The Distressed Debt Alert

Commercial Real Estate CDO Delinquencies Rise, Fitch Says

Commercial real estate loan collateralized debt obligation delinquencies rose by 30 basis points last month, edging up to 12.8% as asset managers' disposals of troubled assets began to slow the rising delinquency rate, according to Fitch Ratings.

However, Fitch analysts said that the rate of realized losses increased almost three-fold. The amount of realized losses for March totaled $121.2 million, while February's was $41.8 million.

Fitch said that 19 assets were added to its CRE loan CDO delinquency total last month, and 17 assets were removed with nine disposed of at a loss.

Fitch said that 34 of its 35 rated CRE loan CDOs reported delinquencies in March, ranging from 1.4% to 41.1%. Fitch's universe of 35 rated CRE loan CDOs encompasses about 1,100 loans and 350 rated securities, or assets with a total balance of $23.8 billion.

Source: Press Release

The city of Glendale, Ariz., is offering to provide Chicago White Sox owner Jerry Reinsdorf up to $65 million in subsidies to purchase the Phoenix Coyotes hockey team, and a guarantee of up to $100 million to cover operating losses if the team is still unprofitable in five years, the Arizona Republic reported.

The National Hockey League purchased the Coyotes out of bankruptcy and threatened to sell the team to another market if Glendale did not reach a deal with a new owner this season to buy the team.

Source: News Story

Golub Capital BDC, a business development company controlled by middle market lender Golub Capital, said it priced an initial public offering to raise about $103 million.

Proceeds from the IPO will be used to financing middle market companies and to repay outstanding debt.

Golub Capital BDC priced the offering of 7.1 million shares at $14.50 each. Underwriters received an option to purchase up to an additional 1.065 million shares.

Wells Fargo Securities and UBS Investment Bank were the joint bookrunning underwriters for the IPO. Co-managers were Stifel, Nicolaus & Co., BMO Capital Markets, RBC Capital Markets, and Janney Montgomery Scott.

Golub Capital BDC said it will invest in senior secured, unitranche, mezzanine, and second lien loans of middle market companies that will mostly be sponsored by private equity investors.

Source: Press Release

Creditors of the Texas Rangers baseball team could block a proposed sale of the team to a group led by former pitcher Nolan Ryan and force the team into bankruptcy unless terms of the sale are improved or another buyer is found, Bloomberg reported.

The creditors group, which includes Monarch Alternative Capital, CIT Group and Galatioto Sports Partners, is negotiating with the Rangers' current owners, Hicks Sports Group, on raising the sales price. Hicks Sports Group, whose principal owner is billionaire Thomas Hicks, defaulted on $525 million in debt last year and must sell the Rangers to meet obligations.

Source: News Story

Noyack Medical Partners, a New York-based real estate investment company, said it formed a $200 million private equity fund for distressed real estate and repositioning opportunities in the health care, student housing and self-storage sectors.

The fund will concentrate its investments on the Eastern Seaboard, but it won't restrict itself if a suitable opportunity arises elsewhere, Noyack said. The fund will target transactions in the $10 million to $50 million range, with conservative leverage levels below 70%. The fund will acquire assets and provide debt in a limited capacity.

Source: Press Release

Point Blank Solutions, a Pompano Beach, Fla.-based manufacturer and distributor of protective body armor, said that it filed for Chapter 11 bankruptcy.

The company has also secured an agreement for up to $20 million in debtor-in-possession financing which needs bankruptcy court approval. The company intends to continue all of its business operations and to honor all of its customer commitments once it receives the DIP approval from the court.

Point Blank said in a statement that its decision to file bankruptcy was driven by continued expenses tied to legacy issues from former management, as well as the lack of financing available because of the credit crisis.

Source: Press Release

Simon Property Group offered to invest $2.5 billion in a recapitalization of General Growth Properties at the same share price as a reorganization plan sponsored by rival Brookfield Asset Management but with more favorable terms for General Growth and its stock holders, according to a letter from Simon CEO David Simon.

Simon said his company's proposal is more favorable because it doesn't include highly dilutive warrants that General Growth proposes to issue to Brookfield and its investment partners Pershing Square and Fairholme Capital. Simon's proposal includes a $1 billion co-investment commitment by Paulson & Co.

Simon offers to acquire 250 million shares of General Growth common stock for $2.5 billion or $10 per share, which matches Brookfield's offer. Simon would not receive any warrants, payments or fees in connection with the General Growth investment, in contrast to Brookfield's offer. Warrants to be issued under Brookfield's plan could dilute General Growth's stock holders' investment by $895 million or $2.75 per share, Simon said.

Source: Press Release

The delinquency rate on loans included in commercial mortgage-backed securities recorded its largest increase ever, rising 69 basis points in March to 6.42%, Moody's Investors Services said.

Moody's Delinquency Tracker report said that 45 basis points of the increase was due to the $3 billion delinquent loan on the Peter Cooper Village/Stuyvesant Town apartment complex in New York City.

The report said that 343 loans included in CMBS had become delinquent in March, increasing the overall delinquent loan balance by $4.3 billion.

The addition of the Peter Cooper/Stuyvesant loan to delinquent status caused the delinquency rate on multifamily housing properties to rise by 283 basis points in March to 12.19%. Multifamily became the worst-performing commercial real estate loan sector, though the total number of delinquent multifamily loans only rose by eight.

Delinquency rates on other commercial properties also rose in March. The delinquency rate on hotel properties jumped 63 basis points to 11.27%, retail property delinquencies jumped by 35 basis points to 5.57%, industrial properties rose 30 basis points to 4.57% and offices increased 14 basis points to 4.12%.

Moody's Delinquency Tracker tracks all loans in conduit and fusion deals issued since 1998 that still have balances outstanding.

Source: Press Release

Simon Property Group and General Growth Properties reached an impasse in their negotiations regarding Simon's divestiture of malls to satisfy anti-trust concerns in its proposed purchase of bankrupt General Growth, the Wall Street Journal reported.

Simon is trying to improve its bid for the company prior to General's Growth's April 19 deadline. The bankrupt company is weighing an alternate proposal for an investment from a group led by Brookfield Asset Management, which would help General Growth emerge from bankruptcy as a stand-alone company.

Source: News Story

A new survey on the distressed debt market shows that 60% of respondents bid on or priced nonperforming loan portfolios last year, but fewer than 17.5% of those bidders were able to complete transactions, according to Ernst & Young.

The survey revealed that although investors were eager to buy loan portfolios, sellers were unwilling or unable to sell. Ernst & Young's Real Estate Distress Services Group surveyed real estate investment and opportunity funds, private equity funds, institutional investors and real estate developers for the survey in late December.

Source: Survey