Fitch Analyzes 2006-2008 Fixed-Rate CMBS

Fitch Ratings has completed its review of 78 U.S. commercial mortgage-backed securities (CMBS) conduit transactions issued between 2006 and 2008, resulting in affirmations for 80% of the tranches ($186.1 billion) and downgrades to 20% ($44.3 billion) by dollar balance.

The review encompassed approximately $230.4 billion in unpaid balance.

The 2007 vintage incurred the majority of negative rating actions. In total, Fitch downgraded 89 junior AAA classes (totaling $16.7 billion) across the vintages and five mezzanine AAA classes ($726 million).

Fitch affirmed all 492 super senior AAA classes in its rated portfolio ($164 billion), along with seven junior AAA classes ($1.1 billion) and 88 mezzanine AAA classes ($17.6 billion).

Rating actions assumed average recognized losses across these deals to be 6.3%, with the weighted average recognized losses per vintage as follows:

  • 34 deals from 2006 – 5.4%;
  • 40 deals from 2007 – 6.9%; and
  • four deals from 2008 – 6.9%.

Fitch assigned negative rating outlooks to 994 bonds ($44 billion) and stable outlooks on 585 bonds ($170.6 billion). Further rating downgrades are possible should the full potential losses associated with maturity defaults be realized, Fitch says, adding that its potential loss analysis does not assume any recovery.

Should those assumptions be realized, average potential losses across these deals are expected to be 8.7%. Weighted average potential losses are 7.2% for the 2006 vintage, 9.7% for the 2007 vintage and 8.8% for the 2008 vintage.

SOURCE: Fitch Ratings

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