Ratings outlook change for US unlikely to impact defeased CMBS
The ratings outlook for defeased U.S. commercial mortgage-backed securities is unlikely to be impacted by Fitch's negative outlook when it comes to the nation's sovereign debt rating, the ratings giant said Monday. Earlier this week, Fitch revised its outlook on the U.S. sovereign debt rating to negative. In a report Friday, the ratings agency said half of the defeased collateral in Fitch's rated U.S. CMBS is set to mature by the end of 2013, making it likely the collateral will pay off before any potential change to the U.S. sovereign debt rating occurs. When a CMBS is in defeasance, other forms of income production can be substituted if the underlying collateral is non-performing. In many cases, such income may come from U.S. Treasurys. "In the event of a downgrade or rating watch negative for the U.S. sovereign rating, Fitch would expect only those CMBS deals and rake bonds with significant exposure to defeased loans to be impacted," Fitch said. Fitch puts its overall exposures to defeased collateral amounts at 4% of its total rated population. Write to Kerri Panchuk.