Downgrades, on the other hand, accounted for only 4% of the reviews, a total of 12. Except for two downgrades with ratings moving from BBB to BBB-, all the others occurred on below-investment-grade classes. Market sectors affected included the health care industry, retail factory outlets, credit tenant lease deals and limited service hotels.
Looking forward, Fitch expects large transactions with proven performance and deals with floating-rate loans that pay down quickly will continue to be upgraded. Conduits with little paydown have less chance of being upgraded unless their performance improves and information is available for the entire pool. Fitch cautions that when financials are not provided it is assumed that the loans are underperforming and treats them conservatively.
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