BAML sells first European 2016 CMBS at improved AAA pricing

Bank of America Merrill Lynch has sold the first CMBS of 2016, with the AAAs pricing tighter than the bank’s initial guidance.

The bank sold the €141.6 million AAA tranche at a 130 basis points margin over three-month Euribor, which was tighter than its indicative pricing of 140-150 bps released on 7 March.

The European CMBS market has been virtually closed since last autumn, due to volatility in the credit markets and the pricing on this first deal in 2016 was being keenly watched. Other lenders said 130bps for the class As in Taurus 2016-1 DEU was an encouraging sign for the market.

Last September, AAA tranche pricing had widened to 165bps – it had been as low as 90bps six months earlier.

There was reasonable demand for the class As through to the class Ds in Taurus 2016-1 DEU, which is backed by a €333.7 million single loan secured by the German ‘Kingfisher’ portfolio of 55 mainly retail properties owned by Blackstone. These classes were oversubscribed by 1.9 – 1.4 times.

But the junior class E sold a discount of 5 percent and the class F tranche at a 6.8 percent discount.

The final structure was:

CLASS SIZE     EXP. RATINGS      LTV    WAL      SPREAD   COUPON   PRICE

• A   €141.6m   AAA/Aaa      30.1     4.57         3mE+130  3mE+130   100.00
• B   €38.2m    AA(hi)/Aa3    38.3    4.57        3mE+240  3mE+240  100.00
• C   €25.5m    AA(lo)/A3      43.7     4.57        3mE+320  3mE+320  100.00
• D   €41.8m    BBB/Baa3     52.6     4.57        3mE+400  3mE+400  100.00
• E   €52.6m    BB/Ba3          63.8    4.57         3mE+550  3mE+425  94.9748
• F   €17.35m   BB(lo)/B2     67.5     4.57         3mE+675  3mE+500  93.1646

The blended nominal coupon is 264bps but it is 294bps taking account of the discounted junior classes. Costar reported that the margin on the original loan which closed last September was 275bps.

DIY retail accounts for 37 percent of the market value, followed by 21 percent for retail parks, supermarkets at 12 percent, shopping centres at 10 percent and retail warehouses at 2 percent.