TEXT-Fitch:Non-traditional U.S. CMBS warrant more scrutiny, but not always a 'AAA'
Feb 01 - Appetite for non-traditional U.S. CMBS deals is increasing, as are questions as to how Fitch Ratings would assess them and whether they would warrant a 'AAA' rating.
Fitch deems assets like sub or non-performing loans or loans on transitional properties as falling into the non-traditional bucket. The deal structures themselves, however, don't necessarily cause a problem.
For instance, take commercial real estate CDOs containing performing whole loans. Fitch would analyze that deal in exactly the same way as a normal CMBS large loan deal. However, the same structure containing floating rate loans on transitional properties would merit far less 'AAA'.
Another perhaps more notable example, one that Fitch has been asked numerous times for feedback on of late, are CMBS deals containing transitional properties. Fitch would only consider a 'AAA' rating on a single asset transitional property if it has meaningful recovery prospects even under very high stresses. A pool of such loans would be more likely to be rated 'AAA'.
Additional information is available in Fitch's weekly e-newsletter, 'U.S. CMBS Market Trends', which also contains recent rating actions and an overview of newly released CMBS research, including Fitch presales and Focus reports. The link below enables market participants to sign up to receive future issues of the E-newsletter: