DBRS Morningstar Places 20 Ratings of Five UK CMBS Transactions Under Review with Negative Implications

DBRS Ratings Limited (DBRS Morningstar) placed its ratings of the following classes of notes issued in the context of five UK CMBS transactions Under Review with Negative Implications.

The rating actions follow DBRS Morningstar’s analysis of the overall risk exposure of the CMBS sector to the Coronavirus Disease (COVID-19) and the resulting conclusion that certain asset classes are more at risk and likely to be affected by the fallout of the pandemic on the economy. The five transactions, listed below, have exposure to either hospitality or retail assets.

Debussy DTC Plc
-- Class A Notes rated B (sf)

Deco 2019-RAM DAC
-- Class A Notes rated AAA (sf)
-- Class B Notes rated AA (sf)

Ribbon Finance 2018 Plc
-- Class A Notes rated AAA (sf)
-- Class B Notes rated AA (low) (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (high) (sf)
-- Class E Notes rated BBB (low) (sf)
-- Class F Notes rated BB (high) (sf)
-- Class G Notes rated BB (sf)

Helios (European Loan Conduit No. 37) DAC
-- Class A Notes rated AAA (sf)
-- Class B Notes rated AA (low) (sf)
-- Class C Notes rated A (low) (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (high) (sf)

Magenta 2020 PLC
-- Class A Notes rated AAA (sf)
-- Class B Notes rated AA (low) (sf)
-- Class C Notes rated A (low) (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (sf)

DBRS Morningstar also rates the RFN Class of notes within Helios (European Loan Conduit No. 37) DAC but did not place this Under Review with Negative Implications.

For transactions secured by hotel assets, DBRS Morningstar expects a short-/medium-term income decline and value drop. There will likely be limited, if any, liquidity for such properties in the short term, but a gradual recovery of income and values can be expected once economies reopen. The extent of income recovery will depend on the type of hotel.

For transactions secured by retail assets, DBRS Morningstar expects a short-term rental income reduction that will gradually recover towards the end of 2020, but likely not back to the end-2019 levels. DBRS Morningstar expects values will decline amid reduced rental income and widening property yields.

DBRS Morningstar typically endeavours to resolve the status of ratings Under Review with Negative Implications as soon as appropriate. If heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 22 July 2020. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/364318/global-macroeconomic-scenarios-july-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 16 June 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated CMBS in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/362693/european-cmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is: “European CMBS Rating and Surveillance Methodology” (13 December 2019).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transactions in accordance with the surveillance section of the principal methodology.

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in these transactions are listed at the end of this press release.

These may be found at: https://www.dbrsmorningstar.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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include servicer reports provided by Mountstreet Mortgage Servicing Limited, CBRE Loan Services Limited, and Situs Asset Management since issuance.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action for Debussy DTC Plc took place on 6 March 2020, when DBRS Morningstar confirmed its B (sf) rating on the Class A notes. The last rating action on Deco 2019-RAM DAC took place on 27 March 2020 and for Ribbon Finance 2018 Plc, Helios (European Loan Conduit No. 37) DAC, and Magenta 2020 Plc took place on 3 April 2020, when DBRS Morningstar changed the trend to Negative from Stable on all classes of notes. However, DBRS Morningstar did not change the trend on RFN Class of notes within Helios (European Loan Conduit No. 37) DAC.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

These ratings are Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. If heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time. Sensitivity analysis is not applicable.
For further information on DBRS Morningstar’s historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and U.S. regulations only.

Lead Analyst: Dinesh Thapar, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Dates: 29 July 2013 for Debussy DTC PLC, 13 September 2019 for Deco 2019-RAM DAC, 9 May 2018 for Ribbon Finance 2018 Plc, 16 December 2019 for Helios (European Loan Conduit No. 37) DAC, 13 February 2020 for Magenta 2020 PLC.

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Tel. +44 (0) 20 7855 6600

Registered and incorporated under the laws of England and Wales: Company No. 7139960

The rating methodologies used in the analysis of these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- European CMBS Rating and Surveillance Methodology (13 December 2019), https://www.dbrsmorningstar.com/research/354637/european-cmbs-rating-and-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (11 September 2019), https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019), https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019),
https://www.dbrsmorningstar.com/research/350907/derivative-criteria-for-european-structured-finance-transactions.
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.