Fitch Rates Citigroup Commercial Mortgage Trust 2016-C2; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned ratings to Citigroup Commercial Mortgage Trust 2016-C2, Commercial Mortgage Pass-Through Certificates, Series 2016-C2. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

High Fitch Leverage: The pool's Fitch debt service coverage ratio (DSCR) and loan-to-value (LTV) are 1.15x and 108.4%, respectively. This is slightly worse than the year-to-date (YTD) 2016 average Fitch DSCR of 1.16x and the YTD 2016 average Fitch LTV of 107.5%. Excluding the credit opinion loan (9.8% of the pool), the Fitch DSCR and LTV are 1.10x and 111.3%, respectively.

Investment Grade Credit Opinion Loan Represents: One loan, Vertex Pharmaceuticals HQ (9.8% of the pool) has an investment-grade credit opinion of 'BBB-sf*' on a stand-alone basis.

RATING SENSITIVITIES

For this transaction, Fitch's net cash flow (NCF) was 17.4% below the 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 CGCMT 2016-C2 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 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBBsf' could result. 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 third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and 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 the findings did not have an impact on the analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under 'Related Research' below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions' (May 2016).

Fitch has assigned the following ratings:

Citigroup Commercial Mortgage Trust 2016-C2, Commercial Mortgage Pass-Through Certificates, Series 2016-C2

--$20,227,000 class A-1 'AAAsf'; Outlook Stable;

--$15,097,000 class A-2 'AAAsf'; Outlook Stable;

--$170,000,000 class A-3 'AAAsf'; Outlook Stable;

--$189,298,000 class A-4 'AAAsf'; Outlook Stable;

--$31,793,000 class A-AB 'AAAsf'; Outlook Stable;

--$456,873,000b class X-A 'AAAsf'; Outlook Stable;

--$68,531,000b class X-B 'A-sf'; Outlook Stable;

--$30,458,000 class A-S 'AAAsf'; Outlook Stable;

--$35,027,000 class B 'AA-sf'; Outlook Stable;

--$33,504,000 class C 'A-sf'; Outlook Stable;

--$32,743,000a class D 'BBB-sf'; Outlook Stable;

--$32,743,000ab class X-D 'BBB-sf'; Outlook Stable;

--$9,137,500ac class E-1 'BB+sf'; Outlook Stable;

--$9,137,500ac class E-2 'BB-sf'; Outlook Stable;

--$18,275,000ac class E 'BB-sf'; Outlook Stable;

--$5,330,000ac class F 'B-sf'; Outlook Stable;

--$23,605,000ac class EF 'B-sf'; Outlook Stable.

a) Privately placed pursuant to Rule 144A.

b) Notional amount and interest-only.

c) Maximum principal amount that may be outstanding. The class E-1 and E-2 certificates (in the applicable proportions) may be exchanged for a related amount of class E certificates, and class E certificates may be exchanged for a ratable portion of each class of class E-1 and E-2 certificates. The class F-1 and F-2 certificates (in the applicable proportions) may be exchanged for a related amount of class F certificates, and class F certificates may be exchanged for a ratable portion of each class of class F-1 and F-2 certificates. The class E-1, E-2, F-1 and F-2 certificates (in the applicable proportions) may be exchanged for a related amount of class EF certificates, and class EF certificates may be exchanged for a ratable portion of each class of class E-1, E-2, F-1 and F-2 certificates. The class E-1, E-2, F-1, F-2, G-1 and G-2 certificates (in the applicable proportions) may be exchanged for a related amount of class EFG certificates, and class EFG certificates may be exchanged for a ratable portion of each class of the class E-1, E-2, F-1, F-2, G-1 and G-2 certificates. The class H-1 and class H-2 certificates (in the applicable proportions) may be exchanged for a related amount of class H certificates, and class H certificates may be exchanged for ratable portion of each class of class H-1 and H-2 certificates.

Fitch does not rate the $2,665,000 class F-1, $2,665,000 class F-2, $5,330,000 class G-1, $5,330,000 class G-2, $10,660,000 class G, $34,265,000 class EFG, $8,376,511 class H-1, $8,376,511 class H-2, or the $16,753,022 class H certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/site/re/884963

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)

https://www.fitchratings.com/site/re/885802

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)

https://www.fitchratings.com/site/re/882237

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)

https://www.fitchratings.com/site/re/884140

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

https://www.fitchratings.com/site/re/735382

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/site/re/873395

Related Research

Citigroup Commercial Mortgage Trust 2016-C2 -- Appendix

https://www.fitchratings.com/site/re/886233

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011006

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1011006&flm_nm=15e_1011006_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011006

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160830006471/en/

Fitch Ratings
Primary Analyst
Lisa Chen, +1 212-908-9109
Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Clement Okeke, +1 312-606-2323
Associate Director
or
Committee Chairperson
Eric Rothfeld, +1 212-908-0761
Managing Director
or
Media Relations, New York
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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