Insights into Recent Changes in Starz Mortgage Securities
Updates on Starz Mortgage Securities 2021-1 DAC
KBRA UK (KBRA) reports significant developments regarding the Starz Mortgage Securities 2021-1 DAC. Recently, the Sellar Loan, one of the key components of this securitization deal, has been transferred to a special servicer. This change occurred in response to the borrower's inability to meet payment obligations on the loan.
The Sellar Loan Details
The Sellar Loan, amounting to £25.6 million, represents a substantial part of the collateral, accounting for 50.9% of the remaining balance. A failure to pay all amounts due by the maturity date triggered this shift in servicing. Originally set for 20 January 2025, this maturity date was adjusted due to earlier payment issues. This adjustment highlights some significant risk factors regarding the loan's performance.
Amendments and Defaults
In June 2023, the loan experienced amendments following a breach of its Debt Service Coverage Ratio (DSCR) covenant. This breach came to light during an assessment in January 2023. The DSCR covenant was waived temporarily until the original maturity date to accommodate the issues the borrower faced.
Collateral Overview
The mortgage is secured by first priority liens on three hotels located in the UK. Within this group, two operate under the Doubletree brand, a subsidiary of Hilton, while the third is branded as a Holiday Inn. These assets play a crucial role in providing value to the transaction and are a factor in securing the overall performance of the securities.
Financial Metrics and Performance
The latest servicer report, dated 20 November 2024, shows the loan's Loan-to-Value (LTV) ratio at 60.1% and a DSCR at 1.00x. These metrics reveal that while the loan is under some pressure, it is still within manageable limits. On the other hand, the remaining Zamek loan, worth £24.7 million, is performing well with an LTV of 69.2% and a DSCR of 1.51x, underscoring its stability compared to the Sellar Loan.
Available Liquidity and Future Prospects
As of the most recent payments at the November 2024 Note Payment Date, the Starz Mortgage Securities transaction boasts a liquidity reserve of £1.6 million. This reserve is essential for covering potential shortfalls in servicing fees and other financial commitments. Specifically, it protects the Class D1 Notes, which currently have a balance of £4.9 million and an interest rate of 8.7%. Remarkably, this reserve could sustain interest payments for approximately 3.7 years, demonstrating a solid buffer.
Monitoring and Rating Actions
KBRA will continue to closely observe the performance of the Starz Mortgage Securities 2021-1 DAC. They are prepared to implement rating actions as necessary to ensure that investors are kept informed of any significant changes that may arise.
Frequently Asked Questions
What is Starz Mortgage Securities 2021-1 DAC?
Starz Mortgage Securities 2021-1 DAC is a commercial real estate collateralized loan obligation, backed by various loans secured by real property assets.
What triggered the special servicing transfer?
The transfer was initiated due to a loan event of default, resulting from the borrower's failure to pay amounts due by the extended maturity date.
What collateral backs the Sellar Loan?
The Sellar Loan is secured by first priority liens on three hotels, two of which operate under the Doubletree brand, with the third being a Holiday Inn.
What are the current financial metrics for the loan?
The reported LTV ratio is 60.1% and the DSCR stands at 1.00x, indicating tight financial conditions yet financial stability.
How is KBRA involved in this situation?
KBRA is monitoring the performance of the Starz Mortgage Securities 2021-1 DAC and may take rating actions if necessary to inform their stakeholders.
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