KBRA Assigns Preliminary Ratings to RCMF 2018-FL2

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Kroll Bond Rating Agency (KBRA) announces the assignment of preliminary ratings to six classes of RCMF 2018-FL2, a $278.3 million commercial real estate collateralized loan obligation (CRE CLO) securitization, with the post-closing ability to acquire companion pari passu participations related to the closing date assets.

On the securitization closing date, the transaction is expected to be collateralized by 54 commercial mortgage assets, consisting of 35 pari passu participations (70.1%), 13 whole loans (15.0%), and six senior participations (14.9%) secured by a total of 56 properties. Fifty-one loans (91.4%) are secured by the borrowers’ fee simple interests in the related mortgaged properties, two loans (4.9%) are secured by the borrowers’ leasehold interests, and one loan (3.6%) is secured by the borrower’s fee simple and leasehold interests in the related properties.

For 24 months following the closing date, the transaction permits the issuer to acquire funded companion pari passu participations related to the closing date assets using certain principal proceeds received from the mortgage assets, provided the acquisition criteria are satisfied. In addition, defaulted loans can be sold to the majority holder of the Class G notes at par plus accrued.

The transaction includes an interest coverage (IC) and an overcollateralization (OC) test. If either test is not satisfied on any measurement date, on the following payment date, interest proceeds remaining after interest is paid to the Class D notes will be diverted and used to pay down the principal balance of the Class A through D notes in sequential (alphabetical) order until the test(s) are satisfied or such classes are paid in full.

KBRA’s 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 KBRA’s values to be, on average, 29.8% and 49.5% lower than the appraiser’s as-is and stabilized values, respectively. The resulting in-trust KBRA Loan to Value (KLTV) was 121.2%. We also conducted scenario analyses to evaluate and incorporate the impact of the transaction’s various structural features in our ratings assignment process.

For complete details of the analysis, please see our pre-sale report, RCMF 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.

Preliminary Ratings Assigned: RCMF 2018-FL2

       
Class     Initial Note Balance     Expected KBRA Rating
A     $154,447,000     AAA(sf)
B     $17,740,000     AA-(sf)
C     $17,392,000     A-(sf)
D     $27,480,000     BBB-(sf)
E     $11,479,000     BB-(sf)
F     $13,566,000     B-(sf)
G     $36,179,285     NR
 

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 Representation & Warranties Disclosure.

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

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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 recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and 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.

More news and information about Kroll Bond Rating Agency

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Business Wire: 23:54 GMT Wednesday 13th June 2018

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