KBRA Assigns Preliminary Ratings to NLY 2019-FL2

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of
preliminary ratings to seven classes of NLY 2019-FL2, a $857.3 million
managed commercial real estate collateralized loan obligation (CRE CLO)
securitization, with a 24-month reinvestment period that includes a
six-month ramp-up period. Annaly Credit Opportunities Management LLC, a
subsidiary of Annaly Capital Management, Inc., will serve as the
transaction’s collateral manager.

The transaction will initially be collateralized by 18 CRE whole loans
(or senior participations therein) with an aggregate cut-off date
balance of $689.1 million, along with $168.3 million of cash that can be
used to acquire loans during the ramp-up period. The pool includes one
delayed-close asset ($50.0 million) that can be acquired within 90 days
following the transaction’s closing date. Previously unidentified whole
loans and participations may be acquired during the ramp-up and
reinvestment periods, subject to eligibility and reinvestment criteria.
The eligibility criteria includes, among other things, maximum
stabilized LTV and minimum stabilized DSC requirements; pool level
concentration limits for loan size, property type, and geographic
location; certain restrictions on participation interests and future
funding assets; and that the rating condition must be satisfied with
respect to KBRA.

The transaction also includes interest coverage (IC) and
overcollateralization (OC) cash diversion tests which, in addition to
structural subordination, provide credit enhancement to the rated notes.
Should either of the tests not be satisfied, interest proceeds remaining
after payment of Class D interest would be diverted to pay down the
senior notes in a sequential manner.

All of the initial mortgage assets are floating rate loans indexed to
one-month LIBOR. The loans are secured by the fee and leasehold
interests in 21 properties. The initial pool’s property types include
office (42.4% of the pool balance of $739.1 million, inclusive of one
delayed-close asset), multifamily (23.9%), retail (15.9%), lodging
(15.4%), and mixed-use (2.3%). The eligibility criteria also permit the
acquisition of multifamily (including student housing), industrial,
office, retail, self-storage, lodging, and mixed-use.

KBRA’s analysis of the transaction involved evaluation of property cash
flows and values within initial loan pool using our U.S.
CMBS Property Evaluation Methodology
. The results of the
analysis yielded KBRA values that were, on a weighted average basis,
39.2% and 47.7% lower than the appraisers’ as-is values and stabilized
values, respectively, and a KBRA Loan to Value (KLTV) for the initial
loan pool of 118.3%. The results of this analysis were utilized in the
application of our U.S.
CMBS Multi-Borrower Rating Methodology
. The analysis also
included quantitative and/or qualitative review of the various
structural features of the transaction, including ramp-up, reinvestment,
and IC & OC tests, as well as a review of the legal documents, the
results of which were incorporated into our ratings assignment process.

For complete details on the analysis, please see our pre-sale report, NLY
, published at www.kbra.com.
The preliminary ratings are based on information known to KBRA at the
time of this publication. Information received subsequent to this
release could result in the assignment of ratings that differ from the
preliminary ratings.

Preliminary Ratings Assigned: NLY 2019-FL2

Class     Initial Note Balance     Expected KBRA Rating
A     $447,956,000     AAA(sf)
A-S     $51,440,000     AAA(sf)
B     $54,655,000     AA-(sf)
C     $57,870,000     A-(sf)
D     $67,515,000     BBB-(sf)
E     $45,010,000     BB-(sf)
F     $23,577,000     B-(sf)
Preferred Shares     $109,310,260     NR

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)


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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus, is recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.


Analytical Contacts:

Ravish Kamath, Director
(646) 731-2328

Michael Brown, Senior Director
(646) 731-2307