BAML prices slimmed down Starwood Capital CMBS at blended discount

Bank of America Merrill Lynch (BAML) has priced the scaled back securitisation of two loans extended to Starwood Capital’s MStar Europe joint venture fund at a weighted average discount of 1.8% to par across the transaction.

Final pricing for BAML’s TAURUS 2015-3 EU DAC was as follows:

CLASS SIZE     EXP. RATINGS     LTV (%)   COUPON   DISCOUNT MARGIN       PRICE

  • A   €60.9m   [AAA/Aaa]     28.3   3mE+165   3mE+165   100.00
  • B   €14.4m   [AAA/Aa3]     35.0   3mE+230   3mE+235   99.79
  • C   €15.9m   [AA/A3]          42.4   3mE+300   3mE+315   99.37
  • D   €19.0m   [A/Baa3]        51.2   3mE+350   3mE+400   97.95
  • E   €17.7m   [BBB/Ba2]     59.4   3mE+400   3mE+550   94.05
  • F   €17.9m   [BB/B3]          67.7   3mE+500   3mE+650   94.18

Total: €145.8m

The capital structure for TAURUS 2015-3 EU DAC reduced by €30.875m, reflecting a 17.5% reduction on the transaction’s original size of €176.675m.

BAML opted to retain the €30.875m in loan format in addition to the regulatory required 5% retention stake.

This retention could either reflect a lack of demand for the price BAML was seeking for the notes, or a planned partial syndication strategy now that TAURUS 2015-3 EU DAC has priced. For now at least, the €30.875m has been retained.

Five of the six classes of bonds were priced at a discount to par, which is thought to reflect the difference between the margin investors required to buy the notes plus the transaction’s running costs and the blended loan margin of the underlying two loans.

Assuming BAML issued the discounted bonds to bridge the gap, this would suggest an all-in blended financing cost of 325bps, compared to the blended loan margin of 291bps.

The 34bps gap is mitigated for BAML through the fees secured in the arrangement of the deal and the ongoing profit in deal from the transaction’s X note. In addition, in

TAURUS 2015-3 EU DAC, the borrower, MStar Europe, is liable for ongoing loan servicing costs, rather than the CMBS issuer.

However, other upfront costs in structuring the deal – such as legal fees and rating agency fees – are borne by BAML.

DBRS and Moody’s are expected to rate the deal. The weighted average loan length is 4.5 years, which an expected maturity scheduled for April 2020 and legal final maturity eight years later in April 2028.

The two loans were extended around May to MStar Europe, the multi-let industrial property joint venture which is 95%-owned by Starwood Fund IX and 5%-owned by M7 Real Estate.

The aggregate portfolio value is €274.6m, which by value is split: €107m in France; €93.4m in Germany; and €74m in the Netherlands. There are 329 tenants across the portfolio. The current occupancy level is 85% across both TEIF and Bilux portfolios.

For further details on the underlying loans – and the margins – please click here.

There are a number of rumoured European CMBS deals which are expected to come to market over the coming weeks, including Deutsche Bank’s circa €260m ‘Ruby’ transactions, which is the securitisation of three loans secured by Portuguese assets. Two of the three loans in Ruby are extended to Blackstone.

BAML is also expected to be bringing at least one other CMBS to market this year, while Apollo’s Bridge portfolio is expected to be financed by an investment bank seeking a securitisation exit.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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