Fitch: CMBS Downgrades To Continue As New Issuance Rises

Downgrades on existing commercial mortgage-backed securities (CMBS) will continue at a less pronounced pace as the market prepares for a steady inflow of new issuance in the coming months, according to Fitch Ratings in an investor FAQ that appeared in the firm's U.S. CMBS newsletter last week.

Fitch says its regular dialogue with CMBS investors has yielded numerous topics of interest, including the possibility of more outstanding CMBS downgrades coming and the effect of interest shortfalls on ratings.

‘Defaults on CMBS will continue through 2012, so further negative rating actions are likely, albeit to a lesser extent,’ says Mary MacNeil, a managing director at Fitch. ‘Future downgrades will be predicated on updated valuations as many highly leveraged loans move closer toward maturity.’

This trend is taking place as new CMBS deals are slowly entering the market. Fitch expects increased new issuance in the coming months, with stable properties with lower leverage as the chief target for newly securitized loans.

‘Several shops are now quoting and originating loans, which is adding liquidity and new sources of refinancing for existing loans,’ MacNeill adds.

SOURCE: Fitch Ratings


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