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KBRA Assigns Preliminary Ratings to SGCP 2019-FL2
[May 15, 2019]

KBRA Assigns Preliminary Ratings to SGCP 2019-FL2

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to five classes of SGCP 2019-FL2, a $453.7 million commercial real estate collateralized loan obligation (CRE CLO) transaction.

The transaction is initially expected to be collateralized by 17 whole loans (or participations therein), inclusive of three combination loans, with an in-trust balance of $437.0 million and $16.7 million of cash collateral. The cash collateral can be used to acquire one pre-identified delayed-close loan ($16.7 million) within 60 days of the closing date. In addition, the transaction permits the acquisition of funded pari passu companion participations related to the initial transaction collateral for a two-year period post-closing, and defaulted and credit risk assets can be sold to the preferred shareholder at par.

This transaction includes an interest coverage (IC) test and a par value test (also referred to as an overcollateralization (OC) test). If either test is not satisfied on any determination date, on the following payment date, interest proceeds remaining after interest is paid to the Class D notes will be used to pay down the principal balances of the Class A through D notes in sequential order until the tests are satisfied. If interest proceeds are insufficient to satisfy the tests or pay down the applicable classes of notes, available principal proceeds will be used for such purpose. This transaction also has a pro rata payment feature where principal proceeds in an aggregate amount equal to 15.0% of the aggregate cut-off date balance of the mortgage assets will be used to pay down the notes on a pro rata basis provided the note protection tests are satisfied and no event of default has occurred.

KBRA's analysis of the transaction included the determination of KBRA net cash flow (KNCF) and KBRA value. The results of the analysis yielded KBRA values that were, on a weighted average basis, 30.0% and 42.8% lower than the appraisers' as-is values and stabilized values, respectively, and a KBRA Loan to Value (KLTV) for the initial loan pool of 119.3%.

KNCF and KBRA value are key inputs for determination of KBRA subordination levels, which were derived for the subject transaction using our U.S. CMBS Single Borrower and Large Loan Rating Methodology and U.S. CMBS Multi-Borrower Rating Methodology. The analysis also included quantitative and/or qualitative review of the various structural features of the transaction, including reinvestment and IC & OC tests, as well as a review of the legal documents, the results of which were incorporated into our ratings assignment process.

For complete details on the analysis, please see our pre-sale report, SGCP 2019-FL2, published at The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: SGCP 2019-FL2

Class     Initial Note Balance     Expected KBRA Rating
A     $231,387,000     AAA (sf)
A-S     $39,699,000     AAA (sf)
B     $25,521,000     AA- (sf)
C     $24,386,000     A- (sf)
D     $28,357,000     BBB- (sf)
E     $18,715,000     NR
F     $16,447,000     NR
G     $14,178,000     NR
H     $15,312,000     NR
Preferred Shares     $39,699,571     NR

To access ratings, reports and disclosures, click here.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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