Morningstar DBRS Comments on Taurus 2018-1 S.R.L. Restructuring

Morningstar DBRS commented on the recent amendments to the Bel Air Loan and the notes issued by Taurus 2018-1 IT S.R.L.

With a written resolution duly approved at the adjourned meeting held on 16 January 2025, the noteholders agreed (among other conditions) to extend the final loan maturity of the Bel Air Loan (the only remaining facility of the initial three facilities included in the transaction) to February 2027 from February 2025. The amendment documents were executed on 13 February 2025. The final maturity date of the notes was also extended to May 2034 from May 2032.

The sponsor has paid an extension fee of 1.0% on the loan outstanding amount, whose proceeds were applied on a pro rata basis. Going forward, the loan will be amortising through quarterly cash sweeps until the final loan maturity date, save for the sum of EUR 750,000 to be transferred out of the excess cash flows into a pledged reserve account on any interest payment date (IPD). The borrower can draw cash from the pledged reserve account in case of unforeseen funding requirements (following approval of the facility agent within three business days, not to be unreasonably withheld). The pledged account will be applied in amortization at the end of the extension period or at the full repayment of loan, if earlier.

The loan margin calculation remains unchanged, bearing the aggregate of a per annum (p.a.) percentage rate equal to the weighted-average margin applicable to the notes and a p.a. percentage rate that the loan facility agent calculates as the ratio between (1) EUR 310,000 and (2) the outstanding securitised loan at the IPDs. However, the relevant margins applicable to the Class A, Class B, and Class C Notes were amended to 3.78% p.a., 4.48% p.a., and 6.84% p.a., respectively.

Prepayment provisions remain unchanged, with the Issuer requested to apply any net disposal proceeds toward loan and note repayment in the following order of priority: (1) the allocated loan amount relating to property disposed shall be distributed to the notes still outstanding (other than the Class X Notes) in a sequential order; (2) the release premium shall be applied pro rata to the notes still outstanding (other than the Class X Notes); and (3) the remaining disposal proceeds shall be applied reverse sequentially to the notes. The Class X Notes do not receive any Class X amount.

The most recent valuation report prepared by Savills Advisory Services Limited and dated 1 November 2024 shows a portfolio market value of EUR 122.3 million, slightly improved from the previous valuation of EUR 120.7 million produced by Jones Lang LaSalle and dated December 2023. As of February 2025 IPD, the portfolio's loan-to-value ratio is 45.86%, down from 51.0% at issuance, while the portfolio's debt yield increased to 23.19% from 13.4% at issuance.

A new hedging agreement was with effective date on 17 February 2025 covering the full amount of the outstanding loan balance at a cap strike rate of 3.25%. The hedging, provided by Bank of America, terminates on 15 February 2027.

In Morningstar DBRS' opinion, the executed amendments are credit neutral for the transaction and no further rating action was taken as a result of the restructuring. As such, the ratings on all other classes of notes in the transaction remain unchanged since the last rating action on 28 November 2024. The trends on the Class A, B, and C Notes remain Stable.

The transaction is a securitisation of one floating-rate senior commercial real estate loan (the Bel Air loan). Two other loans¿the Logo and Camelot loans¿that also formed part of the original transaction were repaid in full. The remaining Bel Air loan, which is sponsored by Partners Group L.P. and managed by Kryalos Asset Management S.r.l., is currently backed by four shopping centres in Italy.

The outstanding Bel Air loan amount was EUR 56.1 million as of the February 2025 IPD compared with EUR 110.0 million at the cut-off date in May 2018. This loan was initially backed by a portfolio of six shopping centres. Since then, two properties were sold: the Primavera shopping centre in June 2020 and the Airone shopping centre in September 2023. In addition, a voluntary prepayment of EUR 10 million occurred on the February 2023 IPD as part of the previous restructuring when the Issuer used the funds to redeem the Class D Notes.

Morningstar DBRS maintained its net cash flow assumption at EUR 8.6 million and its cap rate assumption at 9.0%, which translates to a Morningstar DBRS value of EUR 95.3 million, representing a 22.1% haircut to the most updated market value of EUR 122.3 million.

The transaction benefits from a liquidity reserve facility of EUR 2.96 million available to the Class A and Class B Notes. Based on the Euribor cap strike rate of 3.25%, Morningstar DBRS estimated that the liquidity reserve would cover 11 months of interest payment shortfalls. However, based on a Euribor cap of 4.00%, Morningstar DBRS estimates that the liquidity reserve would cover only 10 months of interest payment shortfalls.

The final note maturity is in May 2034. This results in a seven-year tail period, unchanged since origination.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
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 at https://dbrs.morningstar.com/research/437781 (13 August 2024).

Notes:
All figures are in euros unless otherwise noted.

For more information on Taurus 2018-1 IT S.R.L, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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