Market Overview

Kroll Bond Rating Agency Releases Monthly Newsletter: CMBS Trend Watch


Kroll Bond Rating Agency (KBRA) released today its CMBS monthly newsletter, CMBS Trend Watch.

Total CMBS issuance in October was strong at $10.4 billion, compared to $9.4 billion in September. We expect to see a 35%-50% increase in the number of conduits issued in November compared to October, as several firms may accelerate deal pricing before November 23rd, when Regulation AB II takes effect. Along with the increase in transaction count, transaction sizes are likely to decline, potentially leading to uneven deal flows, and a widening of credit spreads.

Commencing on November 23, 2015, all public offerings of CMBS must comply with the revised rules, commonly referred to as Regulation AB II. There are a number of new requirements applicable to public offerings of asset-backed securities, including that a complete preliminary prospectus must be filed at least three business days prior to the first sale of securities. Additional highlights are available in our report.

KBRA rated a total of eight of the new issued transactions last month, including three conduits, two agency deals (Freddie K's), one single asset transaction, and two SFRs. The SFR transactions included Colony American Finance (CAF) 2015-1, the third multiple borrower (MB) SFR issued to date, and second to be rated by KBRA.

This month there was a fair amount of surveillance activity as KBRA reviewed 19 transactions. The reviews resulted in the affirmation of 155 ratings, two upgrades, two additional ratings placed on Watch Upgrade and the withdrawal of three ratings following the payment in full of the related securities. In conjunction with the reviews, four KBRA Loans of Concern (K-LOCs) were highlighted.

The proportion of conduit loans with KLTVs ≥ 100% and ≥ 110% continued to be at elevated levels. High leverage loans with KLTVs ≥110% stand at 41.3%, the fifth consecutive month the figure exceeds 40%. However, full term IO exposure declined for the sixth consecutive month to 17.1% from 19.5% on a trailing three month basis. The combined percentage of full and partial term IO is the lowest it's been since August 2014, at 63.7%.

In our commitment to transparency, we updated our comprehensive set of the statistics for our rated conduits along with this issue of Trend Watch within the KBRA Comparative Analytic Tool (KCAT). The file enables users to compare data points from all KBRA rated conduits.

To view the report, please click here:

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Paul Fitzsimmons, (646) 731-2495
Managing Director
Larry Kay, (646) 731-2452
Taeho Lee, (646) 731-2317
Follow us on Twitter!

View Comments and Join the Discussion!