First-lien, limited-recourse mortgages, fixtures and escrows from two data centers in Ashburn, Virginia will secure $1.4 billion in asset-backed securities, to be sold to investors through Iskandar Enterprise and Kaveh Enterprise.
Analysts from Fitch Ratings and S&P Global Ratings assessed the notes, finding that the five fixed-rate notes from the deal are interest-only, with a five-year annual repayment date and a 30-year legal final maturity (April 2056).
Guggenheim Securities is the deal's sole structuring advisor, and the transaction is slated to close on May 1, Fitch and S&P said. During the deal's annual repayment date, all the transaction's excess cash flow will hyper amortize the loan, the rating agencies said.
To boost credit to the notes, Iskandar and Kaveh have a liquidity reserve of about $16.3 million at closing, according to S&P.
There is also a cash-trapping trigger if the three-month average class A debt service coverage ratio (DSCR) falls below 1.45x, Fitch and S&P said.
Also, if the three-month average, class A DSCR falls below 1.25x, then an amortization period will begin, and that will continue until the class A DSCR exceeds the trigger threshold for two consecutive months, according to Fitch.
Northern Virginia has the world's densest concentration of data centers, according to analysts.
The one million square feet of data center property represents 160 megawatts Trimont is the mortgages' servicer, according to the rating agencies, and CloudHQ Services is the deal's manager. That the servicer or issuer can remove the manager for cause and replaced it with another gives the deal another credit boost, Fitch said.
Fitch finds that the notes have moderate leverage, with a DSCR of 0.71x, a loan-to-value (LTV) ratio of 125.6%, and a debt yield of 6.4%.
When examining the deal's expected paydown, and excluding accrued step-up interest post-annual repayment date, Fitch said, its LTV will decrease to 91.5%, in year 15, 62.3% in year 20 and 22.0% in year 25, the rating agency said.
S&P assigns 'A' to the A-2 III tranche. As for Fitch, the ratings are AAA, AA-, A, A- and BBB on the A-2-I, A-2-II, A-2-III, B1 and B2, respectively.
