KBRA Upgrades Ratings on NY Liberty Development Corp. Revenue Refunding Bonds (Bank of America Tower at One Bryant Park Project)

KBRA upgrades the ratings on the following New York Liberty Development Corp. Second Priority Liberty Revenue Refunding Bonds, Series 2019 (Bank of America Tower at One Bryant Park Project)

New York Liberty Development Corporation (the “Issuer”) issued $650 million Tax-Exempt Second Priority Liberty Revenue Refunding Bonds, Series 2019 (Bank of America Tower at One Bryant Park Project) (the “Series 2019 Liberty Bonds”), consisting of three classes, under and pursuant to an Indenture of Trust (the “Indenture”). The respective ratings are based on the relative priority of payments from the collateral that secures the bonds. For additional details on the collateral please refer to the One Bryant Park Trust 2019-OBP CMBS Surveillance Report.

The proceeds of the Series 2019 Liberty Bonds were used to redeem in whole a Taxable Series 2019 Bond, the proceeds of which were used to refinance a portion of site acquisition, development and construction costs of a 51-story, approximately 2.4 million rentable square foot office building (the “Facility”) within the City of New York used as office, retail, storage and theatre space. The Facility is ground leased to One Bryant Park LLC, a Delaware limited liability company (the “Borrower”) and serves as the New York City headquarters for Bank of America Corp.

Concurrently with the issuance of the Taxable Series 2019 Bond, the Issuer made a $650.0 million loan to the Borrower (the “Liberty Debt Loan”) pursuant to a Liberty Debt Loan Agreement between the Issuer and the Borrower (the “Liberty Debt Loan Agreement”). The Liberty Debt Loan Agreement obligates the Borrower to make loan payments (subject to a payment priority subordinate to the separate CMBS Loan) to the Issuer in the amounts and at the times sufficient to pay the principal or redemption price of, and interest on, the Series 2019 Liberty Bonds as the same become due.

To secure the Borrower’s obligations under the Liberty Debt Loan Agreement and the CMBS Loan Agreement, the Borrower entered into a Collateral Agency Agreement, pursuant to which the Collateral Agent will hold the security, including a mortgage on the Borrower’s leasehold interest in the Facility and a pledge and security interest in all of the Borrower’s personal property and all tenant leases and rental income relating to the Facility. Each of the Liberty Debt Loan and the CMBS Loan is administered and serviced pursuant to a Servicing Agreement. Pursuant to the Servicing Agreement, the CMBS Loan has a priority in payment over the Liberty Debt Loan, as set forth in the Servicing Agreement and in the Indenture. Further, the Indenture provides that, among the three Classes of the Series 2019 Liberty Bonds, the Class 1, Series 2019 Liberty Bonds are senior in payment priority to the Class 2, Series 2019 Liberty Bonds, which are, in turn, senior in payment priority to the Class 3, Series 2019 Liberty Bonds. The Liberty Bonds are payable solely from the trust estate under the Indenture and are not a general obligation of the Issuer or any other governmental entity. Further, the Issuer has no taxing authority.

The CMBS Loan and the Liberty Bonds Loan are generally cross-defaulted, however, a failure to pay excess interest upon the final maturity date of the CMBS loan will not constitute a default on the Liberty Bonds Loan. Of note, if the CMBS loan defaults, the holders of the Liberty Bonds Loan will have an option to purchase the subject loan for a price generally equal to the outstanding principal balance, all accrued and outstanding interest, and certain other costs and expenses.

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