The Distressed Debt Alert

CMBS Retail Loan Delinquencies Dip, All Others Rise, Moody's Says

The delinquency rate on retail property loans included in commercial mortgage-backed securities dipped slightly in February, in what Moody's Investors Service said was their first decline since November 2007.

However, loan delinquencies rose for all other property types, Moody's said.

The overall delinquency rate for loans included in CMBS pools increased by 31 basis points over the previous month to 5.73%. Moody's said that the overall increase was mild compared to the 44 point average increase over the previous five months.

The delinquency rate of retail loans fell by two basis points from the previous month to 5.22%. Loans on hotel properties had the largest increase in delinquency rate, rising 82 basis points to 10.64%. Multifamily housing properties had the second largest increase, climbing 59 basis points to 9.36%. Office property loan delinquencies rose 45 basis points to 3.98%, and the industrial loan delinquency rate rose 40 basis points to 4.28%.

Source: Press Release

GoldenTree Asset Management, a New York-based hedge fund firm dealing in distressed assets, hired former Lehman Brothers and Barclays Capital executive Tom Humphrey as a partner and executive committee member.

Humphrey will focus on firm strategy and client franchise development, GoldenTree said.

Humphrey previously spent 24 years at Lehman and Barclays, where he most recently played a leading role in the integration of the two firms following Barclays' acquisition of Lehman's North American operations in 2008.

At Barclays, Humphrey was a managing director, head of fixed income distribution for the Americas and head of global commodities sales. He was also a member of the Americas management committee.

At Lehman, Humphrey had been head of global fixed income sales since 2003.

Source: Press Release

Commercial and multifamily mortgages had the lowest charge-off rates in 2009 of any loan type held by banks and thrifts and outperformed their overall portfolio of loans and leases, the Mortgage Bankers Association of America said.

Banks and thrifts held $1.1 trillion in commercial mortgages, representing 15% of all loans, and $211 billion in multifamily mortgages, representing 3% of all loans, the MBAA said in a research report. The largest share of loan holdings is one- to four-unit residential mortgages at $1.9 trillion, representing 26% of all bank and thrift loans, followed by commercial and industrial loans at $1.2 trillion, representing 17% of the total.

The charge-off rate for commercial mortgages was 0.8%, while the rate for multifamily mortgages was 1.1%. Banks and thrifts charged off 1.7% of the balance of their one- to four-unit residential mortgages and 2.4% of their commercial and industrial loans.

Source: Research Report

JCR Capital, a Denver-based commercial real estate finance company, said it recorded its first closing totaling $22 million for its JCR Capital Distressed & Opportunistic Real Estate Fund I.

The JCR Capital Fund will provide financing for distressed and opportunistic commercial real estate transactions. The fund will provide debt, participating debt, preferred equity and equity, JCR said in a statement. The fund will focus on smaller transactions from $1 million to $10 million.

JCR Capital's initial distressed and opportunistic fund has three anchor investors, PartnerRe Capital Markets Corp. of Greenwich, Conn.; JAM Equity Partners of New York and Los Angeles; and Branzan Investment Advisors of Denver. The initial closing included a $5 million commitment to JCR Capital and $17 million of investment capital to the fund.

The fund will remain open for 90 days to accommodate investors and to allow JCR to reach its target of up to $30 million, the fund manager said.

Source: Press Release

Centaur LLC, owner of Hoosier Park Racing & Casino in Anderson, Ind., and the Fortune Valley Hotel & Casino in Central City, Colo., filed for Chapter 11 bankruptcy.

The gaming company said it will continue to operate Hoosier Park and Fortune Valley as it works its way through bankruptcy. Centaur said it hopes the restructuring will also allow it to continue pursuing the development of its Valley View Downs & Casino project in western Pennsylvania.

Source: Press Release

The rate of delinquencies on loans packaged in U.S. commercial mortgage-backed securities rose by 29 basis points in February over the previous month, as a stack of loans originated in 2005 began maturing, Fitch Ratings said.

About 30% of the new delinquent loans came from 2005 transactions, which pushed Fitch's U.S. CMBS delinquency index up to 6.29%. The four largest new delinquent loans, which range from $65 million to $112 million, were funded in 2005. Three of these four loans are past their 2010 maturity dates, and are now considered non-performing mature loans.

The delinquency rate on loans backed by multifamily housing projects rose by 64 basis points, while the delinquency rate on office property loans rose by 45 basis points and the industrial property delinquency rate rose by 43 basis points. When a loan on the massive Peter Cooper Village/Stuyvesant Town apartment project in New York reaches 60 days delinquent, the overall index will rise by 60 basis points and the delinquency rate on multifamily housing will rise by 4 percentage points.

The CMBS delinquency rate on hotel properties was the highest last month at 16.6%, while multifamily housing rose to 8.97%. Retail delinquencies rose to at 5.09%, industrial was at 4.16%, and the office property delinquency rate was 3.5%.

Source: News Release

Kohlberg Kravis Roberts & Co. named Jamie Weinstein and Nathaniel Zilkha to lead its global special situations investment group, which includes distressed debt, in the KKR Asset Management division, Bloomberg News reported.

KKR also hired Erik Falk and Chris Sheldon as managers focusing on leveraged-credit strategy within the asset management unit.

Source: News Story

Extended Stay's bankruptcy reorganization plan, which calls for Paulson & Co., Centerbridge Partners and the hotel chain's senior lenders to invest $450 million, could allow Extended Stay to exit Chapter 11, the Wall Street Journal reported.

Paulson and Centerbridge would invest $225 million in the troubled hotel operator in exchange for a 22.5% stake in the company, court papers said.

Source: News Story

The default rate on bonds issued by U.S. companies with speculative-grade credit ratings declined by 0.9 percentage points in February from the previous month, to 12.7%, Moody's Investors Service said.

Moody's forecasting model estimates that the U.S. speculative default rate will fall to 3.3% by December 2010 and to 3% a year from now. The U.S. speculative-default rate stood at 6.5% a year ago.

Only two of Moody's rated corporate debt issuers defaulted in February and both were U.S-based companies. So far this year, 10 issuers have defaulted, while 45 issuers defaulted in the first two months of last year. Across U.S. industries, Moody's expects default rates to be highest in the consumer transportation sector.

Moody's speculative-grade corporate distress index for February, which measures the percentage of rated issuers that have debt trading at distressed levels, came in unchanged from the previous month at 16.5%. The index was much higher a year ago at 49%.

Source: Press Release