Further restrictions on new bank funding mean that the majority of European CMBS loans are still failing to repay at maturity, according to a Fitch Ratings report.

The Fitch Repayment Index remains low at 38.9%, though this represents a slight improvement from 37.2% in the previous month. The better results are due to five loans repaying in full.

By balance, only 27% of loans that have matured since the beginning of the downturn have fully repaid at or shortly after their maturity dates; 42% of loans have been extended, while 21% are currently in workout.

Fitch estimated that 2.1% of the loan balance that has matured since 2007 (excluding prepaid loans) has been lost.

Full loan repayments at maturity are expected to remain low. Full repayments during the last month included the CHF66.1m Corvatsch Loan (Windermere X CMBS) and the €53.8 million Algarve Portuguese Loan (European Property Capital 3).

While in the first case, the repayment is part of the trend of successful redemptions of Swiss loans, the second loan represents one of the few loans in European CMBS transactions secured by Portuguese collateral. The full repayment follows the utilization of the second one-year extension option in May 2011.

"Despite the ongoing uncertainty surrounding the Portuguese real estate market, the shopping center securing the loan had performed well since closing, which will have greatly facilitated the successful refinancing of the loan," Fitch analysts explained.

Four of the six loans maturing in December have Fitch loan-to-value ratios in excess of 90%. This indicates that it is extremely unlikely that the loans will be successfully redeemed.

One of the loans, the Spanish (Heron City) Loan, securitized in White Tower 2007-1, is exposed to the ongoing downward pressure faced by the Spanish real estate sector. Fitch expects the Spanish retail sector to continue to suffer in the short to medium term. Consequently, the agency anticipates that the loan will be extended in order to avoid selling the asset under stressed market conditions.

Another loan scheduled to mature in December is the Dutch Offices I Loan, securitized in MESDAG (Charlie). Having declined an extension request, Fitch expects the servicer to commence a workout of the loan.   


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