KBRA Releases Research – CRE CLO Trend Watch: 2019 Issuance Up; Subordination Levels Down

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases its CRE CLO Watch: 2019 Issuance Up; Subordination Levels Down report, which covers the strong issuance growth that occurred in 2019 while pointing to a reduction in subordination levels among non-KBRA rated transactions.

The CRE CLO market experienced another year of strong growth in 2019. Full-year 2019 issuance came in at $19.2 billion, up nearly 40% year-over-year. By deal count, the rise in issuance was less dramatic, with 29 securitizations compared to 25 in the prior year. However, that was more than offset by larger average deal sizes, which climbed 20% versus 2018, to reach $663.5 million. Among the 24 sponsors that issued transactions in 2019, five were first-time issuers.

But with the positive news regarding increased issuance, there were some negatives. The market continued to be characterized by increased competition, with many lenders and borrowers increasingly engaging in larger repositioning plans with increased levels of rehabilitation and construction. Against this backdrop, subordination levels among non-KBRA rated transactions declined. Given the competitive landscape, the nature of the transitional collateral underlying these transactions, and the potential for managed deals to experience credit and concentration drift, it seems counterintuitive to see lower enhancement levels, particularly at this point in the economic cycle.

The report also covers new rating and surveillance activity in Q4 2019 and ramp-up and reinvestment trends.

To access the report, click here.

Related Publications: (available at www.kbra.com)

• CRE CLO Trend Watch: Issuance on Track to Surpass 2018; Performance Buoyed by Buyouts
• A Look at CRE CLO Re-Bridging
• CRE CLO Trend Watch: Strong Q2 Issuance as Deals Evolve and Loans Churn

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is 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.