Repayment becomes rare as CMBS issuers opt to extend

Only a quarter of loans due to mature in year to date have been repaid

Just 14 of the 52 loans that were originally scheduled to mature in the year to date have been repaid so far, Fitch Ratings’ May CMBS roundup showed.

Loan extensions increased to 40% from 37% in April, while the number of work-outs fell,  accounting for 18%, compared to 20% the previous month.

Last month, only two loans were paid back out of 23: one secured against St Enoch Shopping Centre in Glasgow, the other the Keops loan, backed by a mix of 149 Swedish proper-ties originally valued at €326m.

Half of the €2.2bn of loans due to mature so far this year were extended, bringing the total amount of loans extended to €9.5bn, or 40%, since the start of the global crisis. Some 20% are being worked out; 10% are in standstill and  only 30% have been repaid.

“It’s mainly the smaller loans backed by higher quality collateral that have been repaid,” said Charlotte Eady, an analyst at Fitch Ratings. “This reduces the average credit quality of the remaining CMBS portfolio.

“With a weighted average Fitch loan-to-value level of almost 100%, this indicates that most of the 2012 loans will not be repaid in a timely manner.” Equally, with more bond maturity dates approaching, she said “actual work-out timing becomes a real concern”.

This gives servicers fewer options, so rather than extending, the loans will need to be worked out with a view to asset sales. Uni-Invest is the most prominent recent example of a loan not worked out in a short, two-year tail period.

In the end, senior noteholders backed TPG Capital’s and Patron Capital Partners’ proposal to recover their €359m of debt, leaving €243m of junior notes, and the class Bs through to Ds, empty handed.

Part of the €521.8m Sunrise loan originally made by Citibank to Treveria that is within the Europrop deal (EMC IV) will  be the next large CMBS loan to reach legal final maturity, next April (see below).