J.P. Morgan Revives Sales of Distressed Commercial-Mortgage Bonds via WSJ

J.P. Morgan Chase & Co. is bringing back sales of commercial mortgage-backed securities supported by mostly delinquent loans for the first time since the late 1990s, providing new incentives for buyers of distressed debt.

Thursday, J.P. Morgan told investors it will sell $132 million of bonds supported by nonperforming loans or other troubled debt purchased by Rialto Capital Management, a distressed investment firm owned by home-builder Lennar Corp.

The CMBS are the first of their type since regulators used similar methods to dispose of troubled assets after the savings-and-loan crisis. In the late 1980s and early 1990s, the government formed the Resolution Trust Corp. to work through hundreds of thousands of residential and commercial loans. The agency in 1992 began selling pools of bad debt carved up into bonds and was credited for helping to clear banks’ balance sheets and make way for a rebound.

“There is an estimated $75 billion to $100 billion of distressed commercial debt out there that has yet to be dealt with, so this could be part of the cleanup process,” said Tad Philipp, director of commercial-real-estate research at Moody’s.


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