KBRA downgrades two MSC 2018-H4 ratings after CMBS pool performance weakens
A fresh surveillance review of MSC 2018-H4 shows weaker collateral performance in the $699.9 million commercial mortgage-backed securities transaction. The action leaves most outstanding ratings unchanged, but two classes are lowered as credit pressure persists in part of the pool.
Highlights
- KBRA downgrades MSC 2018-H4 Class E-RR to BB (sf) from BBB- (sf) and Class F-RR to B- (sf) from B (sf) after worsened performance.
- As of October 2026, one specially serviced REO asset represents 4.2% of the $699.9 million CMBS pool, with K-LOCs totaling 21.4% of the balance.
- K-LOC exposures total $149,664 with $23,530 in estimated losses, while weighted-average KLTV improves to 91.9% and KDSC rises to 1.71x.
Surveillance review drives rating changes
As reported by Kroll Bond Rating Agency, KBRA downgrades two classes of certificates and affirms all other outstanding ratings for MSC 2018-H4 after the transaction shows worsening pool performance since the last ratings change in December 2021.The agency says Class E-RR is cut to BB (sf) from BBB- (sf), while Class F-RR is lowered to B- (sf) from B (sf). The review covers a CMBS conduit transaction with an original balance of $699.9 million.
As of the October 2026 remittance period, the pool has one specially serviced asset representing 4.2% of the balance, and that asset is real estate owned, or REO. KBRA also identifies 12 loan groups as K-LOCs, representing 21.4% of the pool balance, including the specially serviced asset.
Credit metrics show mixed performance
Among the K-LOCs, three loan groups representing 7.2% of the pool carry estimated losses. KBRA says the K-LOC population totals $149,664, with estimated losses of $23,530 tied to the identified troubled exposures.Excluding K-LOCs with estimated losses, the transaction's weighted-average KLTV is 91.9%, improving from 96.9% at the last review and 97.6% at securitization. The KDSC stands at 1.71x, compared with 1.62x at the last review and 1.69x at securitization, indicating some operating improvement outside the most stressed loans.
In a previous article, we explained how KBRA cut ratings in the WFCM 2017-C42 deal after collateral deterioration and K-LOC losses.
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