Performance deterioration seen in CMBS and multifamily transactions in Europe, the Middle East and Africa during the first quarter is expected to continue, Moody's Investors Service said in a report Wednesday, citing upcoming refinancing risks.

"While the refinancing exposure of EMEA CMBS in 2009 and 2010 is still remote, one has to look further ahead," said Deniz Yegenaga, a Moody's associate analyst and co-author of the report. "Given the most recent commercial property market performance and the anticipation of further property value declines, also loans that mature after 2010 will be highly levered on their refinancing date and will most likely experience difficulties to repay. In addition, the significantly declining property values increase the loss upon default of commercial real estate loans."

During the first quarter, the number of loans "subject to an event of default" came close to doubling, Moody's said. The rating agency downgraded 13 classes of notes in nine transactions and placed 23 classes of notes in six transactions on review for possible downgrade during the period. It also upgraded three classes of notes in two transactions during the quarter.

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