DBRS Assigns Provisional Ratings to MCAP CMBS Issuer Corporation, Series 2014-1

DBRS Limited (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-1 (the Certificates) issued by MCAP CMBS Issuer Corporation, Series 2014-1:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
-- Class X at AAA (sf)

Class X is notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

The collateral for the transaction consists of 32 fixed-rate loans secured by 40 traditional property types such as retail, office, industrial and multifamily. All 32 loans in the transaction amortize for the entire term, with the majority of the pool (94.3%) by loan balance amortizing on a 25-year or less amortization schedule (79.9% have between 20 years and 25 years of remaining amortization) and 5.7% of the pool by loan balance having longer than 25-year amortization schedules. Twenty-two loans (60.0% of the pool by loan balance) offer meaningful recourse to the respective sponsor; all else equal, recourse loans typically have lower probability of default and were modeled as such.

The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow and their respective actual constants, DBRS identified seven loans (20.2% of the pool based on A-note balances) or nine loans (27.1% of the pool based on whole loan balances) as having a higher likelihood of mid-term default as evidenced by DBRS Term Debt Service Coverage Ratio (DSCR) below 1.15 times (x). In addition, 56.9% of the pool, based on both A-note and whole loan balances, have DBRS Refinance DSCRs below 1.00x. The DBRS weighted-average (WA) Term DSCR and Going-In Debt Yield based on A-note balances are 1.25x and 8.25%, respectively. The DBRS WA Term DSCR and Debt Yield, based on the whole loan balances, are 1.24x and 8.20%, respectively. The DBRS WA Exit Debt Yield based on A-note and whole loan balances are 9.46% and 9.40%, respectively.

DBRS sampled 25 loans, representing 84.6% of the pool by loan balance, and site inspections were performed on 31 properties, representing 84.6% of the pool by loan allocated balance. Of the sampled loans, two loans were considered to be of Above Average property quality, and one loan was considered to be of Poor property quality.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodology is CMBS Rating Methodology (January 2012), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.