NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases January’s CMBS Trend Watch.
Pari-passu notes have been trending higher for the last five years. The rise in single borrower deal volume has contributed to the growth that has occurred in recent years, as the notes from these transactions are often split and bundled into conduit transactions (sidecar notes). In this month’s publication, we include a “Sidecar Sidebar”, which provides a brief look into these sidecar notes. By dollar volume, these notes were 27.6% higher on a year-over-year basis for full year 2017.
Private-label pricing volume started off the year with a robust start as $4.9 billion priced in January. The month’s volume was 2.9 times greater than the amount that priced last January and the strongest start the market has experienced since 2014. We may see momentum increase into February as we are aware of about a dozen transactions scheduled to announce through month end. A healthy mix of deals are expected, including conduits, single borrower, and CRE CLOs.
The upward trajectory of the three-month rolling average IO Index was among the observations made in our Credit Metric Corner. The three-month average IO index reached a new record high, at 60.9% driven primarily by an increasing concentration of full-term IO loans.
KBRA published pre-sales for eight deals ($6.2 billion), including two conduits ($2.2 billion), three single borrowers ($1.3 billion), one Freddie K-Series transaction ($1.3 billion), one single-family rental (SFR) ($916.6 million), and one CREL CLO ($368.1 million). January surveillance activity included a review of 165 rated classes, including 155 that were affirmed, nine that were upgraded and one that was downgraded.
Along with the January surveillance activity, we included a recap on 2017 CMBS rating transitions. As of year-end December 2017, our surveillance portfolio included 3,112 CMBS ratings across 313 transactions. In total, 52 ratings were upgraded, 12 downgraded and 3,048 affirmed. All of the downgrades were in the non-investment grade category both at issuance and prior to the downgrade.
To view the report, please click here.
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
