CREFW-Fall2015

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CRE Finance World Autumn 2015
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Pricing Comparisons
With relatively few transactions completing recently, useful direct
comparisons between rated and unrated CMBS are rare. Two
specific examples are:
It can be seen from the previous table that unrated CMBS prices
are at considerably higher levels than equivalent rated transactions.
This differential will vary with a wide range of loan and market related
factors and, depending on the size of this differential, arrangers will
have to weigh this against the cost savings of issuing unrated.
A Halfway House?
The expense and scarcity of providers of liquidity facility, hedges
and bank accounts for AAA/Aaa rated transactions has led to
some recent transactions issuing with maximum ratings of A/A2.
Rating criteria for A/A2 rated CMBS is more relaxed and generally
liquidity facilities are not required. Recent examples include
Debussy, Taurus CMBS UK 2014-1 and AYR Issuer S.A. These
transactions can be seen as compromise structures, avoiding the
most onerous ratings requirements but not suffering all of the
pricing disadvantages of issuing unrated (as described above)
while avoiding the most punitive regulatory capital treatment for
unrated tranched transactions.
A recent example of this is Antares 2015-117, which is currently
being marketed. Commentators18 have suggested that adding a
liquidity facility to the structure would increase transaction costs
by approximately 0.10 percent but this would allow the bonds to
achieve a AAA/Aaa rating which would decrease pricing on the
bonds by approximately 0.14 percent.
Privately Placed CMBS
The emergence of unrated CMBS gives rise to the question of
whether a true private placement market can be developed for
European CMBS. Arrangers could save considerable costs if
investors did not rely on arrangers for disclosure but instead
carried out their own due diligence.
European CMBS is generally listed because: (a) investors prefer
the added liquidity of listed bonds and (b) listed bonds qualify
for the “quoted Eurobonds” from withholding taxes. However,
most stock exchanges permit securities to trade on either a
regulated market or an unregulated market19 , with lower disclosure
requirements applying to the unregulated market provided that the
offering meets the exemptions for disclosure required under the
Prospectus Directive. 20 Some recent European CMBS transactions
trade on unregulated markets (e.g. Mint Mezzanine 2014). However,
the offering circulars for these deals are as detailed as those
used for transactions trading on the main regulated markets 21
demonstrating a reluctance to reduce the disclosure even for
privately placed transactions.
Date Name Assets Tranche Size (M) Rating Margin
September 2013 Monnet Finance German multi-family Class A
Class B
Class C
Class D
€289.4
€57.7
€38.6
€20.4
Unrated
Unrated
Unrated
Unrated
1.92%
3.26%
5.50%
4.96% (fixed rate)
October 2013 German Residential
Funding 2013-2
German multi-family Class A
Class B
Class C
Class D
Class E
Class F
Class G
€431
€83.6
€53.7
€59.7
€23.9
€47.8
€36.9
AAA
AA
A
BBB
BBB-
BB
Unrated
1.00%
1.40%
1.90%
3.00%
3.75%
4.75%
6.50% (fixed rate)
December 2013 Gallerie 2013 Italian retail Class A
Class B
Class C
€271.0
€50.0
€42.0
A
A-
BBB-
2.25%
3.25%
4.55%
January 2014 Reni SPV Italian retail Single class €135.0 Unrated 5.162%
Unrated CMBS: A New European Asset Class