Fitch Ratings is confident that the market can readily absorb the $16.4 billion of non-defaulted commercial mortgage loans with 2014 maturities that it rates.
The ratings agency said this week that borowers of around $15.4 billion of these loans have reported year-end 2012 financials and 86% will be able to refinance at market-level refinancing rates.
Of the maturing loans with reported financials, the majority ($9 billion) had balances of $30 million or less. Forty-five loans or $4.6 billion have balances greater than $50 million. The weighted average coupon is 5.65%; if current market rates stay between 5.00% and 5.25%, refinancing is likely, according to Fitch.
“We do not expect the likely reduction in monetary stimulus to have an impact on these loans' refinancing prospects if it progresses at a reasonable pace," said analysts. “However, if the reduction proceeds more quickly (or has a bigger impact) than the market expects, instability could arise and refinancings may slow.”
Approximately $188 billion is scheduled to mature between 2015 and 2017. “Some of these loans may have a more difficult time of refinancing without additional borrower equity as the leverage was higher than previous years and there was less amortization,” said Fitch.
Trepp is also concerned that a stricter lending environment could pose a challenge for loans maturing between 2014 and 2017. Loans structured with higher loan-to-value ratios would be hardest hit, since a “higher LTV ratio means more debt, less equity and increased risk,” Trepp stated in a December report.
