Switch to ‘underperform’ for Dutch retail CMBS

A securitised loan secured on six secondary retail properties in the Netherlands is expected to underperform according to Kroll Bond Rating Agency (KBRA) which rated the deal last year.

The loan to hedge fund Castlelake in the €278 mln CMBS called Kanaal CMBS Finance 2019 represents 50.4% of the securitisation. Some 78.1% of the loan is exposed to retail property.

Although the Netherlands has given more retailers leeway to continue trading than most other European countries, KBRA reported that fewer than half of the tenants accounting for the loan’s collateral remain open. The largest tenant by area, Media Markt, is still trading but other significant retailers such as H&M has closed all its Dutch stores.

KBRA calculates that even if there is a failure to pay at loan level, there should not be a shortfall in bond interest payments for about 18 months, with the €13 mln liquidity facility covering shortfalls.

The ‘underperform’ assessment is not a downgrade but if there were to be a significant fall in asset value or prolonged payment interruption ‘such actions are more likely’, the rating agency said.

Goldman Sachs advanced the two loans in Kanaal, which are secured on 17 predominantly office and retail properties to Marathon Asset Management and Castlelake.

Castlelake's retail assets are in towns outside the Randstad area, in Spijkenisse, Veenendaal, Venlo, Helmond, Assen and Deventer.

Last week DBRS Morningstar downgraded the trend on four Italian retail CMBS transactions from stable to negative.

The trend change for Deco 2019 - Vivaldi, Emerald Italy, Pietra Nera and Taurus 2019-1 was due to the expected deterioration of the Italian retail sector due to coronavirus.