Fitch: Beware of High-Rated Large-Loan CMBS

Fitch Ratings is concerned with the spike in issuance of large-loan commercial mortgage-backed securities (CMBS) in the U.S. The agency believes that the credit protection in these deals is not enough to justify the ratings sought by their issuers.

In a report, the agency said collateral and underwriting standards are starting to deteriorate as more deals come out. Issuance in this segment is expected to hit $11 billion in the first four months of 2013, nearly on par with the $11 billion placed during all of 2012.

“Large loan CMBS of late are coming to market with some average assets and aggressive assumptions,” said CMBS group head Huxley Somerville.

The agency cited a several transactions that could not get the levels they wanted from Fitch. One was MSC 2013-ALTM (Altamonte Mall), which has a senior tranche rated triple-A by both Standard & Poor’s and Kroll Bond Rating Agency. Other deals mentioned by Fitch were MSBAM 2012-CKSV (Clackamas Town Center), COMM 2012-MVP (Sheraton Dallas Downtown, Sheraton Denver Downtown and Hyatt Regency St. Louis At The Arch) and Barclays GGP Mall 3-pack (Tucson Mall, Fashion Place and Town East Mall).

Fitch said the risk in this deals largely stems from the fact that their performance hinges on the strength of a single asset.