CMBS Transaction Profile:

• A+ rated tranche (Class E certificates - $18.0 million purchase of a total $38.9 million tranche) and the A- rated tranche (Class G certificates - $6.0 million purchase of a total $35.7 million trance) from the 11/07-issued MSCI 2007-IQ16 commercial mortgage pass-through certificates at a price equating to swaps +750 for the A- rated bonds (69.0% of face value) and swaps +600 for the A+ rated bonds (76.1% of face value). On a weighted average basis, this translates to a spread of 638 over swaps and 74.3% of face value.
• AllBridge believes the pricing at the average of swaps+638 represents an appropriate risk-adjusted value, whether the bonds are held to maturity or sold in the next 2-4 years as spreads revert closer to historical norms.
• The value proposition could be significant, if spread revert closer to historical levels.

Asset Summary at Time of Purchase:

• The collateral consists of 234 senior mortgages with a cutoff balance of $2.6 billion;
• The certificates present attractive risk/return characteristics, with an average LTV of 66.4% and DSCR of 1.30x.
• The collateral provides sufficient diversification, both from a property type (36% retail, 22% office, 12% multifamily, 12% hospitality) and geographic (12% California, 11% New York, 9% Ohio, 9% Tennessee, 7% Florida) standpoint.
• The top 10 loans represent 37% of the total balance and exhibit characteristics slightly superior to the overall pool, helping to mitigate the large loan exposure risk. The top 10 loans have an average LTV of 63.5% vs. 66.4% on the overall pool and a 1.38x DSCR vs. 1.30x on the overall pool.
• The loan loss modeling results in an expected portfolio loss of 4.67%. At this level, losses would penetrate the BBB- bonds, but not the BBB bonds, representing significant protection to the A+ position (8.625% subordination) and A- position (6.75% subordination).

Investment Substantiation:

• Opportunity to acquire A+ and A- tranches with subordination levels of 8.625% and 6.75%, respectively at spreads to swaps of 600 bps and 750 bps, respectively;
• Purchase price translates to a 26% discount to par value;
• Utilizing attractive financing of 55% LTV at L+150 for 3-year term;
• The bonds are well-insulated from estimated calculated losses. The expected loss was 4.67% at the time of purchase, which compares favorably to the 6.75% subordination on the A- bonds and 8.625% on the A+ bonds.
• The purchase of A rated bonds provides additional diversity to AllBridge’s CMBS holdings, which up until present, have constituted BBB rated bonds.

Sources and Uses/Deal Economics