Euro CMBS Note-Level Defaults Surge


Interest shortfalls in European CMBS loans continue to push note-level defaults. In September, the number of defaults pushed the 2012 total to 21, which is more than half the total number of defaults of 37 in 2011, according to a Standard & Poor’s report.

Six more classes of notes defaulted following interest shortfalls in five transactions. According to S&P’s, Oct. 2012 European CMBS monthly bulletin, two out of eight loans scheduled to mature in September, defaulted. S&P said it expects the trend will continue to add to the volume of loans in its special servicing index.

"We anticipate the rating default index will increase by yearend 2012, as a result of the final reporting period, but should stay below 2011 levels," credit analyst James Belchamber said.

S&P reported better performance for its 12-month rolling maturity default rate. The ratings agency said that defaults here decreased to 13.88% from 15.52% as a result of the £720 million ($1.15 biillion) repayment of one large loan.

"We do not consider this decrease to be part of a new downward trend and envision that this index will increase in the coming months, in line with future reporting periods,” Belchamber said. “Overall, we expect loan performance to continue to come under pressure in 2013, as a large number of loans near maturity and interruptions to cash flow and margin mismatches become more pronounced."


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