NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases December’s CMBS Trend Watch.
CMBS private label pricing volume ended December at $11.2 billion. This brings total 2019 issuance to $96.4 billion, or 27% above full-year (FY) 2018. After a strong end to the year for issuance, the momentum should continue into January, when we could see the launch of up to five or more single-borrower transactions, four conduits, and two Freddie Mac K-Series securitizations. CRE CLOs, in particular, are poised for a strong showing right out of the gate, with as many as 10 deals likely to launch through February.
The Spotlight section provides a review of issuance and ratings activity for FY 2019. With the Fed now signaling that it will stay on hold in 2020, issuance is not expected to experience the adrenaline jolt it received in 2019. KBRA expects issuance to be flat year over year. For CMBS, which KBRA categorizes as conduit, single borrower as well as large loan deals, the upgrade/downgrade ratio for 2019 compressed to 0.89:1 (48 upgrades, 54 downgrades). KBRA expects further compression in 2020, given where we are at in the economic cycle.
KBRA published December pre-sales for 10 deals, including three conduits ($2.2 billion), five single-borrower transactions ($5.1 billion) and two Freddie Mac K-Series ($2.6 billion). December’s surveillance activity included rating actions on 337 classes consisting of 330 affirmations, one upgrade, and six downgrades. The activity was effectuated across 26 transactions, including 20 conduits, two single-borrower transactions, one Freddie Mac K-Series, and three CRE CLOs.
The three-month average KBRA debt service coverage (KDSC) continued its steady rise in 2019 to its highest recorded level of 2.29x. The increase reflects the percentage of full-term IO loans which in December reached 68.8%, another record.
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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 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.