While Moody's Investors Service's new framework for rating domestic CMBS transactions that lack sufficient terrorism insurance coverage may imply the possibility of downgrades on triple-A bonds in single-asset transactions, market participants say that it will have limited impact on investors who deal with traditional conduit paper.

"What the [Moody's] report puts a lot of focus on are the large-loan deals," said Marc Peterson, CMBS manager at Principal Capital Real Estate Investment. "For the most part, the majority of CMBS is traditional conduit paper where you don't have exposure to any one big property so I don't think the market is going to be dramatically impacted except for those large-loan and single-asset deals or maybe some fusion deals. If you look at where large loan deals and single-asset transactions are trading today, they are probably two to 30 basis points back of where they were prior to 9/11. So the risk has already been reflected in how those deals were priced."

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