CMBS modification trends examined | CMBS | Structured Credit Investor

Modifications will remain a key workout method for troubled CMBS loans amid an increasingly challenging lending environment, according to a new report from Citi securitised products analysts. Consequently, the analysts highlight some of the noteworthy emerging trends seen in recent modifications.

The Citi analysts suggest that servicers will likely provide shorter extension periods, but mods will continue to include many additional terms beyond simple maturity extensions. Indeed, complex modifications remain prevalent, as recent notable mods suggest.

"We can now see nuanced, multi-term mods on loans with balances below US$100m," they observe. "Great Wolf Resorts and 2600 Michelson are recent examples. Complexity no longer characterises just mods for multi-billion dollar or hundreds-of-millions dollar loans, such as Beacon Seattle & DC Portfolio, Villas Parkmerced or World Market Center. The latter three are examples of major notable mods of the past year that attracted considerable market attention. Mod complexity continues to require very detailed analysis when assessing the mod impact on bond cashflows."

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