NEW YORK--(BUSINESS WIRE)--During the summer, Kroll Bond Rating Agency (KBRA) published the Beyond the Credit Metrics report. We asked our readers to fill out a survey which ranked by order of importance 22 loan and collateral credit characteristics that our analysts believe could introduce increased credit risk into a transaction. In total, 50 participants (primarily ‘AAA’ investors) responded.
The top five rankings by level of importance are:
- Issuer’s Underwriting Variance Versus Most Recent Net Cash Flow
- Pro-Forma Cash Flow and/or Valuations
- Loans in Troubled Areas
- Single Tenanted Properties
- Property Types
The survey indicates that the level of risk an investor is willing to accept typically depends on where they invest in the capital stack. The survey goes on to distinguish between the risk appetite of ‘AAA’ and ‘BBB’ investors based on their rankings of the 22 topics. The report also includes investors’ comments on other areas of concern they have when reviewing a transaction. In the report, we also discuss some of the credit rankings that surprised us and our reasons why. Some surprises included the low rankings for Properties Sensitive to Environmental Issues (#17), Appraisals (#18), Loan Origination Dates (#20), and Small Balance Loans (#21).
If you would like to discuss our findings, or other CMBS topics in more detail, we welcome you to reach out to us.
Please click on the link below to access the full report: www.krollbondratings.com/show_report/2920
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).