DBRS Ratings GmbH (DBRS) confirmed the ratings on the Commercial Mortgage-Backed Floating-Rate Notes Due November 2026 issued by Taurus 2016-1 DEU Designated Activity Company (Taurus 2016-1) as follows:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AAA (sf)
-- Class C Notes confirmed at AAA (sf)
-- Class D Notes confirmed at A (high) (sf)
-- Class E Notes confirmed at A (high) (sf)
-- Class F Notes confirmed at A (sf)
All trends are Stable.
Taurus 2016-1 is a securitisation of one floating-rate senior commercial real estate loan advanced by Bank of America Merrill Lynch International to Blackstone Group LP (Blackstone or the sponsor) to fund its acquisition of a portfolio, which, at issuance, consisted of 55 commercial real estate properties located throughout Germany. The rating confirmations reflect the continued strong performance of the underlying collateral since issuance. Since issuance, several properties have been sold by the sponsor, which has contributed to a significant deleveraging of the remaining assets.
As of the February 2019 interest payment date (IPD), the whole-loan balance has been reduced to EUR 74.5 million from EUR 317.1 million at issuance, representing a 76.5% reduction in balance. Based on the latest valuation by Jones Lang LaSalle Inc. dated December 2017, the market value for the portfolio was EUR 213.03 million as of the latest November 2018 investor report. According to the servicer, since the November 2018 report was released, the St. Ingbert, Ostr. 80 asset was sold. The property had a market value (MV) of EUR 25.9 million; once it was sold, the portfolio MV reduced to approximately EUR 187.1 million, resulting in a current loan-to-value (LTV) ratio of 41.9%.
According to the most recent investor report from November 2018, the current net rental income (NRI) for the portfolio is EUR 14.8 million; however, with the removal of the St. Ingbert, Ostr 80 asset, the adjusted NRI for the period is approximately EUR 12.8 million. DBRS assumed a net cash flow (NCF) of EUR 8.8 million, representing a 27.8% haircut to the adjusted NRI reported by CBRE Loan Services Limited.
At issuance, DBRS noted a significant tax liability, which was partially guaranteed by various Blackstone funds for a total guarantee of EUR 32.9 million. DBRS did not give any benefit to the sponsor fund guarantees and applied additional penalties to the LTV sizing hurdles at investment-grade level, with no further penalties at below investment-grade level.
The loan is scheduled to mature in November 2020 with a one-year extension option until November 2021 and carries a floating interest rate equal to three-month Euribor (subject to a floor at zero), plus a margin of 2.75%. Classes A through C are supported by a liquidity facility provided by Bank of America Merrill Lynch N.A, which totalled EUR 17.5 million at issuance; however, this has been reduced proportionally to approximately EUR 4.11 million as of the February 2019 IPD. DBRS estimates this amount is sufficient to cover approximately 20.7 months of interest shortfalls on Classes A through C.
The rating assigned to the Class D Notes is lower than the rating stress levels that the notes can withstand, according to DBRS’s direct sizing hurdles outlined in the “European CMBS Rating and Surveillance Methodology”. In this transaction, the assigned rating reflects that the transaction’s liquidity facility cannot be used to pay interest on this class in case of loan payment shortfalls.
The final legal maturity is November 2026, five years beyond the maturity of the underlying loan (including extension option). If necessary, this is believed to be sufficient time to enforce collateral on the loan and repay bondholders, given the security structure and jurisdiction of the underlying loan.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “European CMBS Rating and Surveillance Methodology.”
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for the ratings include CBRE Loan Services Limited and Situs Asset Management Ltd.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing the ratings to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 13 March 2018, when DBRS confirmed its rating on the Class A Notes at AAA (sf) and upgraded its ratings on Classes B through F.
The lead analyst responsibilities for this transaction have been transferred to Christopher Horst.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
Class A Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at AAA (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at AAA (sf)
Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class B at AAA (sf)
-- 20% decline in DBRS NCF, expected rating of Class B at AA (high) (sf)
Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at AA (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at AA (sf)
Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class F at AA (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class F at A (low) (sf)
Class E Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at A (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at BBB (sf)
Class F Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class F at BBB (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class F at BBB (low) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Christopher Horst, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Head of European Structured Finance
Initial Rating Date: 24 February 2016
DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- European CMBS Rating and Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at firstname.lastname@example.org.
This press release was amended on 1 May 2019 to correct a disclosure that incorrectly identified the DBRS legal entity as DBRS Ratings Limited instead of DBRS Ratings GmbH.