Sears, the other major retail tenant in retail CMBS that remains under credit stress, is listed as a tenant in 197 loans compared to 254 loans for JCPenny. The two are frequently co-anchors of securitized regional malls, according to a JP Morgan report.
The retailer said last week that it secured a new $1 billion loan to boost liquidity. The company was expected to run out of cash by April, according to several market reports.
JP Morgan analysts said in a securitization research report this week that CMBS exposure to Sears is “only marginally smaller than JCPenny,” however there are 68 loans where the two retailers are listed in the top three tenants at a property.
Eight of the ten deals with the largest exposure to the Sear/JCPenny loans are from CMBS 2.0. According to Barclays “retail loans in the 2006-07 deals have little margin for underperformance; debt service coverage ratios are usually in the 1.2x range and will not be able to withstand even a temporary loss of large tenant.”
On the other hand “most new issue retail loans are comfortably covering debt service” with a cushion that would still cover debt service “even after discounting rent contribution” from the two retailers, said Barclays.