KBRA Assigns Preliminary Ratings to Marathon 2018-FL1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of Marathon 2018-FL1, a managed commercial real estate collateralized loan obligation (CRE CLO) securitization with a two-year reinvestment period that commences with a 120-day ramp-up period. Marathon Asset Management, L.P. will act as collateral manager for the transaction.

The transaction is initially expected to be collateralized by 16 mortgage assets with an aggregate cut-off date balance of $333.9 million and $136.1 million of cash collateral that can be used to acquire three delayed close mortgage assets ($43.1 million) and up to $93.0 million of ramp-up assets during the ramp-up period. Previously unidentified whole loans (and senior participations therein) may be acquired during the ramp-up and reinvestment periods, subject to satisfaction of the eligibility criteria (and, if applicable, reinvestment criteria). The eligibility criteria include, among other things, maximum stabilized LTV and minimum stabilized DSC requirements; pool level concentration limits for loan size, property type and geographic location; certain restrictions on participation interests and future funding assets; and satisfaction of the rating condition with respect to KBRA.

The transaction waterfall includes an interest coverage test and an overcollateralization test. If either test is not satisfied on any determination date, on the following payment date, interest proceeds remaining after interest is paid to the Class D notes (and, if necessary, principal proceeds) will be diverted and used to pay down the principal balances of the Class A through D notes in sequential (alphabetical) order until the test(s) are satisfied or such classes are paid in full.

KBRA’s analysis of the transaction involved a detailed evaluation of the underlying cash flows using our CMBS Property Evaluation Methodology. The results of the analysis yielded KBRA values that were, on average, 35.4% and 50.2% lower than the appraiser’s as-is and stabilized values, respectively. The resulting KBRA Loan to Value (KLTV) was 121.7%. The results of this analysis were utilized in the application of our US CMBS Multi-Borrower Rating Methodology. The analysis also included quantitative and/or qualitative review of the various structural features of the transaction, including the reinvestment feature and IC & OC tests, as well as a review of the legal documents, the results of which were incorporated into our ratings assignment process.

For complete details of the analysis, please see our pre-sale report, Marathon 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: Marathon 2018-FL1

Class       Initial Note Balance       Expected KBRA Rating
A       $216,200,000       AAA(sf)
A-S       $34,000,000       AAA(sf)
B       $30,500,000       AA-(sf)
C       $28,700,000       A-(sf)
D       $47,500,000       BBB-(sf)
E       $18,800,000       BB-(sf)
F       $23,500,000       B-(sf)
Preferred Shares       $70,800,000       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 Representation & Warranties Disclosure report.

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
Michael McGorty, 646-731-2393
Director
mmcgorty@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Senior Managing Director
nbhasin@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Michael McGorty, 646-731-2393
Director
mmcgorty@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Senior Managing Director
nbhasin@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com