OREANDA-NEWS. Fitch Ratings has affirmed ORIX Capital Markets, LLC's (OCM) commercial special servicer rating at 'CSS2'.

The special servicer rating reflects Fitch's assessment of the company's strong management and experienced asset managers, internal control environment with thorough policies and procedures and use of technology for quality control, as well as the financial strength of OCM's ultimate parent, ORIX Corp.

The rating also reflects Fitch's concerns regarding operational stability given a material decrease in the servicing portfolio following bulk asset liquidations in 2013. While no staffing reductions in the special servicing group have occurred since Fitch's last review or are planned, Fitch expects to see a gradual increase in servicing assignments in order to continue to maintain key components (such as staffing) of the special servicing platform. OCM's senior management has expressed a commitment to special servicing, viewing it as an important function relative to the overall health of the investment platform.

Since the bulk sale in 2013, OCM has maintained relatively stable staffing levels. In the last 12 months, OCM experienced overall turnover of 22% (which is high due in part to the size of the group), up from 7% from the prior review. One staff-level employee left the company as a result of a visa not being renewed and one transferred internally. In 2013, the company experienced overall turnover of 92% as the bulk sale resulted in a large reduction of active special servicing volumes.

Despite past high turnover, OCM has maintained a strong team of seven loan workout and real estate owned (REO) asset managers who average 21 years of industry experience. Within OCM and RED Capital, the special servicing group has the ability to draw upon experienced former OCM special servicing asset managers granting staffing flexibility if special servicing volumes increase. Additionally, OCM has a strong management team of five averaging 24 years of experience with asset management and portfolio management backgrounds, providing knowledgeable leadership.

OCM's special servicing group functions as the credit risk-management arm for CRE investments, remaining an integral component of ORIX USA's and OCM's larger investment platform. OCM is an active investor in CMBS transactions participating across the capital structure; investments in senior legacy CMBS bond positions have become the main avenue by which CMBS assignments are sourced as losses erode control positions in lower classes. With the evolution of the company's new business strategy, new servicing assignments are sourced from third parties in addition to investments in CMBS in the secondary market, loan pools, and loans OCM has originated or purchased. OCM's total named special servicing portfolio has grown by 57% (by balance) since 2014 to \\$1.1 billion as of March 31, 2015 through CMBS control changes and third party appointments, as well as originations.