Fitch Upgrades Mesdag (Charlie) B.V. Class A & B Notes; Affirms Others
EUR119m Class A (XS0289819889) upgraded to 'AAAsf'; Outlook Stable
EUR40.3m Class B (XS0289822677) upgraded to 'A+sf'; Outlook Stable
EUR40.3m Class C (XS0289823568) affirmed at 'CCsf'; Recovery Estimate (RE) 50%
EUR5.48Class D (XS0289824533) affirmed at 'Dsf'; RE0%
EUR0m Class E (XS0289824889) affirmed at 'Dsf'; RE0%
Mesdag (Charlie) B.V. is a CMBS transaction secured by five loans backed by commercial real estate assets in Germany and the Netherlands originated by NIBC Bank N.V.
KEY RATING DRIVERS
The upgrade of the class A and B notes is the result of the good performance of the largest loan in the portfolio, Berlin (EUR112m, 57.1% of the pool balance), and of the timely and sequential interest and principal payments. The affirmation of the class C notes reflects the threat of loss from the bankrupt Dutch Office loans and the thin layer of credit support offered by the class D notes' balance (EUR5.48m).
The Dutch Office I and II loans (EUR30m and EUR22m, respectively) continue to pose a risk of further losses to junior notes. As a result of the sale strategy, the loans are now backed by four and one properties, respectively. The current loan-to-value (LTV) ratios stand at 232.74% and 136.81%. Net proceeds of EUR0.8m from the last property sale will be applied to the notes on the April interest payment date (IPD). Fitch expects significant losses on the Dutch Office loans, in excess of the class D notes' balance, which will lead to some loss being applied to the class C notes.
The performance of the Berlin loan German multifamily housing collateral, underpinned by strong income, low vacancy and a manageable cost base resulted in a current market value increase of 7% to EUR201.9m in the December 2013 valuation from EUR187.9m in the December 2011 valuation. This will benefit the class A notes due to the sequential payment of principal on the notes.
Since Fitch's last rating action, the Sparkasse loan has repaid in full. The EUR8,4m of proceeds will be applied to the notes on the April IPD. Despite the high and volatile costs of some properties backing the Tommy loan, its low leverage (LTV 35%) and its good overall performance, provide comfort that it will repay in full if costs can be kept under control.
The property sale strategy regarding the three loans in special servicing will not affect the ratings on the senior tranches. The recovery amounts are already well below the 'B' market value for each loan. The performance of the portfolio relies heavily on the two multifamily loans. Any deterioration regarding the performance of these two loans could have a subsequent negative impact on the ratings of the senior tranches and consequently the class C recoveries.