The CREL CDO delinquencies rose to 12.5% in October from 12% the prior month, according to the latest Fitch Ratings index.
Volatility will stay for CREL CDO delinquencies as asset managers work out troubled loans within the CDO or find resolution outside the CDO including via a sale or a refinance.
Fitch stated that in October asset managers reported 10 new delinquent assets. Among these were three term defaults, two matured balloon loans, three new credit impaired securities, and two repurchased assets, according to Fitch.
The rating agency said that there were just two assets that were removed from the index in the month, which include a real estate owned multifamily property in Phoenix, AZ. This was sold at no loss to the CDO, Fitch said.
The delinquency rates by asset type are: land: 36% (5% of total collateral);condo: 23% (2%);
construction: 22% (1%); hotel: 16% (16%); industrial: 16% (1%); multifamily: 14% (15%); rated debt: 13% (21%); retail: 8% (7%); office: 7% (24%); and other: 10% (5%).
The remaining 3% comprises uninvested principal proceeds, the rating agency reported.
In October, CREL CDO asset managers reported roughly $25.5 million in realized losses from the disposal of five assets. The weighted average loss on these assets was 28%.
The biggest single loss that totaled $7.4 million, Fitch said, was related to the discounted sale of a mezzanine loan. This loan was secured by interests in a portfolio of luxury hotels. According to Fitch, none of these disposed of assets were in the previous month’s delinquency index.
A lot of asset managers get into the resolutions of potentially troubled assets. These usually happen at losses to par and before the actual default.