KBRA Assigns Preliminary Ratings to BDS 2018-FL1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to six classes of BDS 2018-FL1, a $510.2 million commercial real estate collateralized loan obligation (CRE CLO) securitization. The transaction will initially be collateralized by 27 whole loans and participations and for approximately three years following the closing date, the issuer can acquire funded, non-trust companion participations related to the initial collateral if the acquisition criteria are satisfied. With respect to two loans (14.1%), absent the occurrence of certain circumstances, principal proceeds received from such loans will be distributed to the notes and preferred shares on a pro rata basis.

The transaction will be collateralized by 17 non-recourse whole loans (68.9%) and ten pari passu participations (31.1%). The mortgage assets have an aggregate cut-off date balance of $510.2 million and are secured by the fee simple interests in 27 properties. From the closing date until December 2020, principal proceeds from optional prepayments on the mortgage assets received at least 90 days before the related maturity date can be used to acquire related non-trust companion participations, provided such companion participations are funded and satisfy the acquisition criteria. In addition, defaulted assets and impaired assets can be sold to the majority holder of the preferred shares at par.

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, 7.1% less than the issuer cash flow. KBRA primarily relied on the direct capitalization approach to arrive at a valuation of each of the underlying properties. The KBRA values were, on average, 40.6% and 47.0% lower than the appraiser’s as-is values and stabilized values, respectively. The resulting KBRA in-trust Loan to Value (KLTV) was 135.0%. 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, BDS 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: BDS 2018-FL1

Class     Initial Note Balance     Expected KBRA Rating
A     $275,525,000       AAA(sf)
B     $28,701,000       AA-(sf)
C     $29,338,000       A-(sf)
D     $45,283,000       BBB-(sf)
E     $22,323,000       BB-(sf)
F     $24,873,000       B-(sf)
G     $84,188,602       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: BDS 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 Contacts:
Kroll Bond Rating Agency
Michael McGorty, 646-731-2393
Director
mmcgorty@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 Contacts:
Kroll Bond Rating Agency
Michael McGorty, 646-731-2393
Director
mmcgorty@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