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Morningstar to Begin Rating CRE CLOs
Morningstar Credit Ratings, LLC updated its U.S. CMBS Conduit/Fusion Ratings Methodology that outlines the process it will apply when rating pools of transitional commercial real estate collateral, commonly known as commercial real estate collateralized loan obligations (CRE CLOs). The New York-based rating organization introduced new methodology as part of an approach designed to be clear, concise, and easy for market participants to replicate.
Morningstar will utilize its CRE Credit Model as the basis for calculating expected losses for a pool of transitional commercial real estate loans. Specifically, Morningstar modified its CRE Credit Model to account for the presence of future funding components and of ramp up and reinvestment periods. The company also adjusted its approach to assessing diversity within the CRE CLO transaction.
Morningstar Credit Ratings’ Kurt Pollem says, “We are very excited to begin rating CRE CLOs. We’re confident in our transparent methodology that market participants can easily understand and apply—one that doesn’t hide behind black boxes or proprietary tools. Our criteria incorporates the flexibility to adapt to a rapidly-changing market, and we have a strong CMBS senior team with real-world experience evaluating transitional collateral.”
For comments, questions or concerns, please contact Dennis Kaiser
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