Moody's rating action reflects a base expected loss of 71.3% of the current pooled balance, compared to 37.6% at Moody's last review. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating.
Many retailers are reporting spikes in consumer spending this year related to COVID-19, and Dollar Tree (NASDAQ: DLTR) is no exception. Effects from the pandemic have renewed demand for inexpensive basic household items, even helping the struggling Family Dollar stores that Dollar Tree acquired in 2015. Dollar Tree had just shy of 15,500 stores as of Aug. 1 with new locations opened under the Dollar Tree banner bringing the split with Family Dollar stores close to 50/50.
The ratings on nine P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on one P&I class, Cl. G, was downgraded due to a decline in pool performance, driven primarily by an increase in recent transfers to special servicing, now representing 21% of the pool.