Press Release

DBRS Morningstar Upgrades One Class of Waterfall Victoria Mortgage Trust, Series 2011-SBC2, Changes Trend to Stable

CMBS
March 26, 2020

DBRS Limited (DBRS Morningstar) upgraded the following class of the Mortgage-Backed Certificates Series 2011-SBC2 issued by Waterfall Victoria Mortgage Trust, Series 2011-SBC2 (the Trust):

-- Class M-3 to AAA (sf) from AA (high) (sf)

In addition, DBRS Morningstar confirmed the second remaining class as follows:

-- Class M-2 at AAA (sf)

DBRS Morningstar also changed the trend on Class M-3 to Stable from Positive. The trend on Class M-2 is Stable.

These rating actions reflect the overall strong performance of the transaction, with collateral reduction of 81.3% since issuance as of the February 2020 remittance. Since issuance, 122 of the original 175 loans have been repaid in advance of maturity, while 22 loans have been liquidated from the Trust. Loan repayments, scheduled amortization, and proceeds from liquidated loans have significantly increased the credit support for the senior and mezzanine classes, with losses of $3.6 million contained to the junior Class M-5 certificates, which had a remaining balance of $4.2 million as of the February 2020 remittance. The transaction is composed of small-balance loans, with an average remaining loan balance of approximately $158,000 as of February 2020.

To date, 31 loans (57.8% of the pool) have reported YE2018 net cash flow (NCF) figures and nine loans (19.4% of the pool) have reported YE2017 NCFs, while the remainder of the loans have reported figures for prior years or have not reported since issuance. Based on the most recent year-end financials available, the top 15 loans, which account for 38.4% of the current pool balance, have a weighted-average debt yield of 9.6%.

As of the February 2020 remittance report, there are five loans in special servicing, representing 7.3% of the pool. DBRS Morningstar assumed a 100.0% probability of default (POD) for these loans to increase the expected loss for each in the modelling. There are also 32 loans on the servicer’s watchlist, representing 62.4% of the outstanding pool balance. These loans remain current but are being monitored for various issues, including low debt service coverage ratios, low occupancy rates, and the borrower’s failure to provide updated financials. Although the servicer’s watchlist concentration is high, this is not uncommon for pools composed of small-balance loans that are typically secured by properties with a higher potential for above-average cash flow volatility. DBRS Morningstar modelled the loans on the servicer’s watchlist with an increased POD penalty.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

DBRS Limited
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Ratings

Waterfall Victoria Mortgage Trust, Series 2011-SBC2
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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