KBRA Assigns Preliminary Ratings to BDS 2018-FL2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to six classes of BDS 2018-FL2, a $420.0 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 is expected to be collateralized by 19 commercial mortgage assets, consisting of 12 pari passu participations (70.5%), six whole loans (26.9%), and one senior participation (2.6%) backed by a total of 23 properties. Seventeen loans (77.2%) are secured by the borrowers’ fee simple interests and two loans (22.8%) are secured by the borrowers’ leasehold interests in the related mortgaged properties.

The transaction permits the acquisition of companion participations related to the initial assets for a 24 month period following the closing date. In addition, defaulted and impaired assets can be sold to the preferred shareholder at par at any time. 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.

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, 40.3% and 50.5% 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 135.3%. 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, BDS 2018-FL2 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-FL2

       
Class     Initial Note Balance     Expected KBRA Rating
A     $223,136,000     AAA(sf)
B     $26,251,000     AA-(sf)
C     $26,251,000     A-(sf)
D     $38,326,000     BBB-(sf)
E     $17,851,000     BB-(sf)
F     $21,001,000     B-(sf)
Preferred Shares     $67,205,001     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)

CONNECT
WITH KBRA

Twitter
LinkedIn
Download the iOS App
YouTube

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

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

Contacts

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