The Deutsche Bank, Morgan Stanley and Citigroup led BHMS 2014-ATLS Mortgage Trust priced $1.0 billion of securities backed by a single loan secured by the Atlantis Resort hotel in Paradise Island, Bahamas, according to a person familiar with the deal.
The loan is divided into a $350 million floating-rate component and a $650 million fixed-rate component.
The floating-rate components have a three-year initial term and fully extended maturity at seven years. The notes have been assigned ratings by DBRS, Kroll Bond Ratings and Standard & Poor’s. The class A notes, rated AAA’/ AAA’ priced at 150 basis points over Libor.
By comparison, in July Bank of America Merrill Lynch priced the two-year, floating rate notes, triple-A rated notes issued from BAMLL Commercial Mortgage Securities Trust 2014-ICTS, priced its triple-A rated, two-year class A notes at 80 basis points over one month Libor . The deal is backed by the mortgage on the Intercontinental New York Times Square, a 36-story, 607-room full-service luxury hotel in New York City.
The class B notes, rated AA’/ AA-’ priced at 195 basis points over Libor, the class C notes, rated A’/ A-’ priced at 245 basis points over Libor, the class D notes, rated BBB’/ BBB-’/ BB+’ priced at 300 basis points over Libor and the class E notes, rated BB’/ BB-’/ BB-’ priced at 400 basis points over Libor.
The fixed-rate components have a seven-year term. The AAA’/ AAA’ rated class A notes priced at swaps plus 150 basis points. The class B notes rated AA’/ AA-’ priced at 215 basis points and the A’/ A-’, class C notes priced at swaps plus 270 basis points.
At the triple-B level, the class D notes priced at swaps plus 325 basis points and the BB’/ BB-/ BB-’ rated class E notes priced at swaps plus 400 basis points.
The trust also placed $200 million of unrated class M, fixed-rate notes with an average weighted life of 6.87-year priced at swaps plus 545 basis points.
Among the deal’s strengths, according to S&P, is the fact that the property will be operated under a franchise agreement with Marriott International that was executed in June 2014 with a 20-year term.
Also, the borrower is responsible for expenses that would typically result in shortfalls to the those investing in the deal, such as special servicing, work-out, and liquidation fees, as well as costs and expenses incurred from the special servicer's appraisals and inspections.
Among the risks to the deal, S&P cited the fact that loan is interest-only for its entire seven-year extended term, which the rating agency views as a riskier than amortizing loans, because of the higher loan balance to be refinanced at maturity.
Also, the trust loan balance has a loan-to-value ratio of 89.9%, based on S&P's valuation, which is higher than most single-borrower transactions that is has rated recently.