Cantor Fitzgerald's first-ever CMBS called CFCRE 2011-C1, which is backed by 38 loans in 67 properties, priced today.
The $634.5 million offering was initially circulated much wider than where generic new-issue spread levels have been quoted for recent CMBS transactions, market analysts said.
The transaction's biggest 'AAA' portion, which is worth $304.7 million and matures in 4.77 years, yielded 125 basis points over swaps, according to a Bloomberg report. Meanwhile, the deal's $153.6 million tranche of top-rated securities maturing in 9.64 years priced at 140 basis points over swaps, the report said.
The offering is more highly levered than recent CMBS and has an issuer-reported LTV of 67.6% compared with a weighted average of 62% for other recent CMBS deals. As a result, even before today's pricing, analysts expected Cantor's securitization to price wider than other recent CMBS transactions.
According to Bank of America Merrill Lynch analysts, the back-end triple-As on the deal are being shown at 130/135 basis points over swaps. This is compared with BofA Merrill's generic quote of 100 basis points over swaps.
JPMorgan Securities analysts added that the transaction is also more granular, although is backed by smaller loans when compared with other deals brought to market this year. The average cutoff balance is roughly $17 million, which is just over half the weighted average of $34 million for the 2011 vintage, according to analysts.
Despite the overall credit quality being lower than other recent CMBS, JPMorgan analysts said that rating agencies kept triple-A subordination levels relatively low (17.625% versus the 2011 vintage average of 19.0%) by relying on the offering's more “diversified” loan pool.
"This essentially amounts to the same rating agency model arbitrage that was commonplace into the peak of the market, and suggests that certain rating agencies may still not recognize that a higher diversity score doesn’t obviate the need for good credit," JPMorgan analysts said.