Chalkhill Partners plans to issue a large loan, agency style U.K. commercial mortgage securitization that is secured by student housing, according to a Standard & Poor’s presale report.
An agency-style CMBS directly links the sponsors' cost of debt to the price of the bonds.
The deal, AYR Issuer, being done for Avenue Capital Student Real Estate will finance a £107 million loan that has a five-year term, with a two-year extension option. The notes pay a floating-rate of interest.
S&P expects to assign the single tranche offering a ratings of A’.
AYR establishes an issuer-level interest reserve throughout the transaction's life, which provides liquidity support to the transaction. Issuance proceeds will fund a reserve up to an amount equal to six months' interest.
The borrowers (GL Europe Sheffield 1 S.à.r.l., GL Europe Nottingham 12 S.à.r.l., GL Europe Trinity Square S.à.r.l., and GL Europe Summit S.à.r.l.) pay a further facility fee to the issuer on each loan payment date in order to fund the issuer's expense requirements.
“Between expected final and legal final maturity, we believe the special servicer could sell the underlying collateral, if necessary, in a real estate workout scenario to meet repayment by legal final maturity,” explained S&P in the presale report.
AYR is only the second time, in the past two years that a U.K. CMBS is backed by student housing. It follows the UNITE (USAF) II PLC in 2013.
S&P said that the properties securing the AYR loan are all modern, purpose-built student accommodation, located in popular university towns.