KBRA Assigns Preliminary Ratings to WFCM 2017-C41

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Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the WFCM 2017-C41 transaction (see ratings list below). WFCM 2017-C41 is a $785.9 million CMBS conduit transaction collateralized by 52 commercial mortgage loans secured by 97 properties.

The properties in the collateral pool are located in 26 states, with California (25.4%) and New Jersey (12.2%) each representing more than 10.0% of the pool balance. The pool has exposure to all of the major property types, with three that each represent more than 15.0% of the pool balance: retail (27.1%), lodging (20.4%), and office (18.4%). The loans have principal balances ranging from $1.0 million to $50.0 million for the largest loan in the pool, Headquarters Plaza (6.4%), a 10.4-acre mixed-use development in Morristown, New Jersey, approximately 34 miles west of New York City. The five largest loans, which also include Marriott LAX (5.6%), Mall of Louisiana (5.2%), Adler Portfolio (5.1%), and U.S. Industrial Portfolio III (3.9%), represent 26.2% of the initial pool balance, while the 10 largest loans represent 41.9%.

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of the underlying collateral properties' financial and operating performance, which determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value using our CMBS Property Evaluation Methodology. On an aggregate basis, KNCF was 6.7% less than the issuer cash flow. KBRA capitalization rates were applied to each asset’s KNCF to derive values that were, on an aggregate basis, 39.8% less than third party appraisal values. The pool has an in-trust KLTV of 102.6% and an all-in KLTV of 103.3%. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that are then used to assign our credit ratings.

For complete details on the analysis, please see our pre-sale report, WFCM 2017-C41 published today at www.kbra.com. The report includes our KBRA Comparative Analytic Tool (KCAT), an easy to use, Excel-based workbook that provides the following information:

  • KBRA Deal Tape – Contains KBRA loan level details for every loan in the pool, and the ability for users to input adjustments to KNCF and KBRA Cap Rates and see the related impact on key deal metrics.
  • KBRA Credit Metrics Comparison Tool – Enables the user to compare the subject transaction to a user-defined transaction comp set. The feature provides many of the fields that are included in our CMBS Monthly Trend Watch publication.
  • Excel-based property cash flow statements for the top 20 loans.

Preliminary Ratings Assigned: WFCM 2017-C41

Class     Initial Class Balance     Expected KBRA Rating
A-1     $30,952,000     AAA(sf)
A-2     $14,675,000     AAA(sf)
A-SB     $44,401,000     AAA(sf)
A-3     $215,000,000     AAA(sf)
A-4     $245,117,000     AAA(sf)
A-S     $69,751,000     AAA(sf)
B     $38,313,000     AA-(sf)
C     $32,420,000     A-(sf)
D     $12,771,000     BBB(sf)
E-RR1     $22,595,000     BBB-(sf)
F-RR1     $13,754,000     BB-(sf)
G-RR1     $12,771,000     B-(sf)
H-RR1     $33,402,177     NR
X-A     $550,145,0002     AAA(sf)
X-B     $140,484,0002     AAA(sf)
X-D     $12,771,0002     BBB(sf)

1 In satisfaction of the US Risk Retention rules, these classes will be purchased and retained by a third party purchaser on the closing date. Such classes will represent an “eligible horizontal residual interest” and will represent at least 5.0% of the fair market value of all non-residual certificates issued.

2 Notional balance

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.

Related Publications: (available at www.kbra.com)

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

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Business Wire: 15:06 GMT Monday 13th November 2017

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