The Distressed Debt Alert

CMBS Delinquency Rate Increase Slows With Workouts, Fitch Says

Growth in the delinquency rate of loans packaged in commercial mortgage-backed securities began to slow down, rising only 34 basis points in April from the previous month, as special servicers completed more workouts of delinquent and defaulted loans, Fitch Ratings said.

Fitch said that underperforming properties in states hit hardest in the recession pushed the CMBS delinquency rate up to 7.48%. The ratings agency said that the highest loan delinquencies were concentrated in the Sun Belt and Rust Belt states, which have high unemployment, low personal income growth and weak productivity.

The delinquency rate for loans backed by hotel properties was 18.4%, multifamily housing was 13.6%, retail delinquencies were at 5.83%, industrial delinquencies were at 4.6% and office properties were 3.97% delinquent.

Source: Press Release

Simon Property Group said it withdrew its $6.5 billion bid to buy General Growth Properties out of bankruptcy after a judge approved Brookfield Asset Management's bid proposal.

Brookfield's proposal called for the company to provide about $7 billion to help pay off General Growth's unsecured debt in exchange for two-thirds of the company's stock and warrants that would allow Brookfield to purchase more stock.

David Simon, chairman and chief executive of Simon Property Group, said that Brookfield's proposal valued General Growth Properties at $5 per share less than Simon's offer when Brookfield's stock warrants are taken into account.

The bankruptcy judge's approval of Brookfield's plan will make it the stalking horse bidder in the sale of General Growth Properties.

Source: Press Release

Correction: An earlier version of this article misstated the value of Simon Property's offer.

Sheppard, Mullin, Richter & Hampton said it hired Alan M. Feld as a partner in the law firm's finance and bankruptcy practice in Los Angeles.

Feld's expertise is in cross-border restructuring and insolvency issues. He most recently practiced at Manatt, Phelps, & Philips in Los Angeles, where he co-chaired the law firm's bankruptcy and financial restructuring practice.

Feld focuses his practice in emerging markets, particularly Latin America. He has represented ad hoc committees of bondholders and other creditors in the restructuring of emerging market entities that have securities that are publicly traded in the U.S.

Source: Press Release

The default rate on debt held by U.S. companies rated as speculative-grade by Standard & Poor's is expected to fall to around 3.5% in the 12 months ending in March 2011, the ratings agency said.

The default rate could range as high as 4.9% and as low as 3%, analysts said in an article published by Standard & Poor's Global Fixed Income Research.

A reduction in the cost of funding in the bond market to its lowest level in two-and-a-half years and a steady recession of distress-related indicators has improved investor demand and lowered refinancing risk, Standard & Poor's said. The ratings agency expects easier access to cash and a proliferation of bond-for-loan takeouts to lower corporate default risk in the near term.

Standard & Poor's forecast a default rate of around 5% by the end of this year, possibly ranging as high as 6.9% and as low as 4.5%. The default rate for March fell 48 basis points to 10% from the previous month.

Source: Press Release

A U.S. bankruptcy judge delayed an auction of the majority of Station Casinos' facilities until bankruptcy advisors reveal more about plans to transfer the casinos' computer operations to casino company insiders, Bloomberg reported.

Source: News Story

Major League Baseball may invoke its "best interest of baseball" rule and seize control of the Texas Rangers this week to head off an involuntary Chapter 11 filing by the team's creditors, Street & Smith's SportsBusiness Journal reported.

Source: News Story

The delinquency rate for commercial real estate loans included in commercial mortgage-backed securities rose by 41 basis points in April to 8.02% from the previous month, according to real estate research firm Trepp.

The percentage of loans that were more than 30 days delinquent surpassed the 8% mark for the first time, Trepp said in a report. But the delinquency rate showed signs of easing, as the April increase was 48 basis points lower than March's increase.

The percentage of commercial real estate loans seriously delinquent, which is defined as loans more than 60 days late, in foreclosure, REO or non-performing balloons, was up 48 basis points in April at 7.14%.

The delinquency rate stood at 2.45% one year ago, while the seriously delinquent rate was 1.78% a year ago.

The property type with the highest delinquency rate was hotels, where the delinquency rate increased by 27 basis points to 17.16%. The multifamily housing sector had the second highest delinquency rate at 13.06%, but it was also the only sector to post a decrease in April, falling by 13 basis points. The retail property sector increased 41 basis points to 6.44%, the industrial sector jumped five basis points to 5.44% and the office sector spiked by 64 basis points to 5.37%.

Source: Press Release

Correction: An earlier version of this article included an incorrect figure for the increase in the delinquency rate in April.

General Growth Properties is still considering a $6 billion buyout bid from Simon Property Group after designating Brookfield Asset Management's bid as its preferred choice to finance its exit from bankruptcy, the Wall Street Journal reported.

General Growth's acceptance of Brookfield's bid to exchange two-thirds of General Growth's stock for $7 billion is expected to be reviewed at a bankruptcy court hearing on Wednesday. The bid could be chosen at that hearing as the stalking horse bid for a bankruptcy sale

Source: News Story

Brown Publishing Co., an owner of community newspapers and business publications in 10 states, filed for Chapter 11 bankruptcy and seeks to sell substantially all of its assets, the Boulder County Business Report reported.

PNC Bank of Philadelphia and Wilmington Trust of Boston hold $94 million worth of Brown Publishing's secured debt. Brown Publishing is seeking court approval for $2.5 million in debtor-in-possession financing.

Source: News Story

Startech Environmental Corp., a Wilton, Conn.-based, publicly traded environmental technology company, said it filed for Chapter 11 bankruptcy.

Source: Press Release