Fitch: U.S. CREL CDO Delinquencies Continue to Rise

NEW YORK--(Business Wire)--
21 newly delinquent assets led to an increase in U.S. commercial real estate
loan (CREL) CDO delinquencies to 6.5% for March 2009, up from 5.4% in February
2009, according to the latest CREL CDO delinquency index (CREL DI) from Fitch
Ratings. Fitch currently rates 35 CREL CDOs encompassing approximately 1,100
loans and 370 rated securities/assets with a balance of $23.8 billion.

28 CREL CDOs contained at least one delinquent loan with individual delinquency
rates ranging from less than 1% to 22.1% of the CDO par balance, as of the March
2009 reporting period. Fitch continues to monitor CDO delinquencies on a monthly
basis. Since September 2008, Fitch has taken negative actions on 20 of its 35
Fitch-rated CREL transactions with more downgrades and Negative Rating Watches
anticipated as transactions are reviewed.

In contrast to the recent trend of limited repurchases, six assets (27 basis
points of the CREL DI) were repurchased from three different CDOs in the March
reporting period. One asset manager repurchased two assets from its CDO at par,
while the four other assets from two different CDOs were repurchased at an
average discount to par of 46.3%, including one defaulted security that was
repurchased at 0.001% of par. Many CDOs allow for repurchases at prices below
par based on market pricing or third party opinion of value.

The repurchases were likely prompted by an effort to maintain cushion in par
value tests, thus avoiding the diversion of cash flow from the CDO's preference
shares. While only one repurchased asset was haircut in the prior month for
purposes of its CDO's par value calculation; the remaining assets were expected
to be haircut imminently based on their impaired statuses. In most cases, new
higher rated assets were traded into the CDO at a discount within a few days of
the repurchases to re-build the total CDO par. Fitch considers asset purchase
prices in its evaluation of CDO collateral.

'Further maturity defaults are likely as the illiquid credit markets provide
limited prospects for the payoff of loans,' said Senior Director Karen Trebach.
Excluding the repurchased assets, nearly all of the new additions to the CREL DI
consist of matured balloon loans. Further, reported loan extensions decreased to
21 for the month, down from 37 in February, and more in line with the prior two
months' totals.

Non-cash flowing property types comprise the highest percentage of assets in the
CREL DI. Loans backed by interests in land are now the highest percentage of
assets in the CREL DI at approximately 32%. Condominium conversions and
construction loans comprise an additional 11.1%. 'Under the current credit
market conditions, Fitch anticipates increased defaults on land loans as debt
service reserves burn off and business plans fail to actualize,' said Trebach.

The CREL DI includes loans that are 60 days or longer delinquent, matured
balloon loans, and the current month's repurchased assets.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Karen Trebach, 212-908-0215
Stacey McGovern, 212-908-0722
or
Media Relations:
Sandro Scenga, 212-908-0278
Email: sandro.scenga@fitchratings.com

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