Rating action

Scope Ratings GmbH (Scope) has assigned the following ratings on the to-be-issued instruments:

Class A-1 Variable Funding Notes, up to EUR 80,000,000: not rated

Class A-2 (REG S: XS3039164580, 144A: XS3045501718), EUR 590,000,000, fixed rate notes: new preliminary rating of (P) A-_SF

Class B (REG S: XS3039164747, 144A: XS3045501809), EUR 50,000,000, fixed rated notes: new preliminary rating of (P) BBB-_SF

Preliminary ratings rely on the information made available to Scope up to 25 April 2025. Scope may assign final ratings subject to the review of the final version of all transaction documents and legal opinions. Final credit ratings may deviate from preliminary ratings.
Class A-2 notes’ rating reflects the timely payment of interest and the ultimate repayment of principal on or before the final maturity date. Class B notes’ rating reflects the ultimate payment of interest and principal on or before the final maturity date and timely payment of interest once class B notes become the most senior class of notes outstanding. The ratings assigned to the class A-2 and class B notes do not address payment of any additional interest post their anticipated repayment date in 2030.

Transaction overview

The transaction is a securitisation of real estate and tenant lease receivables related to four data centres across two campuses in Germany, two in Berlin (BER11, BER12) and two in Frankfurt (FRA11, FRA12). The properties are owned, operated and managed by different subsidiaries of Vantage Data Centers group (‘Vantage’). Most of the units are ready for service with only 8MW of fit-out work remaining in FRA12. As of the cut-off date (February 2025), total income amounts to EUR 60.4m for 55.8MW of on-line capacity (excluding rent free periods). The combined market value of the properties was estimated at EUR 928m as of February 2025.

The main structural features are: i) three classes of notes paying monthly interest to be issued by Vantage Data Centers Germany Borrower Lux S.à r.l., the issuer, with class A-1 and A-2 notes (together, the class A notes) ranking pari passu and senior to class B notes; ii) class A-1 notes may only be issued after the closing date, subject to conditions which include a rating agency confirmation; iii) an anticipated repayment date (‘ARD’) for each class of notes, after which additional interest will start to accrue; iv) a final legal maturity date for all classes of notes in 2050; v) financial covenants that protect the rated instruments against a reduction in the properties’ market value or rental income; vi) a monthly sweep of excess cash if the notes are not repaid at their respective ARD; vii) reserves that protect the issuer against liquidity risk and delays in the FRA 12’s fit-out works.

The noteholders are exposed to the following key counterparties: i) Barclays Bank Ireland PLC as issuer and propco account bank; ii) Factory Mutual Insurance Company, Zurich American Insurance Company, Ascot Special Insurance Company and other insurance companies as insurers of the transaction; iii) Vantage Data Centers Europe S.à r.l. and Vantage Data Centers Germany GmbH as data centre managers; and iv) U.S. Bank Europe DAC, UK Branch as principal paying agent.

Rating rationale

Counterparty risk is immaterial, relative to the assigned rating levels.

Key rating drivers:

• Strong tenant covenants (positive)¹. As of the cut-off date, the properties are fully let to three tenants rated AA- or above over a 9-year weighted average unexpired lease terms until the first break option (WAULB). The largest tenant, accounting for 57% of the on-line capacity and 53% of the income, is publicly rated AAA and features a 14-year remaining WAULB.
   
• Strong structural protection (positive)². The transaction features several financial covenants which provide extensive protection to the noteholders against both a decrease in collateral value and in income compared to similar commercial real estate transactions. After the ARD, excess cash is used to amortise the notes sequentially regardless of the financial metrics.
   
• High-quality data centres and experienced sponsor (positive)^3,5. The properties have been built to high industry standards including an average designed power usage effectiveness (‘PUE’) score of 1.23 together with efficient cooling methods and adequate back-up systems (100% historical uptime). Furthermore, Vantage has a global track record in developing and operating data centres. (ESG factor)
   
• Strong fundamentals in the data centre market (positive)^4,5. Demand for data centres is growing, driven by digitalisation, artificial intelligence, cloud computing, and the extensive demand for data, while supply is limited. High costs, time need of construction, and power capacity constraints are significant entry barriers. This is an incentive for tenants to renew the existing leases, which contributes to maintaining healthy cash flows, and supports sustainability of the properties’ market value.
   
• High note leverage at inception (negative)². Note-to-value ratios based on stressed value of collateral properties as calculated by Scope (‘Scope NTV’) are above 100% at inception and significantly higher than comparable transactions. The strong tenant covenants and income profile combined with the long legal term and full cash sweep after the ARD partially mitigate the high leverage.
   
• Liquidity risk (negative)². The transaction features a liquidity reserve providing protection against short-term liquidity shortfalls. The reserve covers only three months of interest and commitment fee due on the notes amongst other items such as certain expenses. Under stressed void period assumptions, Scope sees the class A-2 notes suffer from interest shortfall. The liquidity risk is partially mitigated by the tenants’ high credit quality and high incentives to extend their leases.
   
• Rental income concentration (negative)^1,2,3. Tenant and geographic diversification is limited to three tenants of the same industry on two locations. The risk is partially mitigated by the strong tenant covenants, together with the attractiveness of Frankfurt as the second largest European data centre market.
   
• Obsolescence of data centres (negative)⁶. Unlike traditional commercial real estate asset types, data centres are heavily reliant on the fast-changing high-tech environment. Scope believes the short-term demand for data centres will remain high, but the total 25 years until the final maturity may provide room for development of new technologies or tightening in artificial intelligence regulation, resulting in declining demand for data centres. In addition, the grid operator can reduce the capacity if the data centres are underutilised. (ESG factor)
   
• Fit-out risk (negative)^1,2,3. 8MW capacity remains to be delivered by February 2026. Any delay in handovers would hinder cash flow stabilisation, which would be further jeopardised, should the termination rights be exercised. Nevertheless, Scope deems severe delays as well as the termination rights’ exercise unlikely, as it is against the tenant’s interest, which is not only already committed to the location but also has invested significantly in the property.

One or more key drivers of the credit rating action are considered an ESG factor.

Key quantitative assumptions:

The transaction´s key assumptions are the rental value haircuts applied to the projected cash flows, structural vacancy rate, tenants´ credit worthiness, void period stresses applied following a lease discontinuation event, and the discount rates used to measure the properties’ value.

Details on these assumptions and other quantitative parameters are provided under the section ‘Quantitative analysis’ below.

Key data sources:
The information to derive the key quantitative assumptions is predominantly sourced from: rating agency presentation, data tape, lease abstracts, valuation reports, and draft offering circular.

Rating-change drivers

A change to the levels or parameters of the transaction’s key quantitative assumptions based on observed performance or new data sources, significant changes to the transaction’s collateral and structural features, and a change in Scope’s credit views regarding the transaction’s key rating drivers could impact the ratings.

The sensitivity analysis below provides an indication of the resilience of the credit ratings against deviations in key quantitative assumptions.

Sensitivity analysis

The following analysis has the sole purpose of illustrating the sensitivity of the credit ratings to assumption parameters, all else equal, and is not indicative of expected or likely scenarios.

Class A-2 notes:

• Rental value haircuts increased by 20%: zero notches;
   
• Discount rates increased by 20%: zero notches;
   
• Structural vacancy rate increased by 100%: three notches;
   
• Tenants’ credit worthiness decreased by three notches: zero notches;
   
• Void periods increased by 50%: zero notches.

Class B notes:

• Rental value haircuts increased by 20%: zero notches;
   
• Discount rates increased by 20%: zero notches;
   
• Structural vacancy rate increased by 100%: zero notches;
   
• Tenants’ credit worthiness decreased by three notches: zero notches;
   
• Void periods increased by 50%: zero notches.

Quantitative analysis

This section provides a non-exhaustive list of relevant quantitative inputs. Scope applied the following assumption parameters at the assigned rating levels of BBB- and A-, respectively:

• Rental value haircut: 13.1% / 18.8%
   
• Void period upon reletting: 12 months / 17 months
   
• Weighted-average discount rate: 8.9% / 9.6%
   
• Forward starting lease delay: 10 months / 12 months
   
• Interest rate vectors: as disclosed in Scope´s General Structured Finance Methodology

Scope applied the following non-rating-conditional assumption parameters:

• Structural vacancy rate: 10%
   
• Weighted-average tenancy rating: AA+
   
• Weighted average non-recoverable and maintenance costs (EUR/kW/year): 23.5
   
• Estimated rental value (EUR/kW/month): 90.0 (FRA11, FRA12), 85 (BER11, BER12)
   
• Liquidation costs: 1.5% of notes’ outstanding balance (capped at EUR 2.0m), plus 9% of Scope’s assumed portfolio market value

Rating driver references
1. Data tape (Confidential)
2. Draft offering circular (Confidential)
3. Lease abstracts (Confidential)
4. Scope research
5. Market value report (Confidential)
6. Scope supporting material (Confidential)

Stress testing
Stress testing was considered in the quantitative analysis by considering scenarios that stress factors, like rental value haircuts and capitalisation rates, contributing to sensitivity of credit ratings and consider the likelihood of severe collateral losses or impaired cash flows.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction incorporating relevant asset assumptions and taking into account the transaction’s main structural features, such as the instruments’ priority of payments, the instruments’ size and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for these Credit Ratings (CRE Loan and CMBS Rating Methodology, 16 December 2024; General Structured Finance Rating Methodology, 13 February 2025; Counterparty Risk Methodology, 10 July 2024) are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset due diligence assessment/asset audit. The external due diligence assessment/asset audit was considered when preparing the Credit Ratings and it has no impact on the Credit Ratings.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings are UK-endorsed.
Lead analyst: Benjamin Bouchet, Senior Director
Person responsible for approval of the Credit Ratings: Benoit Vasseur, Managing Director
The preliminary Credit Ratings were first released by Scope Ratings on 8 May 2025

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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