Rating Action: Moody's downgrades one and affirms four CMBS classes of CSMC 2014-USA
Global Credit Research - 25 Aug 2020
Approximately $888 million of structured securities affected
New York, August 25, 2020 -- Moody's Investors Service, ("Moody's") downgraded the rating of one class and affirmed the ratings of four classes of CSMC Trust 2014-USA, Commercial Mortgage Pass-Through Certificates, Series 2014-USA as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Aug 22, 2019 Affirmed Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Aug 22, 2019 Affirmed Aaa (sf)
Cl. B, Affirmed Aa1 (sf); previously on Aug 22, 2019 Affirmed Aa1 (sf)
Cl. C, Downgraded to A3 (sf); previously on Aug 22, 2019 Affirmed A1 (sf)
Cl. X-1*, Affirmed Aaa (sf); previously on Aug 22, 2019 Affirmed Aaa (sf)
* Reflects interest-only classes
The ratings on the three most senior principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, are within acceptable ranges. The rating on Cl. C was downgraded due to an increase in Moody's LTV as a result of protracted store closures in the 2'nd quarter of 2020, higher costs and negative pressures in the retail sector. As consumers continue to focus on social distancing by reducing their store visits and time spent shopping indoors in relation to the coronavirus outbreak, we expect the mall's performance for the rest of the year and 2021 to be negatively impacted. Moody's does not rate Cl. D, Cl. E and Cl. F.
The rating on the interest only (IO) class Cl. X-1 was affirmed based on the credit quality of the referenced classes.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant amount of principal paydowns, an increase in defeasance or an improvement in loan performance.
Factors that could lead to a downgrade of the ratings include a decline in the performance of the loan or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except interest-only class was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875. The methodologies used in rating interest-only class were "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
As of the August 17, 2020 payment date, the transaction's certificate balance was $1.39 billion compared to $1.4 billion at securitization. The certificates are collateralized by a single fixed rate loan backed by a first lien mortgage related to the Mall of America located in the Minneapolis/St. Paul trade area. The 11-year loan that matures in September 2025 was interest only for the initial 66-month period and started to amortize in April 2020. The Mall of America loan is secured by the Borrower's fee simple and leasehold interests in approximately 2.64 million square feet (SF) contained within a 2.82 million SF, four-level super-regional mall. The property's collection of over 300 inline tenants and anchors such as Nordstrom and Macy's, together with the 302,969 SF Nickelodeon Universe theme park and the 14-screen Theaters at Mall of America. The collateral for the loan includes the pad sites ground leased to Sears, however, Sears closed its store at this location in late 2018 as part of its bankruptcy announcement. Best Buy and American Girl (22,409 SF) vacated their locations in 2019 and Forever 21 downsized from 82,408 SF to 32,983 SF. The sponsor, Triple Five Investment, Ltd., has historically demonstrated a track record of creating additional value by creating and re-developing non-functional space into income-producing net rentable area. As of December 2019, the total mall occupancy was 93%. The property's net cash flow (NCF) in 2019 was $88.9 million compared to $88.5 million at securitization. Moody's loan to value (LTV) for the first mortgage ratio is 119%, compared to 104% at last review and reflects a decrease in Moody's stabilized NCF and an increase in Moody's cap rate. Moody's trust stressed debt service coverage ratio (DSCR) is 0.66X compared to 0.73X at the last review. The loan status is 90+ days delinquent and there is outstanding advances totaling approximately $28.1 million. There is interest shortfalls totaling $803,823 affecting Cl. F and there are no losses outstanding as of the August 2020 payment date.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
EunJee EJ Park VP - Senior Credit Officer Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Romina Padhi VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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