Fitch Ratings placed $20.6 billion in bonds in 33 floating-rate CMBS deals on Rating Watch Negative.
The rating agency has also assigned Negative Rating Outlooks to 22 ‘AAA’ and 'AA+' rated classes, which is equivalent to $1.1 billion.
The Rating Watch Negative placements were caused by the consideralbe stress on cash flow experienced by floating-rate loans in 2009 as well as Fitch’s expectation that cash flows will continue to be stressed for the foreseeable future.
Floating-rate loans are transitional in nature and more vulnerable to the declining market conditions compared with stabilized properties usually found in conduit deals. Many floating-rate loans have not reached stabilization and/or have experienced considerable declines in
performance since the agency’s last rating action.
Many recent vintage floating-rate deals also have high concentrations of hotels, particularly the luxury sector.
In total, Fitch rates 34 floating-rate deals. Before this action, the agency placed $4.9 billion or 143 classes from 14 deals on Rating Watch Negative because of expected performance declines.
The details of the Rating Watch Negative placements are as follows: $14 billion (123 classes) rated ‘AAA’; $4.9 billion (184 classes) rated ‘AA’ and below; $1.7 billion (97 classes) currently rated below ‘BBB-'.
The rating agency will be performing a loan-by-loan analysis that covers a review of the most recent financial information, market updates as well as prospective reviews of future performance to resolve the Rating Watch Negative designations.
