The Dominion Bond Rating Service released the DBRS Approach to Monitoring Commercial Mortgage-Backed Securities [CMBS]: Performance Update Reports analysis last week.
The report, which provides transparency for the agency's continuous monitoring of CMBS ratings, describes the DBRS's approach regarding the preparation of each CMBS performance update report.
Details behind the methodology regarding three main sections are provided in the report: transaction; collateral; and loan/property summaries.
The first part of the report offers an overview of the capital structure, DBRS's ratings viewpoint and unique structural features of the transaction.
Under capital structure, the report shows the class of securities offered; original and current outstanding balances, demonstrating whether any shortfalls exist; the range of credit enhancement for comparable deals at each rating; and current and original DBRS ratings.
Under DBRS's ratings viewpoint, the report provides an outline of the transactions' strengths, weaknesses, benefits, challenges and recent ratings actions.
In the final portion of the transaction methodology, the report highlights the transaction's unique structural features. This may include anything from a description of the payment priority to classes tied to specific loans to unique loan characteristics.
In the second part of the report, the DBRS outlines the collateral summary, which includes high-level loan pool stratifications; a large loan performance summary; a list of the DBRS HotList loans; a list of defaulted, delinquent and/or matured performing loans; cumulative interest shortfalls; and a list of properties or loans that are no longer in the pool.
The high-level pool stratifications include such details as the number of loans, total balance, the original and current weighted-average coupon, weighted-average loan-to-value and weighted-average debt service ratio. The section also shows deal trends and provides property type concentrations, province or state concentrations and loan sizes.
The HotList section within the collateral summary includes a list of loans with challenges and provides a description of the performances of such loans.
In the last part of the report, the DBRS presents a loan and property summary. Under the loan summary, the ratings agency offers a loan summary for the 10 largest loans, shadow-rated loans and pari passu loans. Each loan summary includes the loan balance, loan per unit/square foot, shadow rating and loan-term details.
The property summary, situated to the right of each loan summary, includes such details as property type, number of units, rooms or square feet, year built, latest year renovated, number of buildings and number of levels.
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