Fitch Ratings has issued a presale report on Morgan Stanley Bank of America Merrill Lynch Trust 2016-C32 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$36,900,000 class A-1 'AAAsf'; Outlook Stable;
--$6,800,000 class A-2 'AAAsf'; Outlook Stable;
--$58,600,000 class A-SB 'AAAsf'; Outlook Stable;
--$190,000,000 class A-3 'AAAsf'; Outlook Stable;
--$342,567,000 class A-4 'AAAsf'; Outlook Stable;
--$634,867,000a class X-A 'AAAsf'; Outlook Stable;
--$109,968,000a class X-B 'AA-sf'; Outlook Stable;
--$65,754,000 class A-S 'AAAsf'; Outlook Stable;
--$44,214,000 class B 'AA-sf'; Outlook Stable;
--$43,080,000 class C 'A-sf'; Outlook Stable;
--$48,749,000ab class X-D 'BBB-sf'; Outlook Stable;
--$48,749,000b class D 'BBB-sf'; Outlook Stable;
--$23,807,000b class E 'BB-sf'; Outlook Stable;
--$10,203,000b class F 'B-sf'; Outlook Stable.
The following class is not expected to be rated:
--$36,278,869b class G.
a) Notional amount and interest only.
b) Privately placed pursuant to Rule 144A.
The expected ratings are based on information provided by the issuer as of Nov. 28, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 56 loans secured by 76 commercial properties having an aggregate principal balance of $906,952,869 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, KeyBank National Association, and CIBC Inc.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 79.1% of the properties by balance, asset summary reviews on 100.0% of the pool, and cash flow analysis of 86.8% of the pool.
KEY RATING DRIVERS
Average Fitch Leverage: The pool's leverage statistics are in line with other recent Fitch-rated, fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) and Fitch loan to value (LTV) of 1.21x and 103.1%, respectively, are in line with the year-to-date (YTD) 2016 average Fitch DSCR and Fitch LTV of 1.20x and 105.6%, respectively.
Investment-Grade Credit Opinion Loan: Two loans, representing 12.7% of the pool have investment-grade credit opinions. Hilton Hawaiian Village (6.9%), the largest loan in the pool, has an investment-grade credit opinion of 'BBB-sf'* on a stand-alone basis. Potomac Mills (5.7%) has an investment-grade credit opinion of 'BBBsf'* on a stand-alone basis. The two investment-grade credit opinion loans have a weighted average Fitch DSCR and Fitch LTV of 1.55x and 62.1%, respectively.
Above-Average Property Quality: Eight loans, representing 36.1% of the pool and 45.6% of Fitch's sample, were backed by properties receiving Fitch property quality grades of 'B+' or higher. Additionally, five loans, representing 23.3% of the pool and 29.5% of Fitch's sample, were backed by properties receiving Fitch property quality grades of 'A-' including three in the top 10 (Hilton Hawaiian Village, 191 Peachtree, and FedEx Ground Portfolio).
For this transaction, Fitch's net cash flow (NCF) was 11.7% below he 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-C32 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 occur. 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 occur. The presale report includes a detailed explanation of additional stresses and sensitivities on page 11.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Ernst & Young LLP. The third-party due diligence described in Form 15E 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 it did not have an impact on Fitch's analysis or conclusions.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage
Transactions (pub. 18 Aug 2016)
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)
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Multiborrower CMBS Surveillance Criteria (pub. 11 Nov
Morgan Stanley Bank of America Merrill Lynch Trust 2016-C32 -- Appendix
Dodd-Frank Rating Information Disclosure Form
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