 49 loans secured by 59 commercial properties having an aggregate principal balance of $889,168,449 as of the cut-off date. The loans were contributed to the trust by Morgan Stanley Mortgage Capital Holdings LLC, Bank of America, National Association, Starwood Mortgage Funding III LLC and CIBC Inc.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 78.8% of the properties by balance and asset summary reviews, and cash flow analysis of 85.5% of the pool.
KEY RATING DRIVERS
Investment-Grade Credit Opinion Loans: Four loans representing 21.65% of the pool are credit opinion loans. Vertex Pharmaceuticals (8.72%) has an investment-grade credit opinion of 'BBB-sf*' on a stand-alone basis. Easton Town Center (8.43%) has an investment-grade credit opinion of 'A+sf*' on a stand-alone basis. The Shops at Crystals (2.25%) has an investment-grade credit opinion of 'BBB+sf*' on a stand-alone basis. International Square (2.25%) has an investment-grade credit opinion of 'AA-sf*' on a stand-alone basis.
Above-Average Fitch Leverage: The transaction overall has lower leverage than other recent Fitch-rated transactions. The pool's weighted average (WA) Fitch debt service coverage ratio (DSCR) of 1.29x is greater than both the YTD 2016 average of 1.18x and the 2015 average of 1.18x. The pool's WA Fitch loan-to-value (LTV) of 97.8% is better than both the YTD 2016 average of 106.5% and the 2015 average of 109.3%. Excluding the credit opinion loans, the Fitch DSCR falls to 1.23x and the Fitch LTV increases to 108.5%.
Sponsor Concentration: The sponsor concentration for the pool is 703, significantly higher than the recent averages of 428 and 367 for YTD 2016 and 2015, respectively. The largest sponsor within this transaction is Simon Property Group, LP ('A/F1'/Stable Outlook), with four loans representing 19.7% of the pool.
Higher Pool Concentration: The top 10 loans make up 56.5% of the pool, which is higher than the recent averages of 55.3% and 49.3% for YTD 2016 and 2015, respectively. Additionally, the loan concentration index (LCI) index is 433, more than the YTD 2016 average of 428 and the 2015 average of 367.
For this transaction, Fitch's net cash flow (NCF) was 11.9% below the most recent year's net operating income (NOI); for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period.
Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to MSBAM 2016-C30 certificates and found that the transaction displays average sensitivities to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBBsf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10.
DUE DILIGENCE USAGE
Fitch was provided with due diligence information from Deloitte & Touche LLP. The due diligence focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.