Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to eight classes of VMC 2018-FL2, a $462.3 million commercial real estate collateralized loan obligation (CRE CLO) securitization. The transaction is initially expected to be collateralized by 23 whole loans (or participations thereof) with a total in-trust balance of $421.2 million and $41.1 million cash collateral. The cash collateral is expected to be used to acquire two delayed-closing assets ($36.6 million) and funded non-trust companion participations related to the initial transaction collateral ($4.5 million).
Assuming the cash collateral is used to successfully fund the targeted assets, the transaction will be collateralized by 25 loans and participations with an aggregate balance of $457.8 million. The mortgage assets will be secured by the fee simple interests in 24 properties (84.2%) and the leasehold interests in one property (15.8%).
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 H 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 paying Class E interest to pay down the principal of the most senior class, until such test passes again.
KBRAs 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 KBRAs values to be, on average, 39.6% and 46.6% lower than the appraisers as-is values and stabilized values, respectively. The resulting in-trust KBRA Loan to Value (KLTV), assuming that all the future funding commitments are fully funded, was 124.8%. We also conducted scenario analyses to evaluate and incorporate the impact of the transactions various structural features in our ratings assignment process.
For complete details on the analysis, please see our pre-sale report, VMC 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.
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Preliminary Ratings Assigned: VMC 2018-FL2
|Class||Initial Note Balance||Expected KBRA Rating|
Related Publications: (available at www.kbra.com)
- VMC 2018-FL2 Pre-Sale Report
- U.S. CMBS Multi-Borrower Rating Methodology
- U.S. CMBS Property Evaluation 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, is 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.
Brown, Senior Director
Bhasin, Senior Managing Director
Keagle, Senior Director