NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) released today its CMBS monthly newsletter, CMBS Trend Watch. In this month’s Trend Watch we evaluate credit trends in KBRA rated conduits for the first six months of the year.
In total, KBRA rated 15 conduits totaling $16.7 billion through June 30th. Credit risk continued to negatively deteriorate across multiple metrics through the first half. Leverage continued its upward trend, as did increasing percentages of high leverage loans with KLTVs in excess of 100.0%. It has been commonplace this year for more than 50.0% of the pool to be comprised of such loans, which was the case in 14 of the 15 deals rated during the first half. This is in stark contrast to FY 2013, as only three of 13 KBRA rated conduits earned this distinction. While leverage increased, the proportion of deals with interest-only (IO) periods has risen to a new post crisis high, with full-term IO loans leading the charge. As we head into the second half of 2014, we expect competition amongst lenders to continue, but it remains to be seen whether the increased risk observed over the past six months will be the new “norm” or if credit metrics will continue to weaken.
In this edition of Trend Watch we share the past month’s ratings actions, which include two upgrades in one transaction, and 85 affirmations across seven transactions. There were no Watch status placements this month. A review of our surveillance activity and publications over the course of the month are available in the June Surveillance Publications section of the Trend Watch report. In the June Pre-Sale Publications Sections we also highlight our activity on the new issuance front. During the month we assigned ratings to four transactions which included one conduit, one single borrower, one single-family rental, and one large floating rate loan deal.
We also updated our comprehensive set of the statistics for our rated conduits along with this issue of Trend Watch. The spreadsheet is available at this link: KBRA Credit Metrics. The file includes a “Comp Calculator” feature that allows users to dynamically compare credit metrics across our rated conduit universe.
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).
