DBRS Ratings GmbH (DBRS) took the following rating actions on the provisional ratings of the Commercial Mortgage-Backed Floating-Rate Notes due August 2031 (collectively, the Notes) to be issued by Deco 2019 - Vivaldi S.R.L. (the Issuer):
-- Class A Notes upgraded to AA (low) (sf)
-- Class B Notes confirmed at A (low) (sf)
-- Class C Notes confirmed at BBB (low) (sf)
-- Class D Notes confirmed at BB (low) (sf)
-- Class E Notes confirmed at BB (low) (sf)
All trends remain Stable.
The rating actions followed the removal of Valdichiana loan from the transaction (for more details regarding the transaction, please refer to the DBRS press release, “DBRS Assigns Provisional Ratings to Deco 2019 – Vivaldi S.R.L.” published on 30 April 2019). In DBRS’s view, the removal of Valdichiana loan is credit positive as DBRS had previously applied higher hurdle stress on the Valdichiana loan to reflect the risk deriving from the potential default of the HoldCo debt before the expected completion of the restructuring.
However, notwithstanding the above, the overall leverage of the transaction did not reduce as the Valdichiana loan’s leverage level (91.8% DBRS loan-to-value or LTV) was between the remaining Franciacorta (96.4% DBRS LTV) and Palmanova (87.6% DBRS LTV) loans. Moreover, the new capital structure maintains the same credit enhancement level for all classes of notes. Hence, the rating confirmations of Classes B through E
Other material changes following the provisional ratings previously issued are: (1) the addition of financial default covenants post a permitted change of control and (2) the reduction of liquidity facility to EUR 10.5 million. LTV and debt yield (DY) financial covenants have been added for the remaining loans post a permitted change of control.
LTV covenants are set at the lower of 15 percentage points higher than the LTV at the time of permitted change of control, and 85%; while the DY covenants are set at 85% of the DY at permitted change of control. DBRS views the addition of financial covenants as credit positive, yet the covenant level does not materially improve the credit quality of the transaction. The reduced liquidity facility is linked to the reduced balances of the Class A and B Notes balances. Additionally, according to DBRS’s analysis, the commitment amount, as at closing, will be equivalent to approximately 23 months of coverage on the covered notes assuming a cap strike rate of not higher than 1.16%.
The ratings will be finalised upon receipt of execution version of the governing transaction documents. To the extent that the documents and information provided to DBRS as of this date differ from the executed version of the governing transaction documents, DBRS may assign different final ratings to the Notes.
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 principal methodology.
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 these ratings include Deutsche Bank AG, London branch, Blackstone LLP and their delegates.
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 this rating 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 ratings were disclosed to the Deutsche Bank AG, London Branch and amended following that disclosure before being assigned.
These ratings concern a newly issued financial instrument.
This is the first rating action since the Initial Rating Date.
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 net cash flow (NCF), expected rating of Class A at A (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at A (low) (sf)
Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class B at BBB (sf)
-- 20% decline in DBRS NCF, expected rating of Class B at BB (high) (sf)
Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at B (sf)
Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class D at B (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class D at NR
Class E Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class E at NR
-- 20% decline in DBRS NCF, expected rating of Class E at NR
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: Rick Shi, Assistant Vice President
Rating Committee Chair: Erin Stafford, Managing Director
Initial Rating Date: 30 April 2019
DBRS Ratings GmbH
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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 email@example.com.