Lehman Brothers' filing for protection under U.S. Chapter 11 is likely to lead to some rating action on a number of European CMBS transactions, says a Barclays Capital research note.

“Inevitably, any forced sales of either Lehman-owned buildings, commercial mortgage loans or ABS bonds will have a negative impact on the overall market for these assets,” reported Hans Vrensen, director and head of securitization research at Barclays.

Lehman holds multiple roles in various CMBS transactions, said Vrensen. As a tenant, Lehman provides 21% of rents in the Canary Wharf II transaction and 11% of rents in the Broadgate Financing transactions. Barclays notes that even if Lehman remains as a paying tenant, the multi-notch downgrade of this major tenant would lead to a rating review of the CMBS bonds.

In its swap counterparty role, Lehman acted as a fixed-floating, basis and currency swap counterparty in the bank’s Windermere CMBS transactions, with Windermere VII-XIV remaining outstanding.

The transactions had requirements in their legal structures in the case of a swap counterparty downgrade. “Given the June 2 downgrade by Standard & Poor’s and July 17 downgrade by Moody's Investors Service of Lehman Holding  to ‘A’/ ‘A2’, it is yet to be confirmed that each of the Windermere issuers acted in compliance with the downgrade triggers to either find an appropriate replacement swap counterparty; procure another person to become co-obligor or guarantor; or collateralize its obligations under the hedging arrangements,” reported Vrensen. 

He added that market will have to wait for rating agency confirmation.

Lehman has also acted as sponsor for a number of loans backing CMBS deals. According to Barclays, Lehman acts a joint venture partner with the borrower entity in at least three loans. This includes the Windermere XII Coeur Defense, where the single loan is backed by a Lehman joint venture and an additional two loans in Windermere XI where Lehman is also a joint venture partner. 

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