Morningstar DBRS Downgrades One Class of JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16
CMBSDBRS, Inc. (Morningstar DBRS) downgraded the credit rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2013-C16 issued by JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16 as follows:
-- Class D to CCC (sf) from B (low) (sf)
In addition, Morningstar DBRS confirmed the following credit ratings:
-- Class E at CCC (sf)
-- Class F at C (sf)
-- Class X-C at C (sf)
There are no trends as all classes are assigned credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.
The downgrade reflects ongoing interest shortfalls that exceed Morningstar DBRS' tolerance for untimely interest to rated bonds. Classes D, E, and F have been shorted interest payments since February 2024. As of the August 2024 remittance, the trust has accumulated approximately $3.5 million in interest shortfalls. Morningstar DBRS' tolerance for interest unpaid to rated bonds is limited to six remittance periods for the BB and B rating categories. The credit rating downgrade of Class D is a result of continued interest shortfalls, stemming from a lack of resolution on the last four loans remaining in the pool, all of which are in default. Morningstar DBRS previously downgraded Classes E, F, and X-C to reflect liquidated loss expectations upon resolution, as well as the expectation that interest shortfalls would continue to build as the pool became more concentrated in defaulted loans.
The four outstanding loans are backed by office properties located in four distinct markets. Given the concentration of defaulted loans, Morningstar DBRS considered a liquidation scenario for all four remaining loans. The liquidation scenarios were based on stresses ranging from 10% to 15% applied to the most recent appraised values and considered multiple factors, including the property type, age, submarket conditions, historical performance, and upcoming rollover, in determining an expected loss severity. While Morningstar DBRS expects the senior outstanding classes will likely be recovered, the workout and disposition timelines are uncertain and, as noted above, Morningstar DBRS' ratings are constrained by the expectation that the servicer will continue to short interest through the final resolution for the remaining loans.
Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.
Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the -Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.
Class X-C is interest-only (IO) certificate 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.
Other methodologies referenced in this transaction are listed at the end of this press release.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/428797
Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205
For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
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