Kroll Bond Rating Agency Assigns Preliminary Ratings to PFP 2017-3

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to assign preliminary ratings to seven classes of the PFP 2017-3 transaction, a $567.4 million floating-rate commercial real estate collateralized loan obligation (CRE CLO) securitization.

The underlying collateral consists of 11 non-recourse whole loans and 16 pari passu participation interests indexed to the one-month London Interbank Offered Rate (LIBOR). The loan assets have an initial aggregate cut-off date principal balance of $564.9 million and the trust collateral also includes $2.5 million of cash available for reinvestment. The related loans are secured by the fee and leasehold interests in 35 properties. Each of the pari passu participations has an unfunded companion participation that represents an unfunded future funding obligation which is held outside of the trust by the transaction’s sponsor. The unfunded companion participations have an aggregate balance of $53.2 million. During the reinvestment period, the issuer, at the direction of the directing holder, can use principal proceeds from optional prepayments, as well as the $2.5 million of cash collateral, to purchase certain eligible funded companion participations.

KBRA’s analysis of the transaction involved a detailed evaluation of the underlying cash flows using our CMBS Property Evaluation Methodology and the application of our US CMBS Multi-Borrower Rating Methodology. The results of the analysis yielded KNCF for the underlying collateral properties that was, on average, 4.9% less than the issuer cash flow. KBRA applied our stressed capitalization rates to KNCF to arrive at valuations of the underlying properties. The KBRA values were, on average, 34.5% less than the appraiser’s respective as-is valuation. The resulting KBRA in-trust Loan to Value (KLTV) was 117.9%. The weighted average all-in KLTV for the loans was 121.2%. As part of our analysis of the transaction, we also reviewed and considered third party engineering and environmental reports, our analysts’ site visits of the collateral properties, and the transaction structure.

For complete details on the analysis, please see our pre-sale report, PFP 2017-3 published today at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: PFP 2017-3

Class     Note Balance     Expected KBRA Rating
A     $314,905,000     AAA (sf)
A-S     $44,683,000     AAA (sf)
B     $35,462,000     AA- (sf)
C     $32,625,000     A- (sf)
D     $46,101,000     BBB- (sf)
E     $11,348,000     BB (sf)
F     $24,115,000     B (sf)
Preferred Shares     $58,157,755     NR

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s asset level representations, warranties and enforcement mechanisms that are set forth in the offering document when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled CMBS: PFP 2017-3 Representations & Warranties Disclosure Report.

Related publications (available at www.kbra.com):

CMBS: PFP 2017-3 Pre-Sale Report

CMBS: US CMBS Multi-Borrower Rating Methodology, published December 3, 2015

CMBS Property Evaluation Methodology, published December 3, 2015

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Analytical:
Kroll Bond Rating Agency
Fred Perreten, 646-731-2454
fperreten@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Alec Abrams, 646-731-2401
aabrams@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Fred Perreten, 646-731-2454
fperreten@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Alec Abrams, 646-731-2401
aabrams@kbra.com