DBRS Morningstar Upgrades Six Classes of A10 Bridge Asset Financing 2020-C, LLC

DBRS Limited (DBRS Morningstar) upgraded the ratings on the following classes of notes issued by A10 Bridge Asset Financing 2020-C, LLC:

-- Class B Notes to AAA (sf) from AA (low) (sf)
-- Class C Notes to A (high) (sf) from A (low) (sf)
-- Class D Notes to A (low) (sf) from BBB (high) (sf)
-- Class E Notes to BBB (sf) from BBB (low) (sf)
-- Class F Notes to BB (high) (sf) from BB (sf)
-- Class G Notes to B (high) (sf) from B (sf)

In addition, DBRS Morningstar confirmed the rating on the following class of notes:

-- Class A Notes at AAA (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of loan repayment and scheduled loan amortization as there has been collateral reduction of 50.5% since issuance, according to the June 2022 remittance. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at [email protected].

The initial collateral consisted of 58 loans secured by cash-flowing assets, many of which are in a period of transition with plans to stabilize and improve the asset value. The pool had an initial trust balance of $398.2 million comprising loan assets and $10.8 million held in reserve account to fund future funding participations.

As of the June 2022 remittance report, 20 of the original 58 loans remain in the pool. Nine of the loans are cross-collateralized and cross-defaulted into three distinct portfolios with DBRS Morningstar analyzing the transaction as a pool with 14 loans. The current trust balance of $197.9 million consists of an outstanding aggregate loan balance of $192.9 million with $5.0 million of held in reserve, representing a collateral reduction of 50.5% since issuance. Approximately $13.0 million of future funding has been released to date on the outstanding loans in the pool to aid in business plan completion, with $9.9 million of future funding outstanding. No loans are in special servicing and five loans, representing 23.2% of the aggregate loan balance, are on the servicer’s watchlist.

The transaction consists of recently originated loans and loans that were originated in 2017 or earlier. There is the potential for adverse selection in the transaction as properties secured by seasoned loans have generally needed more time than originally projected to stabilize; however, these loans also generally have moderate leverage based on updated appraised values ordered prior to the securitization of the subject transaction in September 2020. As of the June 2022 reporting, the transaction had a weighted-average as-is loan-to-value ratio of 55.7%.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

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/396929.

DBRS Morningstar materially deviated from its CMBS Insight Model when determining the ratings assigned to Classes C, D, E, F, and G as the quantitative results suggested higher ratings. These material deviations are warranted, given the structural features (loan or transaction) and/or provisions in other relevant methodologies that outweigh the quantitative analysis output. In addition, the sustainability of the loan performance trends has not been demonstrated as there are loans remaining that are secured by transitional properties with business plan interruptions, which are delaying stabilization.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 [email protected].

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 [email protected].

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