DBRS Morningstar Finalizes Its Provisional Ratings on the Class A1 Notes, Class A2 Notes, and Class A3 Notes of Bayview Financing SBC Trust 2021-5F

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the Class A1 Notes, the Class A2 Notes, and the Class A3 Notes (together, the Notes) issued by Bayview Financing SBC Trust 2021-5F (the Issuer), pursuant to the Bayview Financing SBC Trust 2021-5F Indenture dated as of September 16, 2021, among Bayview Financing SBC Trust 2021-5F as Issuer, U.S. Bank National Association as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, and Bayview MSR Opportunity Master Fund, L.P as Trustor:

-- Class A1 Notes at A (low) (sf)
-- Class A2 Notes at BBB (low) (sf)
-- Class A3 Notes at BB (high) (sf)

The final ratings on the Notes address the ultimate payment of interest and principal on or before the Maturity Date (as defined in the Indenture referenced above).

Bayview Financing SBC Trust 2021-5F is a re-securitization of previously issued commercial mortgage-backed securities of Silver Hill Trust 2019-SBC1. Silver Hill Trust 2019-SBC1 is a small balance commercial (SBC) securitization that, at the time of closing, was collateralized by 978 first-lien loans secured primarily by commercial real estate, multifamily, and single-family rental properties, and, as of the July 2021 remittance report, was collateralized by 781 loans because of repayment.

The assets backing the Bayview Financing SBC Trust 2021-5F transaction consist of interest-only (IO) notes, and principal and interest (P&I) notes, Class P notes, and Class X subordinated notes issued by Silver Hill Trust 2019-SBC1. The Issuer will purchase approximately $305.7 million IO notes as well as approximately $123.8 million P&I notes such that the total principal amounts of P&I notes is equal to the total initial amount of the Notes.

Given the complexity of the structure and granularity of the underlying SBC loan pool, DBRS Morningstar applied its Rating Structured Finance CDO Restructurings methodology (the Repack Methodology), North American CMBS Multi-Borrower Rating Methodology (the CMBS Methodology) and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (the RMBS Methodology).

DBRS Morningstar materially deviated from its RMBS methodology when determining the ratings assigned to the Notes by applying additional prepayment stresses in addition to the four prepayment stresses—5.0%, 10.0%, 15.0%, and 20.0%—applied on Silver Hill Trust 2019-1. The material deviation is warranted, given the sensitivity of IO notes of Silver Hill Trust 2019-SBC1 to the prepayment speed of the underlying SBC loans, DBRS Morningstar considered the additional prepayment stresses applied to be a conservative approach to stress the cash flows to service the principal and interest payments of the Notes.

The final ratings reflect the following:

(1) The Indenture and other transaction documents dated September 16, 2021.

(2) The integrity of the proposed transaction structure.

(3) DBRS Morningstar’s assessment of the portfolio quality. DBRS Morningstar conducted its analysis on both Bayview Financing SBC Trust 2021-5F and Silver Hill Trust 2019-SBC1 by applying relevant methodologies and appropriate stresses.

(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

(5) DBRS Morningstar’s assessment of the management capabilities of Bayview MSR Asset Selector, LLC and its affiliates as an acceptable servicer and special servicer for small balance commercial transactions.

As the Coronavirus Disease (COVID-19) spread around the world, certain countries imposed quarantines and lockdowns, including the United States, which accounts for more than one-fourth of confirmed cases worldwide. The coronavirus pandemic has negatively affected not only the economies of the nations most afflicted, but also the overall global economy with diminished demand for goods and services as well as disrupted supply chains. The effects of the pandemic may result in deteriorated financial conditions for many companies and obligors, some of which will experience the effects of such negative economic trends more than others. At the same time, governments and central banks in multiple regions, including the United States and Europe, have taken significant measures to mitigate the economic fallout from the coronavirus pandemic.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Structured Finance CDO Restructurings (November 12, 2020), RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), and North American CMBS Multi-Borrower Rating Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].