Morningstar DBRS Downgrades Credit Ratings on Two Classes of A10 Revolving Asset Financing I, LLC

DBRS, Inc. (Morningstar DBRS) downgraded 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) to A (sf) from AA (low) (sf)
-- $10 million Class B Senior Subordinated Floating Rate Notes (the Class B Notes) to BBB (sf) from BBB (high) (sf)

Morningstar DBRS also changed the trends on the Class A and Class B Notes to Stable from Negative.

The credit ratings are based on a pool composed of commercial real estate loans currently held on the revolving loan facility (the transaction) with additional hypothetical loans derived from the concentration limits and eligibility requirements as defined in the Seventh Amended and Restated Trust Indenture (the Trust Indenture). The credit rating downgrades to the Notes reflect the credit risk of the loans and the weighted-average loan expected loss of the loans in the transaction relative to the credit support to the Notes, which is 20.0% for the Class A Notes and 17.3% for the Class B Notes as the advance rate on fully funded senior loan financing is 80.0%. In its previous credit rating action in November 2023, Morningstar DBRS placed both classes of Notes on Negative trend to reflect the increased credit risk of the loans held on the facility. With the review for this credit rating action, Morningstar DBRS determined the loans currently on the facility continued to exhibit increased risks, supporting the credit rating downgrades.. The trend changes on the Notes are warranted as Morningstar DBRS expects the performance of the transaction to remain stable relative to the updated respective credit ratings.

As of September 2024 reporting, there are 18 loans on the facility. The outstanding aggregate senior loan balance is $265.0 million with a potential fully funded aggregate senior loan balance of $283.4 million. The loans are secured by a mix of commercial property types including industrial, retail, multifamily, manufactured housing community, hotel, and office properties. The loans are primarily secured by non-stabilized 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.

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 October 2022, allows a maximum balance of $300.0 million for the Class A Notes. With each extension and upsize, Morningstar DBRS 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 factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

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

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective private rating letters at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

The credit ratings were initiated at the request of the rated entity.

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

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

This are solicited credit ratings.

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model Version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Legal Criteria for U.S. Structured Finance (October 28, 2024), https://dbrs.morningstar.com/research/441840

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.