TEXT-Fitch:EMEA CMBS loan losses increase in Q112

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May 18 - Fitch Ratings says in a new report that the performance of the Fitch-rated EMEA CMBS universe continued to deteriorate throughout Q112. Five loans suffered a loss during the quarter; two of which were secured by the German multi-family housing portfolios backed by the bankrupt Level One Group. Net recoveries from the portfolio sales resulted in significant losses across two transactions. The complex nature of the bankrupt borrowing group is reflected in the lengthy workout process - both loans had been in workout since 2008.

The three other loans that suffered a loss during the quarter were the Solstice and DT Berlin loans (both securitised in Cornerstone Titan 2007-1 plc ) and Agora Max Portfolio (securitised in Indus (ECLIPSE 2007-1) plc ).

"Four of the five loans that suffered a loss were secured on assets located in Germany, making these the first losses to be crystallised in this jurisdiction," says Mario Schmidt, Associate Director in Fitch's EMEA CMBS team. "Fitch expects to see increased enforcement activity throughout 2012 as more loans reach their maturity dates. In turn, this will lead to more loss allocations to the bondholders".

Maturity defaults continue to be the main risk in CMBS. Of the 257 loans that have matured since the onset of the credit crisis, only 103 had repaid in full as of end-Q112. 16 loans have suffered a loss following a maturity default.

A further 85 loans (EUR8.1bn) are scheduled to mature between April and December 2012. Upcoming bond maturities in 2014 for eight of these transactions may limit the remaining options available to servicers. Fitch therefore expects the CMBS portfolio headline performance metrics to deteriorate at an accelerated pace over during the next three quarters.

The report, entitled "Quarterly European CMBS Performance Update Q112", is available at www.fitchratings.com. It also reviews performance trends across the sector and key rating actions taken by Fitch during Q112. An associated data file is also available for download in Excel format.

Link to Fitch Ratings' Report: Quarterly European CMBS Performance Update Q112

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