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
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