DBRS Finalizes Provisional Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2014-C19

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C19 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C19:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class PST at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

All trends are Stable.

Classes X-B, X-C, X-D, X-E, X-F, D, E, and F have been privately placed.

Classes X-A, X-B, X-C, X-D, X-E and X-F balances are 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. DBRS has withdrawn its provisional rating of Class X-G.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for Class PST certificates. Class PST certificates may be exchanged for up to the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 77 fixed-rate loans secured by 114 commercial properties. The second-largest loan in the pool, 300 North LaSalle, representing 8.9% of the pool, was shadow-rated AAA by DBRS. 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, two loans, representing 2.3% of the pool, had a DBRS Term debt service coverage ratio (DSCR) below 1.15times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts, resulting in 69.2% of the pool having refinance DSCRs below 1.00x.

Eleven loans, representing 4.1% of the pool, are leased to single tenants, which have higher loss severities in the Event of Default. Five of the 11 single-tenant loans, representing 32.9% of the single-tenant concentration, are occupied by The Walgreen Company, an investment-grade-rated tenant on leases expiring well beyond loan maturity, providing for minimal term risk and, in certain instances, reduced refinance risk as well. Additionally, seven loans, representing 20.4% of the pool (including two in the top ten), are structured as IO for the full loan term. An additional 33 loans, representing 53.7% of the pool, have partial IO periods ranging from 12 to 72 months. The transaction’s scheduled amortization by maturity at -12.0% is below other recent conduit transactions.

The DBRS sample included 32 of the 77 loans in the pool, representing 78.0% of the pool by loan balance. Five of the sampled loans, including 300 North LaSalle, Gantry Park Landing, Linc LIC, One & Only Ocean Club and Thousand Oaks Medical Center, representing 24.8% of the pool, were modeled with Excellent and Above Average property quality, respectively. Three loans, representing 3.7% of the pool, were given Below Average 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:
All figures are in U.S. dollars unless otherwise noted.

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

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

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 Other Research or by contacting us at info@dbrs.com.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.