New York, August 07, 2020 — Moody’s Investors Service, (“Moody’s”) downgraded the ratings on three classes from two transactions of small business loans issued by Bayview Commercial Asset Trust and Bayview Commercial Mortgage Pass-Through Trust, reflecting performance of the transactions. The loans are secured primarily by small commercial real estate properties in the U.S. owned by small businesses and investors.
Cl. B-2, Downgraded to Caa3 (sf); previously on Jan 14, 2016 Downgraded to Caa1 (sf)
Cl. M-1, Downgraded to Caa3 (sf); previously on Feb 1, 2017 Downgraded to Caa2 (sf)
Cl. M-2, Downgraded to C (sf); previously on Feb 1, 2017 Downgraded to Ca (sf)
Today’s downgrade actions are prompted by the continued realized losses on the underlying pools that have led to significant write downs on the bottom most tranches.
The recent write downs have decreased the subordination available to the 2006-SP1, Cl B-2 and the 2008-3, Cl M-1 to 4.6{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and 7.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, respectively, and overcollateralization has been depleted. Further, in July approximately 25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the pool balance for both transactions is severely delinquent, in foreclosure, or in REO status. In the current environment, the risk of further performance deterioration is heightened, affecting the recovery on these bonds.
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 small businesses 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.
The principal methodology used in these ratings was “Moody’s Global Approach to Rating SME Balance Sheet Securitizations” published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1225856. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Levels of credit protection that are higher than necessary to protect investors against expected losses could drive the ratings up. Moody’s expectation of pool losses could decline as a result of a decrease in seriously delinquent loans or lower severities than expected on liquidated loans. As a primary driver of performance, positive changes in the US macro economy could also affect the ratings, as can changes in servicing practices.
Levels of credit protection that are insufficient to protect investors against expected losses could drive the ratings down. Moody’s expectation of pool losses could increase as a result of an increase in seriously delinquent loans and higher severities than expected on liquidated loans. As a primary driver of performance, negative changes in the US macro economy could also affect the ratings. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance, and fraud.
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 quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.
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.
Chaitali Bharucha Analyst 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 Inga Smolyar 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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