KBRA Releases Research on Rating Considerations for Maturing CRE Loans in a Challenging Environment
Kroll Bond Rating Agency (KBRA) expects many borrowers with loans due to mature through 2021 will face a challenging refinancing environment-particularly in the coming months-owing to current economic conditions. While we expect that many maturing loans could become nonperforming, we also anticipate seeing numerous maturity extensions and other forms of modifications, particularly where borrowers may be facing challenges due to liquidity and/or tenancy issues.
The total balance of loans maturing through 2021 in KBRA's rated conduit universe is relatively modest, at $4.7 billion. The maturities are composed of 194 loans that serve as collateral in 87 transactions totaling $81 billion. While the volume of loans pending maturity through 2021 is modest, there are 15 conduits that have near-term maturity exposures of 10% during this period. In addition, we identified 39 loans ($20.3 billion) across 33 single asset-single borrower (SASB) and large loan (LL) deals with maturities through 2021. Many of these have extension options that are not subject to performance hurdles, which should mitigate maturity default risk. However, nine of the 39 maturing SASB and LL loans have no extension options and another two require the satisfaction of a performance hurdle test to meet their extension requirement. This report will highlight rating considerations associated with maturity risk in these transactions.
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About KBRA and KBRA Europe
KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.