Kroll Bond Rating Agency Assigns Preliminary Ratings to RCMF 2017-FL1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to six classes of RCMF 2017-FL1, a $243.8 million CRE CLO transaction with limited reinvestment ability.

The transaction will initially be collateralized by 38 mortgage loan interests with an aggregate cut-off date principal balance of $243.8 million. Fifteen assets are whole loans (44.2% of the cut-off date pool balance), 16 assets (36.8%) are pari passu or senior participations in whole loans (in each case, with funded and/or unfunded companion participations held outside of the trust) and the remaining seven assets (19.0%) are senior participations in whole loans with funded junior companion participations held outside the trust.

Each of the 16 pari passu participations has either a single pari passu companion participation (eight, 22.2%) or related senior and subordinate participations (eight, 14.6%) and in all cases, the companion participations are unfunded. The aggregate cut-off date balance of the unfunded pari passu and junior companion participations is $16.8 million and $1.7 million, respectively. All of the unfunded obligations are held outside of the trust by, and are obligations of the seller.

During the reinvestment period, which expires in August 2019, the issuer can direct the use of principal proceeds from the prepayment or repayment of trust assets for the acquisition of funded pari passu companion participations related to closing date assets. Junior participations are not eligible for acquisition.

The transaction features also include interest coverage (IC) and overcollateralization (OC) cash diversion tests. If either test is not satisfied on a payment date, interest proceeds remaining after interest is paid to the Class D notes will be used to pay down the principal balance of the Class A through D notes in sequential order until the tests are satisfied. To the extent interest proceeds are insufficient, principal proceeds, to the extent available, will be used.

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, 25.0% less than the issuer cash flow. KBRA primarily relied on the direct capitalization approach, along with other valuation methods to arrive at valuations of each of the underlying properties. The KBRA values were, on average, 38.7% and 49.8% lower than the appraisers’ as-is values and stabilized values, respectively. The resulting KBRA in-trust Loan to Value (KLTV) was 112.1%. We also conducted scenario analyses to evaluate and incorporate the impact of the transaction’s structural features in our ratings assignment process.

For complete details on the analysis, please see our pre-sale report, RCMF 2017-FL1 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: RCMF 2017-FL1

Class     Initial Note Balance     Expected KBRA Rating
A     $141,400,000     AAA (sf)
B     $18,500,000     AA- (sf)
C     $14,900,000     A- (sf)
D     $24,000,000     BBB- (sf)
E     $8,200,000     BB- (sf)
F     $10,300,000     B- (sf)
G     $26,497,021     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: RCMF 2017-FL1 Representations & Warranties Disclosure Report.

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

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

Kroll Bond Rating Agency
Analytical Contacts:
Michael McGorty, Director
(646) 731-2393
mmcgorty@kbra.com
or
Nitin Bhasin, CFA, Managing Director
(646) 731-2334
nbhasin@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Robin Regan, Managing Director
(646) 731-2358
rregan@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Michael McGorty, Director
(646) 731-2393
mmcgorty@kbra.com
or
Nitin Bhasin, CFA, Managing Director
(646) 731-2334
nbhasin@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Robin Regan, Managing Director
(646) 731-2358
rregan@kbra.com