U.S. commercial real estate loan collateralized debt obligations delinquencies (CREL CDOs) registered their first increase since June, according to the latest index results from Fitch Ratings.
October CREL CDOs rose to 12.2%, up from 11.6% in September. New delinquent assets in October consisted of five matured balloon loans, four credit impaired securities and two term defaults.
Fitch Ratings expects the delinquency index to remain volatile as the total universe of CREL CDO assets continues to decline. Delinquent and defaulted assets continue to be liquidated out of the pools.
Furthermore, Fitch Ratings warns that asset managers are, for the most part, no longer able to reinvest principal received from loans that repay. In October, asset managers reported approximately $47 million in realized principal losses from the disposal of three assets, which had minimal recoveries. The largest reported loss was $24 million related to the write down of a preferred equity position on a large office portfolio located throughout southern California.