AAA notes sell at 128bps in year’s second European CMBS

Bank of America Merrill Lynch (BAML) has sold its second European CMBS of the year, with the AAA tranche priced towards the high end of indicative pricing.

The Class A notes in the €229.935 million Taurus 2016-2 DEU priced at 128 basis points over three month Euribor. The bank had put initial price thoughts (IPTs) at 120-130 bps on 9 May. The B tranche had been indicated in the low 200s bps and eventually priced at 220 bps.

As only the second public CMBS to be issued in Europe so far this year, Taurus 2016-2 DEU was closely watched by market participants. BAML was also responsible for the year’s first deal, Taurus 2016-1 DEU, which was sold in March. In that deal, the AAA notes were sold at 130 bps, tighter than indicative pricing of 140-150 bps. AAA tranche pricing had widened to 165 bps by last September.

The Class C and D notes in the latest deal, Taurus 2016-2 DEU, priced tighter than indicative pricing. The Class C notes priced at 285 bps, compared to IPTs of 300 bps. The D class priced at 375 bps, following indications it would price at around 400 bps.

The final structure was:

CLASS  SIZE     EXP. RATINGS   LTV    WAL    Debt         SPREAD       CASH

(MM)     DBRS/Moody’s   (%)    (YRS)  Yield (%)    (bps)        PRICE

A  EUR 130.1    [AAA/Aaa]      27.8    4.6    23.2        3mE+128      100.00

B  EUR 47.0     [AA/Aa3]       37.8    4.6    17.1        3mE+220      100.00

C  EUR 27.2     [A(low)/A3]    43.6    4.6    14.8        3mE+285      100.00

D  EUR 25.635  [BBB(low)/Baa3] 49.1    4.6    13.1        3mE+375      100.00

The A class was 1.1 times oversubscribed, while the C and D tranches were 1.7 and 2.5 times oversubscribed, respectively.

In the previous Taurus deal, the two most junior classes were sold at discounts of 5 and 6.8 percent, although the loan to value on that deal was higher, at 67.5 percent.

Taurus 2016-2 DEU is the securitisation of a single loan backed by a German property portfolio owned by Canada’s Dream Global REIT, a subsidiary of Toronto-based Dream Office REIT, formerly known as Dundee REIT. The underlying portfolio is valued at €493.1 million.

Last December, Dream Global REIT announced that it had agreed a €244.1 million five-year loan with BAML at a margin of 225 basis points over three-month LIBOR to refinance its initial properties in the German market.

The deal has an expected maturity date of January 2021, with legal final maturity set at January 2027.