Morgan Stanley LIBRA CMBS prices at wider end of guidance

By Paul Norman - Tuesday, July 10, 2018 11:04

Morgan Stanley has priced the €220.9m ELoC 31 LIBRA European CMBS, sponsored by MStar, at a blended coupon of 130 basis points, which is at the wider end of expectations, particularly in the middle tranches.

LIBRA is the securitisation of a €282.5m three-year senior loan extended by Morgan Stanley in January to the Starwood Capital and M7 Real Estate joint venture, backed by 49 light-industrial properties and one office property in Germany and in the Netherlands together valued at €418.6m.

The pricing has come in at:

Class  Size Exp.  LTV       Ratings (DBRS/S&P)  Pricing (3mE +)

A1      €113.7m   34.74%   AAA /AAA                 75

A2      €23.7m     41.99%   AAA / AA                   95

B        €12.4m      45.77%  AA (low) / AA-           115

C        €28.5m      54.48%  A (low) / A-                 170

D        €22.9m      61.48%  BBB (low) / BBB-       230

E         €19.7m      67.50%  BB / BB-                     325

In what will provide a slight jolt to the buoyancy surrounding European CMBS at the moment pricing is wider than the initial guidance - which implied a blended coupon of between 118 and 128 bps - in all but the A1 and E tranches.

The initial pricing guidance was A1 – 70/low 70, A2 – low 80s, B – 95/10, C – Low/mid 100s, D – 200/low 200s, E – mid/high 300s.

The widening of pricing compared with the tighter achieved prices on other recent European CMBS issuance could be related to the fact that Blackstone, the sponsor on the majority of the other issuance, is the preferred party, and also that this is a smaller transaction. The popularity of the E tranche could be related to the scarcity of sub investment grade product.

The Morgan Stanley senior is priced at 200 basis points above three-month LIBOR and – as a direct comparable to Goldman’s Kantoor Finance, priced earlier this month – it has been expected to be somewhat less attractive given the transaction loan is for an initial three years with two one-year extension options at the borrower’s choosing, subject to conditions. There is also a subordinated €31.4m mezzanine loan.

Kantoor’s 124.5 bps blended coupon was on a 272 blended loan while LIBRA’s 130 bps blended coupon is then on a 200 bps single loan deal.

The LIBRA transaction refinances a logistics portfolio originally acquired in 2014 and 2015, financed by Deutsche Bank and BAML through the MStar loan in DECO 2015-Charlemagne and the BiLux loan in Taurus 2015-3, respectively.

Morgan Stanley has retained a €50m slice of the senior.

There have been seven European CMBS's issued this year with three in June.

CoStar News wrote about the transactions here.

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