Rating agency Morningstar DBRS has said that recent modifications to the loan securitised in River Green Finance 2020 DAC 'do not currently affect the credit ratings or trends on the notes'.
River Green Finance 2020 DAC, regarded as the first green CMBS in Europe, was downgraded by the ratings agency at the start of this year. The borrower, European privately held property investor LRC Group, defaulted on the loan in January.
The securitised loan, originally issued by Goldman Sachs, was placed into special servicing by Mount Street on 16 January. Although an option to extend the loan to January 2025 was still available at the time, LRC and Mount Street agreed that a 'consensual long-term restructuring' of the loan was in the 'best interests' of all parties concerned.
The loan is secured by the campus-style River Ouest office building, situated in a secondary location in Paris, in the commune of Bezons. The property has served as global headquarters of French IT services provider, Atos, since its completion in 2009.
According to Morningstar, the special servicing route was chosen due to the substantial deterioration of the credit profile of Atos, which accounts for 85% of the rental income. In order to agree the restructuring, the borrower and the special servicer entered into a standstill agreement.
The special servicer has since waived the maturity event of default and consented to certain loan-level modifications, which took effect on 6 August 2024, as reported by Morningstar.
These include extending the maturity date of the loan to 15 April 2026, with the possibility of extending it further to 15 April 2027, provided that loan default and LTV breach is avoided, and that the borrower has entered into a hedging agreement.
The sponsor has also deposited €10 mln, Morningstar has reported, which can be used for servicer-approved asset management initiatives or loan repayment. Any unused amount will be applied to repay the loan at initial termination date in April 2026.
No modifications were implemented at the note-level, and the notes' final legal maturity remains unchanged at 22 January 2032, resulting in a shorter tail period of under five years instead of the seven years at issuance.
Despite the agreed amendments being generally credit positive for the transaction, Morningstar said that they 'do not remove the uncertainty around the property's future value and rental cash flow'.
Atos' debt restructuring is ongoing, with the company entering accelerated safeguard proceedings on 24 July after obtaining lender support in the form of a lock-up agreement under which company noteholders and bank lenders are committing €1.675 bn in new funding.
Morningstar said it understood that Atos 'continues to regularly pay rent at the contracted levels of €22.3 mln per annum'. Atos' lease terminates on 31 July 2030. Other, smaller tenants have recently departed increasing the vacancy of the property to 3.5% as of July, from 1.7% previously.
The latest valuation conducted by CBRE in January 2023 indicated a value of €307 mln. However, the valuation is contingent on the outcome of Atos' debt restructuring proceedings, with the special servicer seeking to revalue the property once greater certainty emerges.
