Arena Finance Securities DAC notes win final Morningstar DBRS ratings on NEC-backed securitisation

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Arena Finance NEC securitisation

Highlights

Arena Finance Securities DAC completed a GBP 611.4 million securitisation backed by NEC assets, with Morningstar DBRS assigning AAA (sf) to Class A and all trends Stable.
The underlying portfolio, led by The NEC Group properties owned by Blackstone, generated GBP 208.9 million revenue in F2026, up 27% from the pre-pandemic average.
The combined loan-to-value for Facility A1 and the capex loan is 70.4% on the CBRE GBP 940.6 million valuation and 98.7% using Morningstar DBRS' GBP 671.2 million value.

Ratings outcome and transaction structure

As reported by Morningstar DBRS, DBRS Ratings Limited finalised provisional credit ratings for notes issued by Arena Finance Securities DAC, assigning AAA (sf) to Class A, AA (low) (sf) to Class B, A (low) (sf) to Class C, BBB (low) (sf) to Class D, BB (sf) to Class E, and B (high) (sf) to Class F. All trends are Stable.

The securitisation centres on a GBP 611.4 million senior loan, known as Facility A1, advanced by the issuer to the borrower using proceeds from the rated notes. The structure also includes a GBP 41.44 million subordinated Facility R1 loan funded through unrated Class R notes to meet regulatory risk retention requirements, with the Class R notes representing about 6.4% of the total issuance amount at closing.

Borrower proceeds are used to refinance existing indebtedness, cover financing or refinancing costs, and support general corporate purposes. The deal also includes a separate GBP 51.22 million capex facility that sits outside the securitisation financing structure but shares security over the underlying property collateral on a pari passu basis with the rated notes.

The senior securitised loan pays a floating rate based on three-month Sterling Overnight Index Average, subject to a zero floor, plus a margin linked to the weighted-average margin of the rated notes. The loan is interest only, initially matures in August 2028, and carries three one-year extension options, with a fourth extension available subject to lender consent and an extension fee; the notes' legal final maturity is set for August 2036 and can extend to August 2037 if the fourth option is exercised.

Portfolio performance and market implications

The underlying security primarily comprises five Birmingham properties owned and operated by The NEC Group, including the National Exhibition Centre, the International Convention Centre, the Vox Conference Venue, bp pulse LIVE and Utilita Arena Birmingham. The assets are ultimately controlled by funds managed or advised by Blackstone, which acquired The NEC Group in 2018.

Morningstar DBRS says the portfolio shows resilient operating performance, with total revenue of GBP 208.9 million in F2026, up about 27% from the average pre-pandemic level recorded between F2018 and F2020. Exhibitions account for 56% of F2026 EBITDA, while arenas contribute 28% and conventions 16%, and the business benefits from a broad event base, with 801 events in FY2025 and no single event outside the top 10 contributing more than 1% of revenue.

The group has invested GBP 71.1 million in capex from FY2023 through FY2026, helping adjusted EBITDA rise to GBP 70.2 million from GBP 39.5 million over that period. Based on a CBRE valuation dated 24 June 2026, the portfolio carries a market value of GBP 940.6 million as of 11 March 2026, while Morningstar DBRS applies a more conservative value of GBP 671.2 million using a sustainable net cash flow assumption of GBP 57.0 million and an 8.5% capitalisation rate.

On that basis, the combined loan-to-value for Facility A1 and the capex loan stands at 70.4% on the external valuation and 98.7% on Morningstar DBRS' value. The agency also notes that Blackstone retains a material equity stake in the portfolio after the refinancing, while covenant protections in the deal rely on cash trap triggers before any permitted change of control and tighter default tests after such an event.

In our earlier article on Morningstar DBRS rating actions for Morgan Stanley Bank of America Merrill Lynch Trust 2017-C33, we covered the downgrade of six CMBS classes as expected liquidation losses rose on a handful of higher-risk loans. We highlighted how special servicing transfers, weakening collateral values, and office/retail refinancing pressures were projected to erode support for junior bonds and drove Negative trends on certain classes.

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