KBRA Assigns Preliminary Ratings to VMC 2018-FL1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of VMC 2018-FL1, a $368.1 million commercial real estate collateralized loan obligation (CRE CLO) securitization with the ability to acquire companion loan participations related to the initial transaction collateral for a two-year period following the closing date. In addition, the issuer can sell defaulted assets and impaired assets to the majority of the Class G holders at par.

The transaction is static with the exception of a single mortgage asset that may not close prior to the closing date (delayed close asset) and which may be acquired within 90-days of the closing date. Further, there is a two-year reinvestment period following the closing date during which the issuer can acquire related companion participation interests that have been funded and that satisfy the acquisition criteria. The transaction will initially be collateralized by 24 whole loans and participations in mortgage loans, as well as cash collateral in an amount equal to the par amount of the delayed close asset. Assuming the delayed close asset is acquired, the transaction will be collateralized by 25 loans that are recourse to the borrower (and non-recourse to the related guarantors). The mortgage assets have an aggregate cut-off date balance of $368.1 million and are secured by the fee simple interests in 26 properties (86.7%) and the leasehold interests in two properties (13.3%). Five assets (11.1%) are whole loans and the remaining 20 assets (88.9%) are pari passu participations in whole loans with related non-trust companion participations that represent unfunded future advance obligations. During the acquisition period, certain principal proceeds can be used by the issuer to acquire funded companion participations, provided that they satisfy the acquisition criteria.

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 a KNCF for the underlying collateral properties that was, on average, 12.4% 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, 32.7% and 44.0% lower than the appraiser’s as-is values and stabilized values, respectively. The resulting KBRA in-trust Loan to Value (KLTV) (assuming the fully ramped pool) was 128.3%. 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, VMC 2018-FL1 published 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: VMC 2018-FL1

Class     Initial Note Balance     Expected KBRA Rating
A     $200,607,000     AAA(sf)
A-S     $14,723,000     AAA(sf)
B     $20,705,000     AA-(sf)
C     $20,705,000     A-(sf)
D     $31,747,000     BBB-(sf)
E     $14,263,000     BB-(sf)
F     $17,484,000     B-(sf)
G (Income Notes)     $47,851,601     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 representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available CMBS: VMC 2018-FL1 Representations & Warranties Disclosure.

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

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:
Kroll Bond Rating Agency
Fred Perreten, 646-731-2454
Director
fperreten@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Nitin Bhasin, 646-731-2334
Managing Director
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Fred Perreten, 646-731-2454
Director
fperreten@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Nitin Bhasin, 646-731-2334
Managing Director
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com