KBRA Releases Research — U.S. CRE NPL Securitizations: Poised for a Comeback?

NEW YORK--(BUSINESS WIRE)--KBRA releases research that analyzes nonperforming loan (NPL) transactions issued following the global financial crisis (GFC).

Concerns regarding commercial real estate (CRE) risk have understandably increased owing to higher interest rates and challenges in the banking sector. There is uncertainty concerning whether we will see CRE NPL securitizations in the future―a thought shared by certain market constituents, with some making inquiries surrounding NPL securitizations. While we are unlikely to experience such transactions this year, it is possible that some could be explored for issuance next year.

This KBRA report discusses the history of U.S. NPL securitizations dating back to the 1990s and then dives into the CRE NPLs issued after the GFC, examining issuance volumes, collateral characteristics, transaction structures, and the ultimate performance of those securitizations, most of which are KBRA rated. The KBRA-rated NPL transactions had pool balances ranging from $157.3 million to $899.3 million and an average of $512 million, as measured by the collateral’s outstanding unpaid principal balance. Sponsors acquired their portfolios at an average of approximately 46% below par and their projected recoveries were around 37% more than purchase price.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.