Approximately EUR 133 million of CMBS rated
London, 23 February 2021 -- Moody's Investors Service ("Moody's") has assigned
the following provisional ratings to the debt issuance of Taurus 2021-2
SP DAC (the "Issuer"):
....EUR 71.7M Class A Commercial Mortgage
Backed Floating Rate Notes due 2031, Assigned (P)Aa3 (sf)
....EUR 9.4M Class B Commercial Mortgage
Backed Floating Rate Notes due 2031, Assigned (P)Aa3 (sf)
....EUR 8.0M Class C Commercial Mortgage
Backed Floating Rate Notes due 2031, Assigned (P)A3 (sf)
....EUR 20.5M Class D Commercial Mortgage
Backed Floating Rate Notes due 2031, Assigned (P)Baa3 (sf)
....EUR 23.292M Class E Commercial
Mortgage Backed Floating Rate Notes due 2031, Assigned (P)Ba3 (sf)
Moody's has not assigned provisional ratings to the Class X Notes of the
Issuer.
Taurus 2021-2 SP DAC is a true sale transaction of a portion of
a floating rate senior loan totaling EUR 269.89 million.
The loan comprises four facilities, two of which relate to a Capex
program. The loan has been partially syndicated for a total of
EUR 45.0 million. The issuer will use the notes proceeds
to purchase a majority interest in the senior loan that was used to finance
the acquisition and related transaction closing costs of seven office
properties and the refinance of a loan for an additional office property.
The combined eight-office portfolio consisting of 30 buildings
is located in Spain, with most of the properties predominantly in
Madrid. There is a EUR 49.4 million mezzanine facility that
is contractually and structurally subordinated to the senior loan.
RATINGS RATIONALE
Today's rating actions are based on: (i) Moody's assessment of the
real estate quality and characteristics of the collateral; (ii) analysis
of the loan terms; and (iii) the expected legal and structural features
of the transaction.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak Spanish economic activity and a gradual recovery
for the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
The key parameters in Moody's analysis are the default probability of
the securitised loan (both during the term and at maturity) as well as
Moody's value assessment of the collateral. Moody's derives from
these parameters a loss expectation for the securitised loan. Moody's
total default risk assumptions are medium for the loan. The Moody's
LTV ratio of the securitised loan at origination is 75.8%.
Moody's applied a property grade of 2.0 for the portfolio (on a
scale of 1 to 5, 1 being the best).
The rating on the Class A Notes is constrained at four notches above the
current Spanish government bond rating (Baa1 Stable). Future changes
to the government bond rating will likely result in a change of the Class
A rating.
The key strengths of the transaction include: (i) the good tenant
and property diversity, (ii) good loan features including conditional
amortization and cash trap covenants, (iii) the medium total default
risk, and (iv) the experienced sponsor and asset manager with local
expertise.
Challenges in the transaction include: (i) the increased uncertainty
around the impact of the coronavirus crisis; (ii) the underperforming
occupancy in the portfolio; (iii) the additional mezzanine debt that
increased the overall leverage; and (iv) the work from home trend.
The principal methodology used in these ratings was "Moody's
Approach to Rating EMEA CMBS Transactions" published in October
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1243194.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Main factors or circumstances that would lead to a downgrade of the ratings
are generally: (i) a decline in the property values backing the
underlying loan; (ii) an increase in the default probability of the
loan; (iii) changes to the ratings of some transaction counterparties;
and (iv) given the exposure to Spain, an increase in sovereign risk.
Main factors or circumstances that could lead to an upgrade of the ratings
are generally: (i) an increase in the property values backing the
underlying loan; (ii) a decrease in the default probability driven
by improving loan performance or decrease in refinancing risk; and
(iii) given the exposure to Spain, a decrease in sovereign risk.
For further details, please refer to the presale report available
in due course.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis relies on a Monte Carlo simulation that generates a large
number of collateral loss or cash flow scenarios, which on average
meet key metrics Moody's determines based on its assessment of the
collateral characteristics. Moody's then evaluates each simulated
scenario using model that replicates the relevant structural features
and payment allocation rules of the transaction, to derive losses
or payments for each rated instrument. The average loss a rated
instrument incurs in all of the simulated collateral loss or cash flow
scenarios, which Moody's weights based on its assumptions
about the likelihood of events in such scenarios actually occurring,
results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Benjamin Bouchet
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Andrea M. Daniels
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
