Articles from Kroll Bond Rating Agency, LLC

KBRA assigns preliminary ratings to six classes of mortgage pass-through notes from Verus Securitization Trust 2025-2 (VERUS 2025-2), a $638.4 million non-prime RMBS transaction. The underlying collateral, comprised of 1,280 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. Borrowers in the subject pool possess a non-zero WA original credit score of 741 and exhibit moderate equity in each mortgaged property, with an original combined LTV (CLTV) ratio of 69.2%. Most of the loans are classified as exempt (40.1%) from the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule due to being originated for non-consumer loan purposes. The remaining loans are classified as Non-QM (28.5%), QM: Safe Harbor (APOR) (27.1%), or QM: Rebuttable Presumption (APOR) (4.2%).

KBRA is pleased to announce the assignment of preliminary ratings to 34 classes of MSBAM 2025-5C1, a $934.6 million CMBS conduit transaction collateralized by 40 commercial mortgage loans secured by 67 properties.

KBRA announces the assignment of preliminary ratings to five classes of INTOWN 2025-STAY, a CMBS single-borrower securitization.

KBRA assigns preliminary ratings to 60 classes of mortgage pass-through certificates from Sequoia Mortgage Trust 2025-3 (SEMT 2025-3), a $521.8 million prime RMBS transaction. The pool is comprised of 440 first-lien, fully amortizing fixed rate mortgages with 15-years or 30-years maturity terms. The collateral is characterized by a weighted average (WA) original credit score of 777 and moderate borrower equity, with a WA original LTV of 72.0% and WA original CLTV of 72.1%.

KBRA assigns preliminary ratings to three classes of notes issued by FHF Issuer Trust 2025-1 (“FHF 2025-1”), a subprime auto loan asset-backed securities transaction.

KBRA assigns a preliminary rating to one class of notes issued by BHG Securitization Trust 2025-1CON (“BHG 2025-1”), an asset-backed securitization collateralized by a pool of unsecured consumer loans (“Consumer Loans”).

KBRA assigns preliminary ratings to five classes of notes issued by Foundation Finance Trust 2025-1 (“FFIN 2025-1”), an asset-backed securitization collateralized by unsecured consumer loans primarily used for home improvements.

KBRA is pleased to announce the assignment of preliminary ratings to four classes of FREMF Series 2025-K760 mortgage pass-through certificates and three classes of Freddie-Mac structured pass-through certificates (SPCs), Series K-760. FREMF 2025-K760 is an $887.9 million CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2025-K760 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

KBRA assigns preliminary ratings to 63 classes from Connecticut Avenue Securities Trust 2025-R02 (CAS 2025-R02), a credit risk sharing transaction with a total note offering of $710,598,000. The pool is characterized by loans with original loan-to-value (LTV) ratios that are greater than 60% and less than or equal to 80%.

KBRA assigns preliminary ratings to three classes of notes (the Series 2025-1/2 Notes) from Centersquare Issuer LLC and Centersquare Co-Issuer LLC Series 2025-1 and Series 2025-2 (Series 2025-1/2), a colocation data center ABS transaction. The transaction represents the second ABS issuance issued by Centersquare Issuer LLC and Centersquare Co Issuer LLC (the Co-Issuers). KBRA’s rating analysis incorporates all prior debt issuance of the Co-Issuers. KBRA anticipates affirming the ratings of the Series 2024-1/2 Notes with the issuance of the Series 2025-1/2 Notes.

KBRA assigns preliminary ratings to five classes of notes issued by NMEF Funding 2025-A, LLC (NMEF 2025-A), an equipment ABS.

KBRA assigns preliminary ratings to seven classes of mortgage-backed certificates from Angel Oak Mortgage Trust 2025-3 (AOMT 2025-3), a $333.3 million non-prime RMBS transaction. The underlying collateral, comprised of 645 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. All the loans are either classified as non-qualified mortgages (57.7%) or exempt (42.3%) from the Ability-to-Repay/Qualified Mortgage rule due to being originated for non-consumer loan purposes. Angel Oak Mortgage Solutions originated 43.9% of the pool, with no other originator comprised over 10% of the collateral.

KBRA releases a report on U.S. commercial mortgage-backed securities (CMBS) loan performance trends observed in the February 2025 servicer reporting period. The delinquency rate among KBRA-rated U.S. private label CMBS in February decreased 16 basis points (bps) to 6.61% from 6.77% in January. The total delinquent plus current but specially serviced loan rate (collectively, the distress rate) decreased 14 bps to 9.53%. However, the multifamily delinquency rate jumped 118 bps, mainly due to two loans, 180 Water ($265 million in three conduits) and Park West Village ($254 million in six conduits). Additionally, seven other multifamily loans totaling $89.1 million also became delinquent.

KBRA assigns a AAA rating, with a Stable Outlook to the State of Wisconsin's (the State's) General Obligation (G.O.) Bonds of 2025, Series A. Proceeds will be used by the State for various governmental purposes for which public debt may be issued.

KBRA releases a recap of the Fund Finance Association’s (FFA) 14th Annual Global Fund Finance Symposium held at the Fontainebleau in Miami Beach on February 24-27. The event was well attended with over 2,500 registrants, attracting market participants including investors, fund managers, bankers, lawyers, and credit rating agencies.

KBRA assigns preliminary ratings to 7 classes of mortgage pass-through certificates from ADMT 2025-NQM1, a $458.9 million non-prime RMBS transaction. The underlying collateral, comprising 1,290 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. Borrowers in the subject pool possess a non-zero WA original credit score of 745 and exhibit notable equity in each mortgaged property, with a WA combined LTV (CLTV) ratio of 68.9%.

KBRA assigns a long-term rating of AA+ to the City of New York, NY (the "City") General Obligation Bonds Fiscal 2025 Series E, Fiscal 2025 Series F, and Fiscal 2006 Series I, Subseries I-6. Concurrently, KBRA affirms the long-term rating of AA+ rating the City's outstanding General Obligation Bonds. The rating Outlook is Stable.

KBRA publishes the senior unsecured debt rating of BBB- with a Stable Outlook for Millennium Consolidated Holdings, LLC (“the company”). On May 9, 2018, KBRA assigned a senior unsecured debt rating of BBB- and Stable Outlook on an unpublished basis. On May 3, 2024, KBRA affirmed the senior unsecured debt rating of BBB- and Stable Outlook on an unpublished basis. At the same time, KBRA assigns a BBB- rating to the company’s $52.5 million, 8.375% senior unsecured debt issuance that matures on March 1, 2030.

KBRA assigns preliminary ratings to ten classes of mortgage pass-through certificates from CROSS 2025-H2 Mortgage Trust, an RMBS transaction issued under the Hildene-CCC Loan Acquisition, LLC (CROSS) shelf, where Hildene Capital Management (Hildene) in affiliation with CrossCountry Mortgage (CrossCountry or CCM) and CrossCountry Capital (CCC) sponsored the transaction. The $426.8 million transaction is collateralized by a pool of 860 residential mortgages originated by CCM, including a meaningful concentration of collateral that KBRA considers to be “non-prime”, with fixed-rate mortgages (FRMs) and hybrid adjustable-rate mortgages (ARMs) making up 85.7% and 14.3% of the pool, respectively.

KBRA assigns preliminary ratings to 6 classes of Mortgage Participation Pass-Through Certificates from J.P. Morgan Mortgage Trust 2025-HE1 (JPMMT 2025-HE1), a $357.5 million RMBS transaction sponsored by J.P. Morgan Mortgage Acquisition Corp. (J.P. Morgan) and FOCUS III Advisory, LLC (FOCUS) consisting mostly of second lien home equity line of credit (HELOC) loans. The underlying pool is seasoned approximately five months and comprises 4,741 loans, with United Wholesale Mortgage, LLC (UWM; 47.2%) and Better Mortgage Corporation (Better; 27.7%) representing the largest contributing originators. The HELOCs are interest-only (IO) adjustable-rate mortgages (ARMs), with IO terms of mostly ten years (94.7%). Most of the loans feature 20-year (91.1%) Amortization Terms, and HELOC initial draw windows of two (1.2%), three (89.5%), five (5.6%) or ten (3.8%) years. As of the January 31, 2025 cut-off date, the borrowers in the pool have drawn $498.4 million from a combined credit limit of $595.6 million for an aggregate utilization rate of 83.7%. The $357.5 unpaid principal balance represents the participation percentage allocated to JPMMT 2025-HE1 from the $498.4 million total drawn amount as of the cut-off date; participation rate equals 71.7%.

KBRA assigns a long-term rating of AA+ with a Stable Outlook to the State of Illinois (the "State"), Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation Series A, B, and C of March 2025 (the "Bonds"). KBRA additionally affirms the long-term rating of AA+ with a Stable Outlook for the State of Illinois' outstanding parity Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation.

KBRA releases a Day 2 recap of the SFVegas 2025 conference held on February 23-26.

On February 25, 2025, Old Second Bancorp, Inc. (NASDAQOSBC) ("Old Second" or "the company") (KBRA senior unsecured debt rating: BBB / Stable Outlook), the parent company of Old Second National Bank, announced a definitive merger agreement with privately-owned Bancorp Financial, Inc., the parent company of Evergreen Bank Group ("Evergreen"). Under the agreement, Bancorp Financial, Inc. would merge with and into OSBC in a stock-and-cash transaction (75% stock / 25% cash) valued at ~$200 million or 1.3x P/TBV at deal announcement (based on OSBC's closing stock price on February 24, 2025). The acquisition is expected to close in 3Q25, subject to customary regulatory approvals, with minimal changes to the pro forma Board of Directors (BOD) and the management team. However, Evergreen will add two members to the BOD, including Darin Campbell, who will lead OSBC’s Consumer Lending Division, leveraging his extensive experience in Evergreen’s powersports consumer lending vertical. Overall, the transaction aligns well with Old Second's business model, in our view, enhancing asset generation while leveraging its high-quality, low-cost core deposit base. Additionally, it diversifies the franchise by expanding consumer lending, a segment that has demonstrated favorable risk-adjusted returns across various interest rate and credit cycles. The acquisition also strengthens Old Second's market position in the greater Chicago metro area, particularly in the western suburbs. With pro forma assets of $7.1 billion, Old Second would become the second-largest bank in the Chicago MSA among institutions with less than $10 billion in assets.

KBRA upgrades the long-term rating for the State of Alaska General Obligation Bonds to AA+, from AA.

KBRA, a global full-service credit rating agency, is pleased to announce the promotion of Thomas Speller, Global Head of Fund Finance, to Senior Managing Director.

Trimont LLC (Trimont) signed an agreement on August 19, 2024, with Wells Fargo Bank, N. A. (Wells Fargo), to acquire Wells Fargo’s third-party commercial mortgage servicing business (WFCMS), with the transaction expected to close on or about March 1, 2025. The pending transaction will include the transfer of the master, primary, and special servicing duties in commercial mortgage-backed securities (CMBS) conduit and single-asset single borrower (SASB) transactions, commercial real estate collateralized loan obligations (CRE CLO), and master and special servicing duties in Freddie Mac K-series, K-deal, Q-deal, or ML-deal securitizations, as well as the primary servicing of third-party warehouse loans. Trimont’s post-acquisition CMBS portfolio will include over $400 billion of master servicing and/or primary servicing, plus over $70 billion of special servicing.

KBRA releases a Day 1 recap of the SFVegas 2025 conference held on February 23-26.

KBRA is pleased to announce the assignment of preliminary ratings to four classes of FREMF Series 2025-K169 mortgage pass-through certificates and three classes of Freddie-Mac structured pass-through certificates (SPCs), Series K-169. FREMF 2025-K169 is a $1.14 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2025-K169 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

KBRA assigns a long-term rating of AAA to the San Diego Unified School District (San Diego County, California): 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 1998, Series R-8A); 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 1998, Series R-8B); 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2008, Series SR-5A); 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2008, Series SR-5B); 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2012, Series ZR-6A); 2025 General Obligation Refunding Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2012, Series ZR-6B). KBRA additionally affirms the long-term rating of AAA for the District's outstanding General Obligation Bonds. The rating Outlook is Stable.

KBRA releases research examining a recent transition to a back-up manager in a whole business securitization (WBS), the first instance in KBRA-rated WBS. According to the transaction documents, a manager termination event was declared following the breach of certain transaction terms, with the back-up manager having to step in to maintain operational continuity.

KBRA releases a report exploring recurring revenue loan (RRL) asset-backed securities (ABS), which provide access to growth-stage, high-yield businesses, while shielding investors from the potential losses normally associated with growth-stage equity investments. RRL ABS also offer a flexible source of balance sheet financing for originators, typically established middle market collateralized loan obligation (CLO) and fund managers, in place of trading vehicles.

KBRA releases research that examines the way in which consumers have prioritized their financial obligations as the strength of labor markets, the availability of consumer credit, and the level of household asset prices have shifted over time. Of the three major forms of household debt, mortgages have generally ranked at the top of the payment priority hierarchy, followed by auto loans and credit cards.

KBRA assigns a long-term rating of AA- to the Pennsylvania Turnpike Commission Turnpike Revenue Bonds, Series A of 2025 and Turnpike Revenue Refunding Bonds, Second Series of 2025. KBRA additionally affirms the long-term ratings of AA- for the Commission's outstanding Turnpike Revenue Bonds, A+ for the Commission's outstanding Turnpike Subordinate Revenue Bonds, and AA- for the Commission's outstanding Motor License Fund-Enhanced Turnpike Subordinate Special Revenue Bonds. The Outlook for each obligation is Stable.

KBRA releases research analyzing New York City multifamily (MF) issuance and performance across CMBS conduits securitizations.

KBRA provides an update on key RMBS market and performance themes, including issuance volume trends and forecasts for the remainder of the year, as well as collateral performance trends and non-prime risk layering.

KBRA releases research analyzing the exposure of General Services Administration (GSA) leases for the broader CMBS and commercial real estate collateralized loan obligation (CRE CLO) universe and KBRA-rated transactions. The Trump administration has proposed or implemented executive actions focused on headcount reductions and real estate downsizing by various government agencies and the GSA. These actions will have potentially negative, but still uncertain impacts, on CMBS and commercial real estate collateralized loan obligations (CRE CLO) with GSA leases, which represent $28.7 billion of the $350.6 billion of principal balance outstanding as of February 18, 2025.

KBRA releases updated research that examines the resilience of its ratings for subscription facilities, a fund finance product introduced in the 1990s that is estimated to have grown to $850 billion globally. KBRA-rated subscription facilities have also grown at an accelerated pace since we rated our first facility in 2018. KBRA has assigned ratings or provided credit assessments on 181 subscription facilities through year-end 2024, with issuance volume totaling $132 billion and rated/assessed debt exposure totaling $46 billion. Since our last report on subscription facilities in April 2023, both the number and dollar volume of KBRA-rated/assessed facilities have grown more than fourfold.

KBRA assigns preliminary ratings to 59 classes of mortgage-backed notes from GCAT 2025-INV1 Trust. The GCAT 2025-INV1 mortgage loans are secured by first liens on non-owner occupied (NOO) investor properties and second homes. The loans were primarily underwritten to agency guidelines. The pool comprises 1,075, first-lien, fixed rate residential mortgage loans as of the cut-off date. The pool is characterized by moderate borrower equity in each mortgaged property, as evidenced by the WA original LTV of 73.0%. The weighted average original credit score is 772, which is within the prime mortgage range.

KBRA is pleased to announce the assignment of preliminary ratings to 14 classes of BBCMS 2025-5C33, an $892.4 million CMBS conduit transaction collateralized by 44 commercial mortgage loans secured by 111 properties.

The Trump administration has proposed or implemented executive actions focused on headcount reductions and real estate downsizing by various government agencies and the General Services Administration (GSA), which are highlighted further in this release. These actions have potentially negative but still uncertain impacts on property owners with related leasing exposure—including Easterly Government Properties, LP, (Easterly) which primarily owns properties leased to the federal government. Easterly has BBB issuer and senior unsecured note ratings with a Stable Outlook.

KBRA assigns preliminary ratings to seven classes of mortgage-backed notes from OBX 2025-NQM3 Trust, a $577.4 million non-prime RMBS transaction. The underlying collateral, comprising 1,077 residential mortgages, is characterized by a notable concentration of alternative income documentation (89.4%) loans. Most of the loans are classified as non-qualified mortgages (Non-QM) (49.0%) or exempt (44.0%) from the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule due to being originated for non-consumer loan purposes.

KBRA releases its fourth-quarter 2024 U.S. Bank Compendium, providing the latest view of the U.S. banking industry and analysis of 4Q24 results for U.S. banks with KBRA ratings.

KBRA assigns preliminary ratings to the Class A Notes and Class B Notes issued by ALTDE 2025-1 Trust, an aviation ABS transaction (ALTDE 2025-1). ALTDE 2025-1 represents the inaugural issuance serviced by Altavair L.P. and Altavair Limited. Altavair was founded in 2003, and through a joint venture with KKR Credit Advisors (US) LLC in 2018, has a managed portfolio of approximately $4.5 billion across more than 130 aircraft. KKR funds will retain the equity position in ALTDE 2025-1 at closing.

KBRA announces the assignment of preliminary ratings to six classes of BX 2025-ROIC, a CMBS single-borrower securitization. The collateral for the transaction is a $2.78 billion floating rate, interest-only mortgage loan. The loan is expected to have an initial two-year term with three, one-year extension options and require monthly interest-only payments. The loan will be secured by the borrowers’ fee simple and leasehold interests in 93 retail assets located on the West Coast. In total, the portfolio contains 10.5 million sf and the properties are located in three states: California (66.0% of loan balance), Washington (22.3%), and Oregon (11.7%). As of December 2024, the portfolio was 96.5% leased to over 1,400 unique tenants.

KBRA assigns preliminary ratings to 20 classes of mortgage-backed notes from RCKT Mortgage Trust 2025-CES2 (RCKT 2025-CES2).

KBRA announces the assignment of preliminary ratings to seven classes of RFR 2025-SGRM, a CMBS single-borrower securitization. The collateral for the transaction is a $1.2 billion fixed rate, interest-only mortgage loan. The fixed rate loan has a four-year term and requires monthly interest-only payments based on an assumed interest rate of 6.25%. The loan is secured by the borrower’s fee simple interest in 375 Park Avenue, which is commonly known as the Seagram Building, a 38-story, Class-A office tower containing 859,934 sf. The building is located along Park Avenue between East 52nd and 53rd Streets in the Midtown neighborhood of New York City’s borough of Manhattan. The property was built in 1958 and subsequently received landmark status in 1976. As of January 2025, the property was 96.3% leased to approximately 40 tenants. The five largest tenants by base rent consist of Blue Owl (31.0% of base rent), TIAA of America (9.8%), Centerbridge Partners (5.5%), Advent International (5.0%), and Arbor Realty Trust (4.8%). Together, these top five tenants account for 56.1% of base rent and 50.4% of sf.

KBRA assigns preliminary ratings to 30 classes of mortgage pass-through certificates from Provident Funding Mortgage Trust 2025-1 (PFMT 2025-1).

KBRA assigns preliminary ratings to seven classes of mortgage-backed certificates from Angel Oak Mortgage Trust 2025-2 (AOMT 2025-2), a $263.1 million non-prime RMBS transaction. The underlying collateral, comprised of 497 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. All the loans are either classified as non-qualified mortgages (57.8%) or exempt (42.2%) from the Ability-to-Repay/Qualified Mortgage rule due to being originated for non-consumer loan purposes. Angel Oak Mortgage Solutions originated 27.0% of the pool, with no other originator comprised over 10% of the collateral.

KBRA is pleased to announce the assignment of preliminary ratings to four classes of FREMF Series 2025-K759 mortgage pass-through certificates and three classes of Freddie-Mac structured pass-through certificates (SPCs), Series K-759. FREMF 2025-K759 is an $857.5 million CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2025-K759 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

KBRA is pleased to announce the assignment of preliminary ratings to 14 classes of BMO 2025-C11, a $906.9 million CMBS conduit transaction collateralized by 63 commercial mortgage loans secured by 82 properties.

KBRA assigns a long-term rating of AA to the State of Louisiana General Obligation Refunding Bonds, Series 2025-A and affirms the long-term rating of AA for the State's outstanding General Obligation Bonds. The rating Outlook is Stable.

KBRA assigns a long-term rating of AA-, with a Positive Outlook to the Miami-Dade County Aviation Revenue Bonds, Series 2025A (AMT), Series 2025B (Non-AMT) and Series 2025C (Taxable). In addition, KBRA affirms the long-term rating of AA- assigned to outstanding Aviation Revenue Bonds and revises the Outlook to Positive from Stable. As of October 1, 2025, approximately $4.5 billion of Aviation Revenue Bonds were outstanding.

KBRA assigns preliminary ratings to 62 classes of mortgage backed notes from PMT Loan Trust 2025-INV2 (PMTLT 2025-INV2), a prime RMBS transaction sponsored by PennyMac Corp. (PennyMac), an indirect, wholly-owned subsidiary of PennyMac Mortgage Investment Trust (PMT). PMTLT 2025-INV2 comprises 959 fixed-rate mortgages (FRMs) with an aggregate principal balance of $338,910,720 as of the February 1, 2025 cut-off date. The underlying pool consists of agency-eligible loans that are collateralized by investment properties (80.4%) and second homes (19.6%). The pool is characterized by significant borrower equity in each mortgaged property, as evidenced by the WA original LTV of 72.3%. The weighted average original credit score is 774, which is well within the prime mortgage range.

KBRA assigns preliminary ratings to the Series A Notes and Series B Notes issued by Gilead 2025-1 Aviation Limited and Gilead Aviation (Warehouse) LLC, an aviation ABS transaction (together, Ghost 2025-1). Ghost 2025-1 represents the sixth aviation ABS transaction serviced by wholly owned subsidiaries of AerCap Holdings N.V. (AerCap). As of September 30, 2024, AerCap and its subsidiaries had total assets of approximately $74 billion and had a fleet (owned or serviced) that included over 2,700 aircraft and engines.

KBRA assigns a AAA rating, with a Stable Outlook to the State of Wisconsin's (the State's) General Obligation (G.O.) Refunding Bonds of 2025, Series 3 and G.O. Refunding Bonds of 2026, Series 1 (Forward Delivery). Proceeds of 2025, Series 3 will be used by the State to purchase certain outstanding G.O. bond maturities tendered by invited bondholders under a January 24th Invitation to Offer to Tender Bonds. Proceeds of 2026, Series 1 (Forward Delivery) will current refund certain outstanding G.O. bond maturities with a May 1, 2026 call date. A portion of the proceeds for each series will also fund related costs of issuance. Debt service savings is the State’s ultimate goal for both transactions.

KBRA has placed its BBB- issuer rating for SmartStop OP, L.P. on Rating Watch Downgrade, which follows KBRA's review of recent acquisition activity and parent SmartStop Self Storage REIT, Inc.'s (collectively 'SmartStop') updated S-11 filing for a potential initial public offering (IPO). The BBB- rating for SmartStop OP's outstanding $150 million 4.53% senior secured notes due 2032 is also placed on Watch Downgrade.

KBRA releases a report exploring the mechanics, benefits, and challenges of revolving credit facilities (RCF) within the structured credit market. Low-levered RCFs, often executed privately, have become a common tool in the rated structured credit universe. RCFs are a flexible source of financing that allows issuers and lenders to manage credit risk while optimizing financing availability through its dynamic structure, which often incorporates a “borrowing base” overcollateralization (OC) mechanism. These facilities essentially act as a line of credit provided by preselected lenders through a special-purpose vehicle (SPV), which invests in a portfolio of corporate loans.

KBRA assigns preliminary ratings to 8 classes of Certificates from EFMT 2025-CES1, a $268.9 million RMBS transaction, as of the cut-off date, sponsored by EFMT Sponsor LLC and consists entirely of newly originated closed-end second lien mortgages (CES; 100.0%). The underlying pool is seasoned approximately 3 months and comprises 4,032 loans originated solely by Nationstar Mortgage LLC d/b/a Mr. Cooper (Mr. Cooper). The collateral is characterized entirely by fully amortizing, fixed-rate mortgages (FRMs) with predominantly 20-year (77.8%), 15-year (10.2%) and 30-year (7.2%) maturity terms.

KBRA assigns preliminary ratings to 50 classes of mortgage pass-through certificates from Radian Mortgage Capital Trust 2025-J1 (RMCT 2025-J1), which is backed by primarily prime jumbo mortgages with an aggregate principal balance of approximately $372.9 million as of the February 1, 2025 cut-off date. The pool comprises 474 first-lien, fixed rate residential mortgage loans, and is characterized by notable borrower equity in each property as evidenced by the WA original LTV and WA original CLTV of 72.4% and 72.7%, respectively. The weighted average original credit score is 774, which is within the prime mortgage credit score range. RMCT 2025-J1 is the third issuance of RMBS by sponsor Radian Mortgage Capital LLC (RMC), a subsidiary of Radian Group Inc., a mortgage insurance and services company. The underlying collateral consists of predominately 30-year fixed-rate mortgages (FRMs) and includes both non-agency (60.5%) and agency-eligible (39.5%) loans.

KBRA assigns preliminary ratings to 24 classes from Freddie Mac Structured Agency Credit Risk (STACR®) REMIC 2025-HQA1 Notes, Freddie Mac STACR REMIC Trust 2025-HQA1 (STACR 2025-HQA1), a credit risk sharing transaction with a total note offering of $620,000,000. STACR 2025-HQA1 features loans with loan-to value (LTV) ratios greater than 80%, but less than or equal to 97%. The Offered Notes represent obligations of the STACR 2025-HQA1 Trust in a credit-linked note structure governed by a credit protection agreement between the trust and Freddie Mac, with payments subject to the credit and principal payment risks of the STACR 2025-HQA1 Reference Pool.

KBRA announces the assignment of preliminary ratings to six classes of BAMLL 2025-ASHF, a CMBS single-borrower securitization.

KBRA assigns preliminary ratings to five classes of notes (seven tranches) issued by GLS Auto Receivables Issuer Trust 2025-1 (“GCAR 2025-1”), an auto loan ABS transaction.

KBRA assigns preliminary ratings to five classes of notes issued by Avant Loans Funding Trust 2025-REV1 (“AVNT 2025-REV1”), an unsecured consumer loan ABS transaction. AVNT 2025-REV1 has initial hard credit enhancement level of 50.39% for the Class A Notes to 4.22% for the Class E Notes. Credit enhancement consists of overcollateralization, yield supplement overcollateralization, subordination (except for the Class E Notes), a cash reserve account funded at closing and excess spread.

KBRA assigns preliminary ratings to seven classes of notes issued by Carvana Auto Receivables Trust 2025-N1 (“CRVNA 2025-N1”), a non-prime auto loan ABS transaction. The transaction has initial hard credit enhancement levels ranging from 41.95% for the Class A notes to 1.25% for the Class E notes. Credit enhancement consists of overcollateralization, excess spread, subordination (except for the Class E notes) and a cash reserve account funded at closing.

KBRA releases the January 2025 issue of CMBS Trend Watch.

KBRA releases research that explores the potential benefits and risks of artificial intelligence (AI) in insurance, along with key governance considerations. AI’s presence across the insurance sector has ramped up materially, with many insurers already implementing AI-driven processes or establishing frameworks to harness its potential. In KBRA’s view, insurers that effectively deploy AI can achieve greater efficiency, increased productivity of agents and employees, and improved customer satisfaction—factors that could positively impact revenues, expenses, and other credit considerations. These benefits could quickly become table stakes, and insurers left behind could find themselves at a competitive disadvantage.

KBRA assigns preliminary ratings to 60 classes of mortgage pass-through certificates from Sequoia Mortgage Trust 2025-2 (SEMT 2025-2), a $548.4 million prime RMBS transaction. The pool is comprised of 466 first-lien, fully amortizing fixed rate mortgages with 20-years or 30-years maturity terms. The collateral is characterized by a weighted average (WA) original credit score of 782 and moderate borrower equity, with a WA original LTV of 73.2% and WA original CLTV of 73.2%.

In this quarterly update, we review the more than 2,200 KBRA assessments completed for 1,903 unique middle market (MM)-sponsored borrowers in 2024. These companies collectively account for $922 billion in debt, offering a clear view of the overall private credit direct lending market. We examine key trends shaping credit quality by company size and sector. In addition, we identify and describe the roughly 5% of companies in this portfolio that appear most at risk to default in 2025, given expectations for prolonged base rates, fundamentally weak performance, and limited financial flexibility.

KBRA assigns preliminary ratings to six classes of mortgage pass-through certificates from Verus Securitization Trust 2025-INV1 (VERUS 2025-INV1), an approximately $515.2 million investor cash flow non-prime RMBS transaction. The underlying collateral, comprising 1,337 rental property mortgages, is characterized by a significant concentration of loans underwritten using DSCRs. All the loans were originated for business purpose and are exempt from the Ability-to-Repay (ATR) and TILA-RESPA Integrated Disclosure (TRID) rules.

KBRA assigns preliminary ratings to the Class A Notes, Class B Notes, and Class C Notes issued by Castlelake Aircraft Structured Trust 2025-1, an aviation ABS transaction (CLAS 2025-1). CLAS 2025-1 represents the 11th aviation ABS transaction sponsored by the Company. CLAS 2025-1 will be serviced by Castlelake Aviation Holdings (Ireland) Limited and Castlelake, L.P. The Company is comprised of over 220 individuals operating out of eight offices with headquarters in Minneapolis, Minnesota.

KBRA announces the assignment of preliminary ratings to four classes of IRV 2025-200P, a CMBS single-borrower securitization.

KBRA is pleased to announce the assignment of preliminary ratings to 37 classes of BANK5 2025-5YR13, a $737.1 million CMBS conduit transaction collateralized by 31 commercial mortgage loans secured by 59 properties.

KBRA is pleased to announce the assignment of preliminary ratings to 16 classes of WFCM 2025-C64, a $822.2 million CMBS conduit transaction collateralized by 31 commercial mortgage loans secured by 69 properties.

KBRA releases an update to a KBRA report published in mid-January regarding the Maryland Office of Financial Regulation (OFR) notice of emergency regulations and formal guidance regarding the applicability of Maryland licensing laws to assignees of mortgage loans on properties in Maryland. The rule, issued on January 10, 2025, requires mortgage trusts and their assignees to obtain licenses under Maryland’s Installment Loan Licensing Law and Mortgage Lender Law.

KBRA is pleased to announce the assignment of preliminary ratings to 14 classes of Benchmark 2025-V13, a $767.4 million CMBS conduit transaction collateralized by 35 commercial mortgage loans secured by 120 properties.