Fitch Assigns Final Ratings to MSBAM 2016-C29 Commercial Mortgage Trust Pass-Through Certificates

Fitch Ratings has assigned the following ratings and Ratings Outlooks to Morgan Stanley Bank of America Merrill Lynch Trust (MSBAM) Mortgage Trust 2016-C29 Commercial Mortgage pass-through certificates:

--$29,800,000 class A-1 'AAAsf'; Outlook Stable;

--$39,500,000 class A-2 'AAAsf'; Outlook Stable;

--$58,500,000 class A-SB 'AAAsf'; Outlook Stable;

--$190,000,000 class A-3 'AAAsf'; Outlook Stable;

--$248,821,000 class A-4 'AAAsf'; Outlook Stable;

--$566,621,000b class X-A 'AAAsf'; Outlook Stable;

--$97,136,000b class X-B 'AA-sf'; Outlook Stable;

--$54,639,000 class A-S 'AAAsf'; Outlook Stable;

--$42,497,000 class B 'AA-sf'; Outlook Stable;

--$35,413,000 class C 'A-sf'; Outlook Stable;

--$42,797,000ab class X-D 'BBB-sf'; Outlook Stable;

--$22,260,000ab class X-E 'BB-sf'; Outlook Stable;

--$8,095,000a class X-F 'B-sf'; Outlook Stable;

--$42,497,000a class D 'BBB-sf'; Outlook Stable;

--$22,260,000a class E 'BB-sf'; Outlook Stable;

--$8,095,000a class F 'B-sf'; Outlook Stable.

(a) Privately placed and pursuant to Rule 144A.

(b) Notional amount and interest-only.

The ratings are based on information provided by the issuer as of May 5, 2016. Fitch is not rating the following classes:

--$17,201,000 class X-G;

--$20,236,885 class X-H;

--$17,201,000 class G;

--$20,236,885 class H.

The certificates represent the beneficial ownership interest in the trust, primary assets of which are 69 loans secured by 106 commercial properties having an aggregate principal balance of approximately $809.5 million as of the cut-off date. The loans were contributed to the trust by Morgan Stanley Mortgage Capital Holdings LLC, Bank of America, National Association, KeyBank, National Association, and Starwood Mortgage Funding III LLC.

Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 72.5% of the properties by balance, cash flow analysis of 69.9%, and asset summary reviews on 100% of the pool.

KEY RATING DRIVERS

High Fitch Conduit Leverage: This transaction has a Fitch debt service coverage ratio (DSCR) and loan-to-value (LTV) of 1.15x and 107.8%, respectively. Excluding the credit opinion loan, Penn Square Mall (5.8% of the pool), the Fitch DSCR and LTV are 1.12x and 111%. The YTD 2016 and 2015 Fitch DSCR were 1.17x and 1.18x, respectively, and 108% and 109.3%.

Lower Pool Concentration: The top 10 loans comprise 41.1% of the pool, which is lower than the respective recent averages of 49.3% and 50.5% for 2015 and 2014. Additionally, the loan concentration index (LCI) is 265, less than the 2015 average of 367.

Investment-Grade Credit Opinion Loan: One loan, Penn Square Mall (5.8% of the pool), has an investment-grade credit opinion of 'A' on a stand-alone basis. Excluding this loan, the conduit has a Fitch stressed DSCR and LTV of 1.12x and 111%, respectively.

RATING SENSITIVITIES

For this transaction, Fitch's net cash flow (NCF) was 14.5% 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 MSBAM 2016-C29 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 'BBB+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 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 11-12.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence information was provided on ABS Due Diligence Form-15E and focused on a comparison and re-computation of certain characteristics with respect to the mortgage loan and related mortgaged properties in the data file. Fitch considered this information in its analysis, and the findings did not have an impact on our analysis.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 03 Mar 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878298

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

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

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

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

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Related Research

Morgan Stanley Bank of America Merrill Lynch Trust Series 2016-C29 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880420

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004047

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1004047&flm_nm=15e_1004047_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004047

Endorsement Policy

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

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