Fitch: Rating Watch Negative For CRE CDOs With 2005 CMBS Exposure

Fitch Ratings has placed on rating watch negative 58 classes from 13 commercial real estate (CRE) collateralized debt obligations (CDOs) containing a concentration of 2005-vintage commercial mortgage backed securities (CMBS). The actions stem from Fitch placing classes from the 2005-vintage CMBS on rating watch.

The affected transactions have greater than 10% exposure to 2005-vintage CMBS that are currently on rating watch negative by Fitch or another agency.

Similar to the rating watch actions for classes within CRE CDOs taken when Fitch placed the 2006-2008 vintage CMBS classes on rating watch negative, Fitch is placing classes from CRE CDOs with 2005-vintage CMBS concentrations on negative watch. Two of the CRE CDOs affected in this action already had some of their bonds on negative watch from that earlier action.

The magnitude of the negative rating actions on the 2005-vintage CMBS is expected to be less significant than the 2006-2008 vintage CMBS rating downgrades, Fitch says. Nevertheless, the expected CMBS downgrades still exceed Fitch's expectation when the downgrade actions were taken on these CRE CDO bonds earlier this year following the implementation of revised criteria.

On Oct. 22, Fitch placed 247 classes from 22 fixed-rate CMBS conduit transactions from the 2005 vintage on rating watch negative, with the expectation that the majority of the classes will be downgraded approximately one category when the rating watch negative is resolved.

Fitch says it will be carrying out individual analyses on the affected transactions in the coming months.

SOURCE: Fitch Ratings

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