Moody's Investors Service raised a red flag in its quarterly review of the U.S. CMBS market, saying the leverage on loans backing upcoming CMBS conduit transactions is poised to increase. Several conduits in its second quarter 2012 CMBS deal pipeline have collateral pools with average leverage approaching or exceeding 100% Moody's loan-to-value ratio (MLTV).
"While final pool composition is still subject to change, should the more highly levered Q2 transactions be issued as currently constituted, they will see from 50 to 100 basis points of additional credit support across their investment-grade rated bond classes," said Tad Philipp, Moody's director of commercial real estate research. "Should the adverse credit drift continue in future quarters it will be met with further subordination increases."
Read more...Frothy: CMBS Deals Return to the Days of Loans Exceeding 100% of Value - CoStar Group
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