The precipitous fall in UK and continental European property values – in some cases 20% and higher – in the months since the sub-prime crisis began to bite has put pressure on a handful of commercial mortgage-backed securitizations. Refinancing risk is the greatest spectre in the CMBS market, with some deals facing dire consequences if banks remain tight-fisted with their cash in the next 12 to 18 months.
Fitch Ratings has put five tranches of four deals on outlook negative, citing refinancing risk as the main concern (see box). Deals from Credit Suisse, Deutsche Bank, Lehman Brothers and Morgan Stanley have all been flagged as headed for trouble if the credit markets’ stagnation develops into a fully fledged downturn.
| CMBS deals on outlook negative because of loan refinance risks | ||||
| Tranche | Rating | Rating agency | Date | |
| Deco 8-C2 | G | BB | Fitch | 16 Jan ’08 |
| Euro 26 | H | BBB+ | Fitch | 16 Jan ’08 |
| Titan 2006-CT1 | H | BB | Fitch | 16 Jan ’08 |
| Titan 2006-CT1 | J | B | Fitch | 16 Jan ’08 |
| Windermere VIII | E | BB | Fitch | 16 Jan ’08 |
| Source: Citi | ||||
"The property market has moved, particularly in the UK, where we’ve seen declines in value," says Andrew Currie, managing director at Fitch in London.