Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of VMC 2019-FL3, a $627.5 million commercial real estate collateralized loan obligation (CRE CLO) securitization. The transaction is initially expected to be collateralized by 22 whole loans (or participations thereof) with a total in-trust balance of $572.6 million and $54.9 million of cash collateral. The cash collateral is expected to be used to acquire two pre-identified delayed-closing assets within 90 days of the closing date. The mortgage assets will be secured by the fee simple interests in 23 properties (96.1%) and the fee and leasehold interest in one property (3.9%).
The transaction permits the acquisition of additional companion participations related to the initial assets for 36 months, post-closing. In addition, defaulted and impaired assets can be sold to the Class G noteholder at par under certain circumstances. The transaction also features an overcollateralization test, the failure of which will result in diversion of all interest proceeds remaining after interest is paid to the Class D notes will be used to pay down the principal balances of the Class A through D notes in sequential order until the test is satisfied or such classes of notes are paid in full.
The subject transaction includes a pro rata payment feature in the securitizations principal waterfall. The first dollars of principal proceeds up to an aggregate amount of $74.7 million, if not reinvested in companion participations that have been funded in accordance with the acquisition criteria, will be distributed to each class of notes, including the Class G notes, on a pro rata and pari passu basis. However, the reinvestment application of pro-rata proceeds will occur for the first $74.7 million of principal proceeds regardless of whether these loans prepay as anticipated.
KBRAs analysis of the transaction involved evaluation of property cash flows and values within the loan pool using our U.S. CMBS Property Evaluation Methodology. The results of the analysis yielded KBRA values that were, on a weighted average basis, 33.6% and 48.3% lower than the appraisers as-is and stabilized values, respectively, and a KBRA Loan to Value (KLTV) of 122.7%. The results of this analysis were utilized in the application of our U.S. CMBS Multi-Borrower Rating Methodology. The analysis also included quantitative and/or qualitative review of the various structural features of the transaction as well as a review of the legal documents, the results of which were incorporated into our ratings assignment process.
Preliminary Ratings Assigned: VMC 2019-FL3
Initial Note Balance
Expected KBRA Rating
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- VMC 2019-FL3 Pre-Sale Report
- VMC 2019-FL3 CRE CLO KCAT
- U.S. CMBS Multi-Borrower Rating Methodology
- U.S. CMBS Property Evaluation Methodology
- Global Structured Finance Counterparty Methodology
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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 designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is 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.
Ravish Kamath, Director
Michael Brown, Managing Director
Christina Moy, Senior Director
Dayna Carley, Senior Director