DBRS Upgrades Three Classes of A10 Securitization 2012-1, LLC

DBRS has today upgraded three classes of Senior Subordinated Fixed Rate Notes issued by A10 Securitization 2012-1, LLC as follows:

-- Class B to A (high) (sf) from A (sf)
-- Class C to BBB (high) (sf) from BBB (sf)
-- Class D to BBB (sf) from BBB (low) (sf)

Additionally, DBRS has confirmed the Class A Senior Fixed Rate Notes at AAA (sf). All trends are Stable.

The rating upgrades reflect the increased credit enhancement to the transaction as a result of successful loan repayment, as well as the stable performance of the remaining loans in the transaction. Since the transaction closed in April 2012, 22 loans have been repaid in full, with the collateral now consisting of 14 loans secured by traditional commercial real estate, including retail, office and industrial properties. As a result of the loan repayments, there has been total collateral reduction of 57.1%. Credit enhancement to the investment-grade-rated notes has increased between 9.1% and 10.8% since issuance. Additionally, as of the June 2014 reporting period, there are no delinquent loans.

All of the collateral loans were originated by A10 Capital, LLC (A10 Capital). A10 specializes in mini-perm loans, which typically have two- to five-year terms and are used to finance properties until they are fully stabilized. The borrowers are typically new equity sponsors of fairly well-positioned assets within their respective markets. A10 Capital’s initial advance is the senior debt component typically for the purchase of a real estate-owned acquisition or discounted payoff loans. Most loans are structured with three-year terms and include built-in extensions and future funding facilities meant to aid in property stabilization, both of which are at the lender’s sole discretion.

The transaction is concentrated, as the largest five loans, based on their respective fully funded amounts, represent 52.5% of the pool balance. The two largest loans in transaction, which represent 27.3% of the pool balance, are secured by office properties in San Antonio, Texas, and Danbury, Connecticut, respectively. Both assets have yet to fully stabilize, with the San Antonio asset already having its initial maturity date extended to November 2015. The Danbury asset matures in August 2014 and according to the servicer, the borrower has requested the lender to execute a one-year maturity date extension option on the loan. Both loans have future funding components remaining, which will likely be needed to stabilize the properties.

The ratings assigned by DBRS contemplate timely payments of distributable interest and, in the case of the Senior Subordinated Fixed Rate Notes, other than the Class A Notes, ultimate recovery of Deferred Note Interest Amounts (inclusive of interest payable thereon at the applicable rate, to the extent permitted by law). The transaction currently is paying pro rata to all classes, including the subordinate Classes E and F. As such, the credit support in terms of percent of pool is expected to remain constant with the actual dollar balances available to absorb losses decreasing. This structural feature will most likely cap future ratings improvements even if performance remains stable.

Notes:
All figures are in U.S. dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

All classes are privately placed pursuant to Rule 144A.

The applicable methodologies are CMBS Rating Methodology and Rating North American Commercial Real Estate Non-Performing Loan Liquidating Trusts, which can be found on our website under Methodologies.