The Distressed Debt Alert

Office Defaults Fuel CMBS Delinquency Spike, Fitch Says

The delinquency rate on loans in commercial mortgage backed securities rose by 49 basis points in May to 7.97%, fueled by a $1 billion net increase in delinquencies in loans on office properties, Fitch Ratings said.

Office loan delinquencies are expected to rise into next year as tenant downsizing, rent reductions and leasing concessions continue to impact office property revenues, Fitch said in a report.

The delinquency rate on loans for hotel properties remained the highest of all commercial property types at 18.63%, Fitch said. Multifamily housing properties recorded the next highest rate at 13.65%. Retail loan delinquencies were at 6.03%. The industrial property delinquency rate was 5.07% and office loan delinquencies were the lowest at 4.59%.

Source: Press Release

Network Communications, a Lawrenceville, Ga.-based real estate media company owned by private equity firm Court Square Capital Partners, said it's seeking to restructure its finances after missing a payment on $175 million in debt, Bloomberg reported.

Source: News Story

Victims of Bernard Madoff's Ponzi scheme are receiving offers from investors to buy them out at a discount for their claims to what they may eventually recover from a court-appointed trustee, the Wall Street Journal reported.

Source: News Story

The severity of losses for U.S. commercial mortgage-backed securities will continue to rise and exceed historical averages through the end of 2011, Fitch Ratings said in a report.

Fitch calculates the average loss severity for CMBS as the net realized loss amount divided by the original secured loan balance.

Fitch said in a report that its overall view of CMBS remains negative as it expects higher loss severities for all property types this year. The average loss severity rate for U.S. CMBS in 2009 was 57%, up from 43% in 2008.

In 2009, losses on loans for hotel properties were more severe than for any other property type, with a loss severity rate of 81.9%, Fitch said. Multifamily housing properties had a 58% loss severity rate, and the loss severity rate of office properties was 56.9%. Industrial properties had a loss severity rate of 48.8%, and retail properties' was 48.2%.

Fitch attributed the higher losses to declines in property values and a tremendous amount of loans in special servicing at the close of 2009, with 4,435 loans totaling $74 billion.

Source: Report

Moody's Liquidity-Stress Index remained at 4.8% in May, halting a 13-month improvement in this measure of corporate liquidity, the ratings service said.

The lull in May was the first interruption in the liquidity measure's improvement since the index peaked at 20.9% in March 2009.

Moody's Liquidity-Stress Index measures the percentage of companies rated by Moody's with the rating agency's lowest speculative grade liquidity rating of SGL-4. The index generally declines as corporate liquidity improves.

The slowdown in improvement in the index in May coincides with a sharp decline in high-yield debt issuance as concerns about the European financial crisis prompted a flight to less-risky assets, Moody's said in a report. A sustained drop in demand for high-yield corporate paper could push companies with maturing debt or tight covenants closer to default.

Source: Press Release

Robert C. Rowe was named executive vice president and chief credit officer at middle market lender CIT Group.

Rowe's responsibilities include overseeing the transaction approval process, setting credit policy, and overseeing the company's workouts and special assets function, CIT said in a statement.

He previously served as senior credit officer of commercial banking at Akron, Ohio-based FirstMerit Bank. Rowe was also previously chief credit officer at Cleveland-based National City Bank and account officer at Irving Trust, which is now Bank of New York Mellon.

Source Press Release

The delinquency rate for loans included in U.S. commercial mortgage-backed securities spiked by 40 basis points in May from the previous month, reaching 8.42%, according to research firm Trepp.

Delinquencies on loans for hotel properties led all property types, rising 129 basis points in May to 18.45%, according to Trepp. Multifamily property delinquencies rose by 28 basis points from the previous month to 13.34%. Retail property loan delinquencies increased by 42 basis points to 6.86%, while office property loan delinquencies jumped 44 basis points to 5.81%.

Industrial was the only sector to record a drop in loan delinquencies, as the rate fell 10 basis points to 5.34%, which was also the lowest delinquency rate among the different property types.

Source: Press Release