NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) released August’s CMBS Trend Watch today.
Private-label volume remained strong through August with $9.9 billion priced during the month. The August deals brought the year-to-date total to $52.0 billion, a 41.4% increase year-over-year (YOY). The market didn’t provide for much beach time this summer - the combined pricing volume for July and August ($17.6 billion), represented about a third of YTD 2017 volume.
Based on the forward pipeline, we may see up to seven conduits and six-single borrower transactions launch in September. If these deals come to market by the end of September, we could see the strongest third quarter since 2014, when issuance reached $27 billion.
In this month’s spotlight section, we took a look at select key credit metrics by loan rank. Observations were made within the KBRA rated conduit universe by loan rank across three buckets: loans 1-10, 11-20 and >20. Based on our review, we found that there was a clear distinction in credit quality among the three loan groupings in regard to leverage, debt service coverage, and IO composition.
New issue conduit spreads widened out slightly in August, as the AAA LCF spread-to-swaps ranged between +90 and +95 bps, compared to a range of +88 to +92 bps in July. On the other hand, there was some tightening within the BBB- spreads, which ranged between +325 and +360 bps, from +345 and +375 bps in July. In both months, BBB- pricing was only available for two of the four priced deals.
On the ratings front, KBRA published pre-sales for nine deals ($8.4 billion), and conducted a review of 249 rated classes. The surveillance activity included 232 ratings that were affirmed, 12 that were upgraded and five that were downgraded. As part of August’s surveillance activity, KBRA highlighted 44 KBRA Loans of Concern (K-LOCs), which are loans that are either in default or at heightened risk of default.
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