Kroll Bond Rating Agency Assigns Preliminary Ratings to Bancorp 2017-CRE2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to assign preliminary ratings to five classes of Bancorp 2017-CRE2, a $314.4 million static CRE CLO securitization. The transaction is structured as a REMIC trust, and unlike to other CRE CLOs rated by KBRA in 2017, it does not permit any ramp-up or acquisition/reinvestment of assets post-closing. In addition, the subject transaction differs from the other 2017 KBRA-rated CRE CLOs because the sponsor does not retain the first-loss position; here, the first-loss position will be sold to a third party.

The transaction will be collateralized by 24 assets with an aggregate cut-off date principal balance of $314.4 million, secured by the fee interests in 31 properties. The collateral consists of whole loans or participations in whole loans, including eight loans (31.5%) that have associated unfunded future advance amounts represented by companion pari passu participations with an aggregate unfunded amount of $14.3 million, which are held outside the trust by the seller. One asset is a pari passu participation interest in a whole loan where the companion participation was securitized in the sponsor’s previous securitization (BANC 2016-CRE1).

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, 5.2% less than the issuer cash flow. KBRA primarily relied on the direct capitalization approach to arrive at valuation of each of the underlying properties. The KBRA values were, on average, 32.1% and 44.1% lower than the appraiser’s as-is values and stabilized values, respectively. The resulting KBRA in-trust Loan to Value (KLTV) was 112.0%.

For complete details on the analysis, please see our presale report, Bancorp 2017-CRE2 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: Bancorp 2017-CRE2

Class     Note Balance     Expected KBRA Rating
A     $161,110,000     AAA (sf)
A-S     $48,726,000     AAA (sf)
B     $18,862,000     AA- (sf)
C     $17,683,000     A- (sf)
D     $23,970,000     BBB- (sf)
E     $12,574,000     NR
F     $11,003,000     NR
G-RR1     $20,433,178     NR

1A third party purchaser, VMF Structured Finance LLC, is expected to purchase the Class G-RR certificates which are intended to constitute an "eligible horizontal residual interest” for purposes of the US risk retention rules.

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: Bancorp 2017-CRE2 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

Analytical Contacts:
Kroll Bond Rating Agency
Ravish Kamath, (646) 731-2328
rkamath@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Nitin Bhasin, (646) 731-2334
nbhasin@kbra.com
or
Michael Brown, (646) 731-2307
mbbrown@kbra.com

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Ravish Kamath, (646) 731-2328
rkamath@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Nitin Bhasin, (646) 731-2334
nbhasin@kbra.com
or
Michael Brown, (646) 731-2307
mbbrown@kbra.com