DBRS Upgrades Three Classes of Waterfall Victoria Mortgage Trust, Series 2011-SBC2

DBRS, Inc. (DBRS) has today upgraded three classes of Waterfall Victoria Mortgage Trust, Series 2011-SBC2 as follows:

-- Class M-1 to AAA (sf) from AA (high) (sf)
-- Class M-2 to AA (low) (sf) from A (high) (sf)
-- Class M-3 to A (low) (sf) from BBB (high) (sf)

DBRS has also confirmed the rating of Class A at AAA (sf). All trends are Stable. DBRS does not rate Class M-4, Class M-5 or the notional bond, Class XC.

The rating upgrades reflect the stable performance of the underlying collateral, coupled with the increased credit enhancement to the bonds from loan liquidations, early repayments and amortization. Since issuance, 86 of the original 175 loans have either paid off in advance of maturity or been liquidated from the trust. As a result, the total collateral reduction has increased to 59.0% as of the February 2016 remittance. The transaction is composed of small balance loans, as the average outstanding loan balance is approximately $450,000. To date, 19 loans have been liquidated from the pool at a combined realized loss of approximately $3.3 million, which has been contained to the unrated Class M-5. According to the most recent year-end financial reporting, the top 15 loans, which account for 33.2% of the current pool balance, have a weighted-average debt yield of 9.6%.

As of the February 2016 remittance report, there are two loans in special servicing, representing 2.5% of the pool. DBRS analyzed these loans assuming a 100.0% probability of default and elevated losses. There are also 38 loans on the servicer’s watchlist, representing 41.4% of the outstanding pool balance. These loans remain current but are being monitored for low debt service coverage ratios and low occupancy rates.

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 methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.