CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings for Commercial Mortgage Loan Trust 2001-2.
KEY RATING DRIVERS
While CE has continued to increase, the current characteristics of the transaction are not consistent with high investment grade ratings. As such, the class A and B notes were affirmed at 'Asf' and 'BBBsf', respectively. Both classes have Stable Outlooks as CE is expected to continue to provide adequate protection to the notes.
In reviewing the transactions, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', issued July 6, 2015, including asset quality, CE, financial structure, legal structure, and originator and servicer quality.
Fitch's analysis incorporated a review of collateral characteristics, in particular, focusing on delinquent and defaulted loans within the pool. All loans over 60 days delinquent were deemed defaulted loans. As of the July 2015 payment date, there were no delinquent accounts beyond 30 days. As such, Fitch utilized the 12-month peak delinquency average as the base case cumulative gross default proxy. The defaulted loans were applied loss and recovery expectations based on collateral type and historical recovery performance to establish an expected net loss assumption for the transaction. Fitch stressed the cashflow generated by the underlying assets by applying its expected net loss assumption. Furthermore, Fitch applied a loss multiplier to evaluate break-even cash flow runs to determine the level of expected cumulative losses the structure can withstand at a given rating level. The loss multiplier scale utilized is consistent with Fitch's 'Criteria for Rating U.S. Equipment Lease and Loan ABS', dated Dec 23, 2014.
Additionally, Fitch's analysis focused on concentration risks within the pool, by evaluating the impact of the default of the largest performing obligors. The obligor concentration analysis is consistent with the previously mentioned equipment criteria. The analysis compares expected loss coverage relative to the default of a certain number of the largest obligors. The required net obligor coverage varies by rating category. The required number of obligors covered ranges from 20 at 'AAA' to five at 'B'. Fitch applied loss and recovery expectations based on collateral type and historical recovery performance to the largest performing obligors commensurate with the individual rating category. The expected loss assumption was then compared to the modeled loss coverage available to the outstanding notes given Fitch's expected losses on the currently delinquent loans. Fitch also applied the 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' dated May 28, 2014 in determining the ratings.
While the stresses loss approach was the primary driver, its results were compared to the obligor concentration approach and qualitative factors such the results of these approaches compared to prior reviews, recent performance, and available CE. The rating actions taken were ultimately the result of a combination of these factors. Fitch will continue to closely monitor these transactions and may take additional rating action in the event of changes in performance and CE measures.
Loss severity greater than assumed for the pool and increases in delinquencies may result in downgrades of the notes. Additionally, while current obligor concentrations remain limited, they may pose risks as the transaction amortizes. However, if CE continues growing for the classes and loss severity is similar to Fitch's assumptions, the classes will likely have Stable ratings over the near term.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
--Class A at 'Asf'; Outlook Stable;
--Class B at 'BBBsf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Dodd-Frank Rating Information Disclosure Form