First City Financial (FirstCity) plans to securitize a much smaller pool of non performing commercial real estate  loans in its third securitization.

The deal, called VFC Series 2015-3, securitizes a $253 million portfolio of largely non-performing, commercial real estate loans. In total the portfolio consists of 341 loans of which 47% are currently nonperforming, 43% are re performing and the rest are real estate owned, according to a Kroll Bond Ratings presale report.

VFC Series 2015-3 has the highest exposure to CRE assets among the eight commercial NPL transactions that Kroll has rated since March 2013. Almost all of the CRE collateral (93.0% of CRE) is comprised of core CRE property types, which include retail, lodging, industrial, multifamily, office, mobile home communities, and mixed-use properties. First City acquired the assets in the portfolio for $150 million between the second quarter of 2014 and January 2015 through 27 transactions from 21 financial institutions.

Credit Suisse Securities and Wells Fargo are the placement agents. Two classes of notes in the deal are entitled to principal and interest payments. Interest payments can be deferred up to one year if there are not sufficient funds to make the payment. Kroll has assigned a preliminary rating of  ‘BBB-’ to the class A notes due December 2031.

FirstCity has issued NPL CMBS from its VFC series at a rate of one per year since its debut securitization in 2013, VFC 2013-1. Its first transaction, VFC 2013-1 (not rated by KBRA), paid off in conjunction with the issuance of their second transaction, VFC 2014-2 (rated by KBRA), in July 2014. As of the March 2015 payment date, the VFC 2014-2 transaction has paid down by approximately 33.4% and has performed in line with the issuer’s and KBRA’s projections.

All of the transactions are structured as liquidation vehicles that monetizes recoveries from non-performing, performing and REO assets to pay the notes.  

FirstCity was founded in 1991. Over the past 25 years the firm has invested more than $5.0 billion to acquire non-performing commercial loans that are primarily secured by CRE.

In May 2013, FirstCity went private when all of its outstanding stock was purchased by Värde Partners for approximately $105 million. Since 2009, Värde has deployed over $1.3 billion in capital investment with First City in sub- performing and non-performing loans.

In 2010, the two companies entered into a five-year, $750 million, investment agreement and together Värde and FCSC source, underwrite, and service between $4 billion and $5 billion of CRE assets and loans on an annual basis.

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