DBRS Morningstar Assigns Ratings to Two Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21, Places Ratings Under Review with Developing Implications

DBRS, Inc. (DBRS Morningstar) assigned ratings to the non-pooled rake bonds of Commercial Mortgage Pass-Through Certificates, Series 2015-C21 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21, which are backed by the $30.0 million subordinate B-note of the Class 555 certificates, as follows:

-- Class 555A at A (sf)
-- Class 555B at BBB (sf)

The non-pooled ratings were subsequently placed Under Review with Developing Implications, as the ratings of these certificates are determined based on the credit characteristics of the whole-loan balance. The Under Review with Developing Implications rating actions were taken because of a request for comment on DBRS Morningstar’s “North American Single-Asset/Single-Borrower Ratings Methodology” on November 14, 2019. The non-pooled ratings carry no trends.

These non-pooled certificates are currently also rated by DBRS Morningstar’s affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about December 23, 2019. In accordance with MCR’s engagement letter covering these certificates, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at www.morningstarcreditratings.com.

Additionally, DBRS Morningstar confirmed the ratings on the following classes:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class PST at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)

All pooled classes have Stable trends.

The ratings were determined using DBRS Morningstar’s “North American CMBS Multi-borrower Rating Methodology,” “North American CMBS Surveillance Methodology,” and North American CMBS Insight Model. As part of the integration of the analytical teams for DBRS, Inc. and MCR, DBRS Morningstar announced its determination that the aforementioned methodologies and model would be used to assign ratings to the outstanding multi-borrower transactions rated by MCR. For further information on that announcement, please see the press release dated September 12, 2019, on the DBRS Morningstar website at www.dbrs.com.

At issuance, the collateral consisted of 64 fixed-rate loans secured by 99 commercial and multifamily properties. As of the November 2019 remittance, the pool had 63 of the original 64 loans remaining in the pool, with a collateral reduction from issuance of 4.5%. No loans have taken a loss since issuance. As of the November 2019 remittance, there were 12 loans on the servicer’s watchlist, representing 13.9% of the pool, and one loan in special servicing, representing 5.7% of the pool. Based on the most recent year-end financials, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) of 1.96 times (x) compared with the DBRS Morningstar Term DSCR at issuance of 1.80x. At issuance, the pool had a WA loan-to-value (LTV) of 61.9% compared with the WA LTV for the pool of 61.8% as of the November 2019 remittance.

DBRS Morningstar analyzed the conduit pool to determine the ratings, reflecting the long-term probability of default (POD) within the term and its liquidity at maturity. As part of this process, DBRS Morningstar reviewed the performance for the underlying loans, with a focus on the largest 15 loans in the transaction and any loans in special servicing or on the servicer’s watchlist. In general, the issuer’s underwritten net cash flow figure was analyzed, stressed by the average haircut by vintage for transactions previously rated by DBRS Morningstar. In general, qualitative adjustments for property quality and/or sponsor strength were not applied. Market ranks were generally assigned by zip code(s). For those loans with a higher-risk profile, based on either the issuance metrics or the performance history since issuance, an increase to the loan’s POD was made. As the one loan in special servicing was transferred due to a sponsor-related issue, the loan was analyzed with an elevated POD given the increased risk profile of the loan, with consideration given to the most recent appraised value, the most recent financial reporting, and the special servicer’s workout strategy. For loans exhibiting investment-grade characteristics, a POD and/or loss given default adjustment may have been made in certain instances.

DBRS Morningstar will provide detailed loan-level commentary for pivotal loans within the transaction on the DBRS Viewpoint platform within the near term.

DBRS Morningstar notes that a legal analysis, which included but was not limited to legal opinions and various transaction documents, was performed by MCR as part of its normal course of assigning new ratings to the transaction on or prior to the closing date. Additionally, DBRS Morningstar notes that the transaction contains and benefits from representations and warranties (R&W) surrounding the origination of the mortgage loans; however, DBRS Morningstar did not separately review the R&W or any of the mortgage exceptions. Lastly, DBRS Morningstar also notes that the transaction is part of a programmatic issuance.

Classes X-A, X-B, X-E, and X-FG are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are the North American CMBS Multi-borrower Rating Methodology and North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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