KBRA Rated CMBS Exposure Impacted by A&P Store Closings

NEW YORK--(BUSINESS WIRE)-- On Sunday July 19, 2015, the Great Atlantic & Pacific Tea Company (“A&P”) filed for chapter 11 protection, just three years after emerging from a previous bankruptcy filing. The company operates 296 grocery stores under several brands, including: A&P, Food Emporium, Pathmark, Super Fresh, and Waldbaum’s. As a result of the bankruptcy filing, A&P announced plans to sell 271 stores and close the remaining 25.

Following the announcements, KBRA evaluated its rated CMBS transactions universe for securitizations that could be impacted by the store closings. One transaction, MSBAM 2015-C22, was identified. The deal has exposure to one loan (1.2%), Pathmark-Linden, that appeared on the closing list. The related collateral is a 59,250 sf free standing Pathmark located in Linden, New Jersey. The property was appraised at $17.7 million in March, 2015, resulting in a 75.0% LTV at securitization. No upfront re-leasing or re-tenanting reserves were established at closing. A monthly tenant improvement and leasing reserve of $4,361 is required, which has accrued to $8,721.

KBRA re-evaluated the property value should the loan default, and also considered potential carrying costs and disposition fees. The analysis resulted in a potential loss severity of 43.5% of the loan’s current outstanding principal balance.

At this juncture, the store closing will not prompt any ratings actions. Should the loan transfer and its loss be materially higher than our current projection it could result in a Watch placement and/or downgrade of the ‘B-’ rating on Class G. KBRA will continue to monitor the situation, as well as any additional impacts from A&P store closings or sales on its rated CMBS universe.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

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Source: Kroll Bond Rating Agency

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