Moody's assigns provisional ratings to Extended Stay CMBS
Moody's Investors Service gave good marks to the coming $2 billion of commercial mortgage-backed securities backed by the hotel properties of Extended Stay Inc. Analysts assigned provisional ratings of triple-A to $1.2 billion Class A certificates; Aa2 to $245 million of Class B certificates; A2 to $243 million of Class C certificates; and Baa2 to $312 million of Class D certificates. A single loan backed by first lien commercial mortgages for 664 extended-stay hotels secure the CMBS. Moodys' said the strong ratings for the Extended Stay issue are bolstered by the structure of the deal, which includes "properties that are cross-collateralized and cross-defaulted." Analysts also pointed to the geographic diversity of the properties and strong Herfindahl score as credit strengths. Although the pool of the mortgages in the CMBS have mirrored the entire lodging sector by "deteriorated dramatically" since the fourth quarter of 2009, the decline is offset somewhat by a rebound in recent quarters, according to analysts. The Wall Street Journal has reported JPMorgan Chase (JPM) and Deutsche Bank (DB) will lead the sale. Additional information about timing and pricing wasn't immediately available. In early October, Extended Stay Inc. exited bankruptcy after Centerbridge Partners, Paulson & Co. and Blackstone Group closed their $3.93 billion acquisition of the company. The investors won a auction to acquire the nationwide hotel chain in late May. Write to Jason Philyaw.