Loan Maturity Defaults Up in European CMBS
European CMBS had a bad start to 2013 with January recording the highest number of loan maturities ever, in a single month, according to Standard & Poor’s.
Of the 53 loans scheduled to mature in January, about 80% were originated in the U.K. or Germany. Thirty-eight of these loans (approximately 72%) failed to meet their maturity obligations, leaving an aggregate euro equivalent balance of €2.50 billion ($3.2 billion) unpaid from a total of €3.49 billon due to mature, said S&P in a report today.
According to the report, of the 53 loans that matured, servicers declared 15 to be in default. All of the loans that became delinquent in January failed to meet their maturity obligations.
S&P said that a quarter of the loans that matured over the month entered special servicing. The ratings agency added that, as a result, downgrades continue to dominate rating actions for European CMBS.
Barclays Capital analysts noted in a report today that the trend of loans ending up in special servicing has resulted in increased property sales. According to the analysts, recent transaction restructuring activity for Deutsche Annington's GRAND; the U.K. offices securitized portfolio known as London & Regional Debt Securitization No. 1 plc; and Bruntwood’s CMBS deal issued in November 2006, resulted in price increases for the affected bonds, driven primarily by substantial margin increases.
“Maturity performance in the German multi-family sector continues to be better than for other CMBS sectors, as shown by recent refinancing activity in GRAND and the repayment of the Woba loan securitized in Deco 14 and Windermere IX,” said Barclays.
The Barclay’s analysts noted in the report that good sponsors still have the ability to refinance outstanding CMBS debt as evidenced in the likely repayment of Opera Finance CSC3 Plc CMBS, which will be funded by a new more flexible debt vehicle set up by the sponsor Intu Properties, formerly known as Capital Shopping Centres.
Intu plans to raise about 1.15 billion pounds ($1.7 billion) to replace debt secured by shopping centers that are part of the Opera Finance deal, according to a Bloomberg report. The loans total 559 million pounds and are scheduled to repay in April 2015.