KBRA Releases Research – CMBS Single-Borrower Default and Loss Study Update
NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) releases its CMBS Single-Borrower Default and Loss Study Update, which reviews the performance of 421 single-borrower (SB) deals issued from August 1993 to June 2018—the SB study population—that had at least one year of loan seasoning.
The SB transactions, which had an average securitization balance of $534.6 million, issued liabilities that were fixed rate (232 deals, 55.1% of population by balance), floating rate (170, 40.4%), and a combination of fixed and floating rate (19, 4.5%).
To date, there have been six loan defaults, of which five were secured by hotel collateral. Of these six loans, three experienced losses with an average loss severity of 0.77% to date. Since the last publication, there was one additional default, resulting in a 1.4% cumulative default rate.
While there is uncertainty whether favorable SB performance will continue in the future, it is clear that the leverage characteristics of the product type have changed in a manner that has the potential to negatively influence future default rates. For deals that have not yet reached the Study’s one-year (July 2018-June 2019) seasoning requirement, the proportion of loans with in-trust leverage in excess of 60% (44.8%) was meaningfully higher than the overall study population (27.1% where LTVs were available). This was somewhat influenced by the composition of the transactions, including the increasing prevalence of floating rate loans, which tend to have higher leverage.
To view the report, click here.
Related Publications: (available at www.kbra.com)
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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.
Larry Kay, Senior Director
Praveen Pallapothula, Associate
Nitin Bhasin, CFA, Senior Managing Director
Eric Thompson, Senior Managing Director