NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) announces the preliminary ratings on the bonds of NYCTL 2018-A Trust, a property tax lien ABS transaction.
This transaction represents the 24th sale and subsequent term securitization of tax liens by The City of New York (the “City”). The collateral pool is comprised of 3,554 property tax liens with an aggregate initial adjusted redemptive value (equal to the redemptive value plus recoverable lien administration expenses as of such date) of approximately $91.0 million. This includes approximately $58.6 million aggregate initial redemptive value of tax liens in the first sale on the closing date and approximately $32.5 million aggregate initial adjusted redemptive value of tax liens in the second sale in July 2018 (the “Second Sale Tax Liens”). The tax liens arose from unpaid real property taxes, assessments, sewer rents, sewer surcharges, water rents and other charges imposed by the City, in the case of water and sewer charges, the New York City Water Board. The underlying properties are located in the five boroughs of the City.
The borough of Brooklyn represents approximately 35.00% of the initial pool by redemptive value, while Queens, the Bronx, Manhattan and Staten Island represent 30.00%, 12.70%, 16.40% and 5.90% respectively. The property types in the initial collateral pool consist of residential (63.98%), commercial and industrial (30.96%) and vacant land (5.05%).
As part of the transaction, a working capital reserve fund with an initial balance of $3.4 million may be used to pay certain lien administration expenses. In addition, the transaction features an interest reserve fund with a required minimum balance initially equal to three months of interest on the original principal balance of the bonds and remains equal to such amount until such amount is equal to or greater than six months of interest on the outstanding bond balance. Pursuant to the transaction documents, the Indenture Trustee is also required to advance the lesser of $7.5 million or 10% of the then current aggregate tax lien principal balance to pay interest on the bonds, providing additional liquidity to the transaction.
Credit enhancement is comprised of overcollateralization, an interest reserve fund, excess spread and amounts in the working capital reserve fund. The credit enhancement levels for the bonds are sufficient to cover KBRA’s corresponding stressed cash flow assumptions for the bonds. The transaction is structured to de-lever rapidly through a “full turbo” pay structure designed to limit the amount of tail risk for bondholders. This de-leveraging increases the level of credit enhancement over time, which is beneficial to the maintenance of the bond ratings.
KBRA used the Property Tax Lien ABS Rating Methodology to analyze the transaction’s underlying collateral pool, the proposed capital structure and the City’s historical performance data.
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 final ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: NYCTL 2018-A Trust
|Bonds||Rating||Initial Principal Balance|
|Class A||AAA (sf)||$74,659,000|
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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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.