The Distressed Debt Alert

National Envelope Corp. Files Chapter 11

National Envelope Corp. filed for Chapter 11 bankruptcy, seeking to restructure its debt.

The Uniondale, N.Y.-based company, which has closed several manufacturing facilities over the past two years, said it plans to operate as normal during the reorganization process.

Source: Press Release

The delinquency rate on loans included in U.S. commercial mortgage-backed securities increased by 48 basis points in May reaching 7.50%, according to Moody's Investors Service.

The delinquency rate is likely to reach 9% to 11% by the end of 2010, Moody's said. That's an increase from Moody's previous forecast that the delinquency rate would reach 8% to 9%.

Last month, 349 loans became delinquent, raising the total number of delinquent loans in the U.S. to about 4,000 with a total balance of $48.8 billion, Moody's said. The rating agency reported that there were 1,800 delinquent loans with a balance of $15.5 billion and a 2.27% delinquency rate one year ago.

Loans on hotel properties had the highest delinquency rate in May, rising 27 basis points to 13.25%. The multifamily housing sector's rate increased by 26 basis points to 13.13%, while retail properties jumped 24 basis points to 6.10%. The office property sector's rate spiked by 101 basis points to 5.59%. The industrial sector had the lowest delinquency rate, rising 6 basis points to 5.29%.

Moody's tracks all loans in U.S. conduit and fusion deals issued since1998 with a current balance greater than zero.

Source: Press Release

The delinquency rate for loans packaged in commercial real estate loan collateralized debt obligations fell by 50 basis points to 11.6% in May from the previous month as asset managers continued to extend loan maturities and trade out credit risk assets, Fitch Ratings said.

Asset managers reported 45 loan extensions in May, including four former matured balloon loans. They also disposed of three previously delinquent assets at losses ranging from 20% to 99.8% of par, Fitch said.

Total realized losses on credit risk assets were reported at over $50 million. Fitch said that many of the troubled assets disposed of at losses in May were not yet considered delinquent. The credit rating agency said that its CRE loan delinquency index may understate the extent of credit risk assets as asset managers continue pursuing resolutions and trade out troubled assets at losses to par, often before actual default.

Source: Press Release

Sales of hotel properties picked up in the first four months of the year, according to research firm Real Capital Analytics, as 78 hotels changed hands for a total of $2.2 billion. That compared to 52 hotels totaling $888 million in the same period last year, the Wall Street Journal reported.

The hotel sales revival was largely driven by distressed debt, as 42% of deals involved properties that were delinquent on their debt payments or that had been foreclosed upon. Last year, only 11% of deals in the same period involved distressed debt, according to Real Capital Analytics.

Source: News Story

GE Capital, whose commercial real estate portfolio has lost about 40% of its value since 2008, said it will cut its commercial real estate holdings in half, from $80 billion to $40 billion, the Wall Street Journal reported.

Source: News Story

Hedge funds investing in distressed assets sustained larger losses in May than funds pursuing most other major hedge fund strategies, according to advisory firm Hennessee Group.

The Hennessee Distressed Index, which tracks the performance of hedge funds that invest in distressed assets, declined 4.87% last month. The decline was more than the 2.99% loss for the Hennessee Hedge Fund Index, which tracks hedge funds with a variety of strategies.

The distressed index fell in May due to declines in equity and credit markets and the overall flight to quality, according to Hennessee Group.

Prior to May, investing in distressed assets had been one of the top-performing strategies this year.

This year through May, the distressed index was the second best performing hedge fund index tracked by Hennessee with a 4.85% cumulative gain. The Hennessee Event Driven Index was the only strategy to perform better through May, with a 6.38% gain.

Source: Press Release

Mark Manski joined the law firm of Greenberg Traurig in its business reorganization and bankruptcy practice. Manski was previously with Barclays Capital as head of the investment bank's workout practice for the Americas and as chief credit officer for U.S. commercial real estate

Greenberg said in a statement that Manski will focus his practice on general corporate and real estate restructurings in the firm's New York and Boston offices.

Source: Press Release