Commercial lending

Credit investors are stepping into a void left by banks and insurance companies and providing debt financing for top-quality hotels in a bet on a post-pandemic recovery, according to a report from the real estate services firm JLL.

At least four leveraged loan issuers came to market with deals that included “Revlon clawback language” in credit documents in recent weeks.

About $4 billion in value was erased from 118 retail-anchored properties with commercial mortgage-backed securities debt after reappraisals triggered by payment delinquencies, defaults or foreclosures.

Nearly all of the loans were originated by affiliates of Prime; a majority of the loans were for property acquisitions (26, 72.6%), with the remainder for refinance.

Already contending with stressed retail, hotel and restaurant loans, bankers are beginning to view office lending — historically a safe bet — as increasingly risky as companies of all types rethink their space needs.

Ares Management is among five issuers to have sponsored CRE CLO transactions so far in 2021; Starwood REIT's collateral advisor has also launched a CDO for project finance and corporate infrastructure loans.

Deals, trends and research in structured finance and asset-backed securities for the week of Feb. 19-25

Shared national credit balances rose 5% last year, and the percentage of at-risk loans nearly doubled. Regulators point out that banks have stashed away extra capital, but a lot will depend on the speed of the economic recovery and the performance of nonbank loans.

Companies most impacted by the economic crisis have seen their borrowings, including leveraged loans, considered “non-pass,” rise to 29.5% in last year’s third quarter from 13.5% in the same period a year earlier.

Just over 12 billion euros ($14.6 billion) of new issue, refi and reset paper has priced so far this year, surpassing a previous high of 7.3 billion euros in the first two months of 2018.