Rating Action: Moody's assigns a rating to one class of notes issued by ONY Funding, LLC

Global Credit Research - 14 Jan 2021

New York, January 14, 2021 -- Moody's Investors Service ("Moody's") has assigned a rating to one class of notes issued by ONY Funding, LLC (the "Issuer"):

The Receivables Backed Notes, Series 2020, Assigned A2 (sf)

The Receivables Backed Notes, Series 2020 are referred to herein as the "Rated Notes."

RATINGS RATIONALE

The rating reflects the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets.

ONY Funding, LLC is a static cash flow commercial real estate backed financing CLO (CRE CLO). The transaction is backed by senior mezzanine interests in, and related collateral backed by, a portfolio of eligible federal low income tax credit (the LIHTC) multi-family properties. At the closing date, 100% of the assets in the transaction are fully identified and closed. The closing pool is collateralized by cashflow generated by the properties, after senior debt payments, and LIHTC related fees -- such as compliance, developer and GP related fees, payable to SPV general partners of 37 limited partnership funds invested in 37 LIHTC properties located in 6 states and territories of U.S with a concentration in New York City and Connecticut.

The transaction closed on January 14, 2021.

OMNI TEM, LLC. (the "Administrator") will act as the administrator of the CRE CLO. This is the Administrator's first Moody's rated CRE CLO transaction and will provide servicing to the collateral interests during the life cycle of the transaction. TCAM Asset Management will act as standby administrator. Wilmington Trust, National Association will act as collateral agent and paying agent for this transaction.

The transaction does not incorporate interest and par coverage tests. However, the transaction incorporates planned principal amortization metrics and a mechanism to direct subordinate payments to amortize the Rated Notes if the amortization falls below the plan metrics. Moody's has identified the following parameters as key indicators of the expected loss within CRE CLO transactions: weighted average rating factor (WARF), a primary measure of credit quality with credit assessments completed for all of the collateral, weighted average life (WAL), weighted average recovery rate (WARR), number of asset obligors; and pair-wise asset correlation. These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals.

For modeling purposes, Moody's used the following base-case assumptions:

Par amount: $345,446,025

Number of obligors: 37

Weighted Average Rating Factor (WARF): 936

Weighted Average Recovery Rate (WARR): 41.4%

Weighted Average Life (WAL): 9.5 years

Weighted Average Spread (WAS): NAP

Weighted Average Coupon (WAC): Projected Developer Fees and GP fees

Pair-wise asset correlation: 35.0%

Methodology Underlying the Rating Action:

The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231934. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the rating:

The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The administrator's investment decisions and management of the transaction will also affect the performance of the Rated Notes.

Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was a component in determining the rating assigned to the Rated Notes. This sensitivity analysis includes increased default probability relative to the base-case.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment.

The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of commercial real estate from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1257489 .

The analysis relies on a Monte Carlo simulation that generates a large number of collateral loss or cash flow scenarios, which on average meet key metrics Moody's determines based on its assessment of the collateral characteristics. Moody's then evaluates each simulated scenario using model that replicates the relevant structural features and payment allocation rules of the transaction, to derive losses or payments for each rated instrument. The average loss a rated instrument incurs in all of the simulated collateral loss or cash flow scenarios, which Moody's weights based on its assumptions about the likelihood of events in such scenarios actually occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Francis Teo Asst Vice President - Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Deryk Meherik Senior Vice President/Manager Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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