KBRA Assigns Preliminary Ratings to SGCP 2018-FL1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to six classes of SGCP 2018-FL1, a $415.1 million commercial real estate collateralized loan obligation (CRE CLO) securitization with the post-closing ability to acquire pari passu companion participations related to the closing date assets. The transaction will be collateralized by 22 commercial mortgage assets, consisting of 15 whole loans (57.4%) and seven pari passu participations (42.6%) backed by a total of 41 properties. Nineteen loans (74.2%) are secured by the borrowers’ fee simple interests, one loan (16.7%) is secured by the borrower’s fee simple and leasehold interests, and two loans (9.1%) are secured by the borrowers’ leasehold interests in the related mortgaged properties.

The transaction structure permits the acquisition of companion participations related to the initial assets for 24-months following the closing date. In addition, defaulted and impaired assets can be sold to the preferred shareholder at par. The transaction also includes an interest coverage (IC) test and an overcollateralization (OC) test. If the tests are not satisfied on any determination date, on the following payment date, interest proceeds remaining after the payment of interest to the Class D notes (and principal proceeds, to the extent interest proceeds are insufficient) will be used to pay down the principal balances of the Class A through D notes in sequential order until the test(s) are satisfied or such classes of notes are paid in full. This transaction also has a pro rata payment feature where principal proceeds in an aggregate amount equal to 10.0% of the aggregate cut-off date balance of the mortgage assets will be used to pay down the notes on a pro rata basis provided the note protection tests are satisfied and no event of default has occurred.

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 analysis resulted in KBRA’s values to be, on average, 38.7% and 49.8% lower than the appraiser’s as-is and stabilized values, respectively. The resulting in-trust KBRA Loan to Value (KLTV), assuming that all future advance obligations were fully funded, was 123.6%. We also conducted scenario analyses to evaluate and incorporate the impact of the transaction’s various structural features in our ratings assignment process.

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

 
     
Class   Initial Note Balance     Expected KBRA Rating    
    A       $220,000,000       AAA(sf)    
    B       $36,800,000       AA-(sf)    
    C       $28,000,000       A-(sf)    
    D       $38,900,000       BBB-(sf)    
    E       $16,600,000       BB-(sf)    
    F       $17,600,000       B-(sf)    
    Preferred Shares       $57,231,533       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 here.

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:
KBRA
Albert Lee, 646-731-2448
Associate Director
alee@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Senior Managing Director
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com

Contacts

Analytical:
KBRA
Albert Lee, 646-731-2448
Associate Director
alee@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Senior Managing Director
nbhasin@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com