CMBS deals grow larger after period of stagnation: S&P
Larger commercial mortgage-backed securities deals are starting to come back to the market just 15 months after a few smaller transactions priced following a period of dormancy, Standard & Poor's said in a research note this week. The return of the market, which is being referred to as CMBS 2.0, began in late 2009 with three single-borrower transactions that are not as complex as some of the more recent deals, S&P said. "Most recently, three $1.2 billion-plus conduit/fusion deals were issued this month, each of which included an average of 10 principal and interest bonds and two interest-only classes," said S&P analyst James Manzi. "Compared with late-2009 issuances, the newer multiborrower deals have higher leverage, less debt service coverage, and somewhat looser underwriting." The report noted that the 10 most recent CMBS transactions were valued well below peak levels reached in 2007, but the amounts issued in the more recent transactions trump the single-borrower deals valued at $453 million that came to market in 2009, said credit analyst Brian Snow. "Compared with the first two single-borrower deals in late 2009, issuer loan-to-value ratios are up about 10% and debt service coverage ratios are down quite a bit," S&P analyst Kurt Pollem said. "Additionally, rating agency stressed loan-to-values have shifted upward -- to the low 90s most recently -- and stressed debt service coverage ratios have trended down to about 1.2x from 1.5." Write to Kerri Panchuk.