NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to the Class A notes, which are the sole class of securities issued in the VSD 2017-PLT1 transaction.
VSD 2017-PLT1 is structured as a liquidation vehicle that monetizes recoveries from the assets to pay the rated notes. The transaction’s collateral is primarily comprised of performing loans (93.3% of the issuer’s basis), and also includes small exposures to non-performing loans (NPL) and real-estate-owned (REO) properties. Collectively, these equate to 201 assets, which have an aggregate unpaid principal balance (UPB) of $378.1 million and were acquired (191 assets) or originated (10 assets) by Värde Partners. Using the acquisition cost of the $299.6 million acquired assets and the UPB of the originated assets, the aggregate basis of the portfolio is $348.2 million (92.1% of UPB).
The underlying collateral is comprised of commercial real estate properties (95.3% of the sponsor’s basis), land (4.5%) and single-family rental assets (0.2%). The top three state exposures are California (15.0%), Illinois (14.8%) and Texas (12.6%). The largest, top-ten, top-25 and top-50 relationships comprise 7.2%, 43.6%, 67.8%, and 84.2% 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 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 recoveries. The baseline values were adjusted to derive KBRA’s baseline recovery proceeds, reflective of, among other items, the following: KBRA’s stressed resolution path and timeline, NOI captured from defaulted and REO assets, carry costs for non-income or negative-income producing assets, legal and foreclosure costs, and property sales costs. The baseline values and recovery proceeds were stressed further under the investment grade stress scenario. The resulting proceeds were applied to the transaction waterfall, while taking into account reserves, cash flow leakages and other structural elements, 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 December 3, 2015, and can be accessed on our website. Overall, KBRA’s baseline recovery amounts were 83.9% of the UPB, 91.1% of the issuer’s acquisition basis, and 76.0% of the issuer’s projected net recovery amounts.
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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).