DBRS Release CMBS European Surveillance Methodology

DBRS Ratings Limited ("DBRS") has today published a methodology for its surveillance of European commercial mortgage-backed securities (CMBS). This methodology details DBRS’s surveillance procedures as they relate to European CMBS rated by DBRS (inclusive of public ratings, private ratings and CMBS collateral contributed to asset-backed commercial paper and collateralized debt obligations) and describes the analysis taken to arrive at any rating actions arising from the surveillance.

"A variety of events can affect the collateral of a CMBS pool and the cash flow necessary to ensure timely and ultimate payment of CMBS bonds," says Erin Stafford, Managing Director. "During the life of a transaction, loans go delinquent, take losses, defease or prepay; tenants vacate; markets improve or soften; property values increase or decrease, to name only a few things that can change."

When initially establishing a rating, DBRS assumes that changes in the performance of the underlying loans can and do occur; therefore, it assigns ratings designed to withstand a certain level of volatility within the underlying commercial mortgage loans. Surveillance is critical to measuring and communicating to the investment community whether or not a change has the potential of affecting the ratings assigned to the bonds.

"This methodology will give investors greater transparency into the DBRS CMBS European rating philosophy," says Scott Goedken, European CMBS. DBRS expects its ratings to hold throughout a cycle; however, DBRS is committed to performing surveillance and releasing performance update reports at a level that increases the transparency of its ratings.