Kroll Bond Rating Agency Assigns Preliminary Ratings to VFC Series 2014-2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of its preliminary ratings to the Class A notes issued in the VFC Series 2014-2 transaction.

VFC Series 2014-2 is a non-performing loan (NPL) securitization of 1,610 NPL, performing loans, and real-estate-owned (REO) properties (collectively, the assets). The assets, which have an aggregate unpaid principal balance (UPB) of $834.5 million, were acquired for $386.3 million (46.3% of UPB) by affiliates of FirstCity Financial Corporation (together with such affiliates, FirstCity). The transaction is structured as a liquidation vehicle that monetizes recoveries from the assets to pay the rated notes.

The underlying collateral is comprised of commercial real estate properties (CRE, 81.4% of acquisition basis), other non-real estate collateral (other; 6.7%), residential assets (residential; 6.0%), and land (5.9%). The top-three state exposures are Florida (10.5%), California (10.0%), and Illinois (7.8%). The largest, top-ten, top-25 and top-50 relationships comprise 3.0%, 17.3%, 31.0%, and 45.2% of the pool’s acquisition basis, respectively.

To evaluate and rate this transaction, KBRA followed a multi-step “ground-up” approach, which leveraged our commercial and residential real estate methodologies. KBRA derived a “baseline value” for each collateral item using one or more methods. These included the income capitalization approach, comparable sales approach, as well as discounting third party valuation conclusions and the asset manager’s estimates of net sales proceeds. The baseline values were adjusted to derive KBRA’s Baseline Recovery Proceeds, reflective of the following, as and where applicable: KBRA’s stressed resolution path and timeline, NOI captured from defaulted and REO assets, carry costs for non-income producing assets, legal and foreclosure costs, property sales costs, deferred maintenance, and accrued unpaid taxes. The baseline recovery proceeds were stressed further to determine higher level investment grade stresses. The resulting proceeds were applied to the transaction waterfall to determine our credit rating. This methodology is detailed in our publication entitled “U.S. Liquidating Trust Rating Methodology for Pools of Distressed Commercial Real Estate,” which was published on May 22, 2014. Overall, KBRA’s baseline recovery amounts were 40.5% of the UPB, 87.5% of FirstCity’s acquisition basis, and 61.4% of FirstCity’s projected net recovery amounts.

 
Class     Rating     Balance (USD)     Rating Action
A BBB- (sf) $226,976,000 Preliminary
B     NR     $62,780,000     NAP
 

For complete details on the analysis, please see our presale report, VFC Series 2014-2, published at www.krollbondratings.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 final ratings that differ from the preliminary ratings.

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:
Christina Moy, 646-731-2327
cmoy@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
Christina Moy, 646-731-2327
cmoy@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com