Fitch Ratings has issued a presale report on the Credit Suisse Commercial Mortgage Securities Corp. Commercial Mortgage Pass Through Certificates, Series 2016-NXSR.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$22,779,000 class A-1 'AAAsf'; Outlook Stable;
--$85,980,000 class A-2 'AAAsf'; Outlook Stable;
--$115,000,000 class A-3 'AAAsf'; Outlook Stable;
--$174,907,000 class A-4 'AAAsf'; Outlook Stable;
--$26,116,000 class A-SB 'AAAsf'; Outlook Stable;
--$455,124,000(b) class X-A 'AAAsf'; Outlook Stable;
--$30,324,000 class A-S 'AAAsf'; Outlook Stable;
--$455,124,000(c) class V1-A 'AAAsf'; Outlook Stable;
--$40,961,000 class B 'AA-sf'; Outlook Stable;
--$40,961,000(b) class X-B 'AA-sf'; Outlook Stable;
--$40,961,000(c) class V-1B 'AA-sf'; Outlook Stable;
--$31,100,000 class C 'A-sf'; Outlook Stable;
--$31,100,000(c) class V-1C 'A-sf'; Outlook Stable;
--$31,100,000(a) class D 'BBB-sf'; Outlook Stable;
--$31,100,000(a)(c) class V1-D 'BBB-sf'; Outlook Stable;
--$18,963,000(a)(b) class X-E 'BB-sf'; Outlook Stable;
--$6,827,000(a)(b) class X-F 'B-sf'; Outlook Stable;
--$18,963,000(a) class E 'BB-sf'; Outlook Stable;
--$6,827,000(a) class F 'B-sf'; Outlook Stable;
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Exchangeable certificates
These expected ratings are based on information provided by the issuer as of Dec. 6, 2016.
Fitch does not expect to rate the $22,757,039(a) class NR, $22,757,039(a)(b) class X-NR, $48,547,039(a)(c) class V-1E, and $606,832,040(a)(c) class V-2 certificates.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 33 loans secured by 54 commercial properties having an aggregate principal balance of approximately $606.8 million as of the cut-off date. The loans were contributed to the trust by Column Financial, Inc., Natixis Real Estate Capital LLC, and UBS AG, New York Branch.
Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 76.7% of the properties by balance, cash flow analysis of 86.6%, and asset summary reviews on 86.6% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has similar leverage to other recent Fitch-rated transactions. The Fitch LTV for the trust of 106.8% is slightly higher than the YTD 2016 average of 105.3%. The Fitch DSCR for the trust of 1.23x is slightly higher than the YTD 2016 average of 1.20x. However, the Fitch leverage is lower when compared to the YTD 2016 average Fitch DSCR and LTV for Fitch-rated deals excluding credit-opinion loans at 1.12x and 111.2%. The current transaction does not include any credit-opinion loans.
Highly Concentrated Pool: The pool size is relatively smaller by balance and loan count at $606.8 million and 33, respectively. The top 10 loans comprise 66.2% of the pool, which is greater than the recent averages of 54.9% for YTD 2016 and 49.3% for 2015. Additionally, the loan concentration index (LCI) and sponsor concentration index (SCI) are 561 and 709, respectively, greater than the respective YTD 2016 averages of 423 and 495.
Limited Amortization: Based on the scheduled balance at maturity, the pool will pay down by only 9.3%, which is below the YTD 2016 average of 10.5%. Nine loans, representing 47.7% of the pool, are full-term interest-only (including four loans comprising 21.9% of the pool which have an anticipated repayment date [ARD] structure following the interest-only term), and eight loans, representing 10.8% of the pool, are partial interest only.
For this transaction, Fitch's net cash flow (NCF) was 8.6% 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 CSMC 2016-NXSR certificates and found that the transaction displays average sensitivity 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 'Asf' 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 'BBB+sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 33 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the 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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 01 Jul 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria
(pub. 01 Dec 2016)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
CSMC 2016-NXSR -- Appendix
Dodd-Frank Rating Information Disclosure Form
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