U.S. commercial real estate loan collateralized debt obligation (CREL CDO) delinquencies closed out last year at over 13%, according to the latest index results from Fitch Ratings.
CREL CDO delinquencies rose in December to 13.6% from12.7% in November, primarily due to an increase in credit risk securities, including defaulted real estate investment trust debt and credit-impaired commercial mortgage-backed securities.
‘The current rise in the delinquency rate is not expected to impact Fitch's ratings, as its analysis of each CREL CDO takes into account potential increases,’ says Director Stacey McGovern. While the current actual delinquency rate is 13.6%, the average modeled base case default rate is 58.9%.
‘Ratings on most junior classes, however, remain subject to volatility as losses are realized, which may differ from expectations,' McGovern adds.
New December delinquencies consisted of one matured balloon loan, one term default and 10 credit risk securities.
Resolution activity in December was limited, with only one prior delinquency – an extended matured balloon loan – removed. Further, realized losses in December were less than $10 million, which is well below the 2010 monthly average of approximately $60 million, Fitch says. Total realized losses for the year made up 3.5% of current collateral.
The universe of 34 Fitch-rated CREL CDOs currently encompasses approximately 1,100 loans and 400 rated securities/assets, with a total collateral balance of $20.9 billion. One CREL CDO was removed from the universe during December following the repurchase of the notes by the issuer.
SOURCE: Fitch Ratings
