DBRS Morningstar Confirms Credit Ratings on All Classes of A10 Revolving Asset Financing I, LLC; Changes Trends on All Classes to Negative From Stable

DBRS, Inc. (DBRS Morningstar) confirmed its credit ratings on all classes of notes issued by A10 Revolving Asset Financing I, LLC (the Issuer) as follows:

-- $300 million Class A Senior Variable Funding Notes (the Class A Notes) at AA (low) (sf)
-- $10 million Class B Senior Subordinated Floating Rate Notes (the Class B Notes) at BBB (high) (sf)

The trends on the Class A and Class B Notes have been changed to Negative from Stable.

The credit ratings are based on a pool composed of commercial real estate loans derived from the concentration limits and eligibility requirements as defined in the Seventh Amended and Restated Trust Indenture (the Trust Indenture). The Negative trends reflect the increased credit risk of the loans currently held on the revolving loan facility (the transaction), which are primarily secured by nonstabilized commercial real estate properties with individual borrower plans to improve cash flow and asset value. Historically, the Issuer has used the transaction as a vehicle to hold loans prior to securitizing them in commercial mortgage backed securities (CMBS) transactions. In the analysis, DBRS Morningstar constructed a pool based on loan collateral currently in the facility, proposed loans to be added to the facility, and the addition of hypothetical loans based on the concentration limits and eligibility requirements as defined in the Trust Indenture for the subject transaction. The weighted-average expected loss for the pool suggests downward pressure on the Classes of Notes relative to the credit support, which is 20.0% for the Class A Notes and 17.3% for the Class B Notes, therefore supporting the Negative trends.

The transaction originally closed in October 2012 and has been extended and upsized multiple times over the years. The most recent version of the Trust Indenture, dated November 2022, allows a maximum balance of $300.0 million for the Class A Notes. With each extension and upsize, DBRS Morningstar reviewed the documentation and finalized terms as part of the Issuer’s request for rating agency condition. The credit ratings address the likelihood of the timely receipt by the Class A Noteholders of interest and the ultimate repayment of principal on or before the legal final maturity date of the Issuer. The Class A Notes mature on the payment date occurring seven years following the date of the latest extension of the facility. The credit rating on the Class B Notes addresses the ultimate repayment of principal and, with regard to interest, the likelihood of the timely receipt by the Class B Noteholders of interest to the extent not deferred as provided for in the indenture and, if deferred, ultimate repayment of interest by its final legal maturity date. The Class B Notes shall mature on the payment date occurring three months following the legal final maturity date of the Class A Notes.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance 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/416784 (July 4, 2023).

All credit ratings are subject to surveillance, which could result in credit 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 (March 16, 2023), https://www.dbrsmorningstar.com/research/410912.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating assigned to Class A materially deviates from the credit rating implied by the predictive model. DBRS Morningstar typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit rating would consider a three-notch or more deviation from the credit rating stress implied by the predictive model to be a significant factor in evaluating the credit rating. The rationale for the material deviation is uncertain loan level event risk as the transaction is composed of loans secured by primarily nonstabilized commercial real estate assets. In addition, the structural features (loan or transaction) and/or provisions in other relevant methodologies outweigh the quantitative model output.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and credit ratings are monitored.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model Version 1.1.0.0, https://www.dbrsmorningstar.com/research/410913

-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://www.dbrsmorningstar.com/research/420982

-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://www.dbrsmorningstar.com/research/419592

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023), https://www.dbrsmorningstar.com/research/415687

-- Legal Criteria for U.S. Structured Finance (December 7, 2022), https://www.dbrsmorningstar.com/research/407008

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