Fitch: U.S. CMBS Delinquencies Up 6 BPs on Maturity Defaults

NEW YORK--(BUSINESS WIRE)--An uptick in non-performing matured loans drove overall U.S. CMBS delinquencies six basis points (bps) higher in October to end the month at 0.51%, according to the latest U.S. CMBS loan delinquency index by Fitch Ratings.

'With CMBS issuance at a standstill and portfolio lenders cautiously managing their balance sheets, borrowers are facing increased difficulty accessing capital to refinance maturing loans,' said Susan Merrick, Managing Director and CMBS Group Head. 'Given the illiquidity in the market, we expect the proportion and dollar balance of maturity defaults to continue to grow at a fast pace with delinquencies approaching close to 75 bps by the end of this year.'

The proportion of non-performing matured loans within the loan delinquency index has increased significantly over last year and particularly has trended upward in recent months. In October 2007, non-performing matured loans made up 16% of new delinquencies and 4% of the overall index. This compares to the 42% of new delinquencies and 15% of the overall index comprised of non-performing matured loans one year later, as of October 2008.

Within its portfolio of rated CMBS transactions, Fitch has identified 274 fixed-rate loans totaling $987.8 million and 29 floating-rate loans totaling $2.4 billion that are scheduled to mature in November or December 2008. All but two of the floating-rate loans have extension options remaining and are likely to extend as performing loans. Although earlier in the year, Fitch expected those fixed-rate loans with high coupons and strong debt service coverage ratios to find financing, even those loans are facing maturity defaults as lending has come close to a halt.

'Timely repayment of maturing loans will continue to be a concern until global economic pressures subside and both lender and investor confidence are restored,' said Merrick.

Fitch notes that one newly delinquent, non-performing matured loan with a current balance of $58.4 million contributed approximately one bp to the October loan delinquency index reading. The property securing the loan is currently undergoing repair work following recent hurricane damage. Insurance proceeds are expected to cover 100% of the rebuilding costs; however, the borrower was unable to exercise a loan extension option due to performance triggers structured into the loan.

The loan delinquency index measures loans that are at least 60 days delinquent within the universe of all Fitch-rated transactions, which consists of 475 transactions totaling $553.1 billion.

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