 |
||||||
| Wednesday, March 17, 2010 |
Contact Us
|
 RSS
|
|||||
|
|
| |
|||
|
||||||
|
||||||
|
|
ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
|
|
|
|
January 12, 2009 12:01 AM ET
Banks had to slash the value of their holdings in residential mortgage-backed securities aggressively last year as the U.S. housing market collapsed and home prices fell. Now, a looming spike in commercial real estate loan defaults could cause even more pain. Though securitization of commercial mortgages all but stopped last year as credit markets tightened and the global economy slipped into a recession, more than $230 billion in bonds backed by the loans were issued in 2007, according to Commercial Mortgage Alert, a publication tracking the industry. As the commercial real estate market withers, banks holding the securities could be forced to take big write-downs, further battering already bruised balance sheets. Some of the biggest financial institutions have huge, potentially troublesome commercial real estate stakes, Standard & Poors data shows. Based on information in their most recent financial reports, Citigroup and Barclays each had more than $20 billion worth of commercial mortgage-related investments. Merrill Lynch, acquired by Bank of America last year, had some $19.7 billion in such investments, according to S&P. The commercial real estate market’s increasing weakness could lead to a big jump in the default rate on those securities, Fitch Ratings said in a report last week. Worrisome stuff. Indeed, default rates for securities issued over the past few years, when the real estate market was at its zenith, could increase two-and-a-half times, from 0.6% last year to 1.5% in 2009. “Loans originated at market peaks experienced from 2005 through 2007 will face increasing defaults as real estate performance declines during the stressed economic climate of 2009 and beyond,” said Fitch Managing Director Eric Rothfeld in a statement. More defaults could lead banks to write down their commercial real estate loan and CMBS holdings. Such a scenario would seem to be a lock. As companies buffeted by the sour economy laid off workers, scaled back or cancelled plans to expand and put off new investments in office space in the second half of last year, rents fell and demand for newly constructed buildings evaporated. Some who borrowed to build or buy commercial real estate may find it hard to pay back that debt now. “After several years of strong and often spectacular growth, transaction volume declined precipitously in 2008 and market fundamentals began to weaken as a lack of capital and a lack of confidence forced investors and corporate tenants to the sidelines,” NAI Global, a commercial real estate group, reported in its year-end review of the market. Banks worldwide have reported write-downs and credit losses of $741 billion since mid-2007, according to data compiled by Bloomberg.
|
|
|
|
Latest News
• Reversal? Stanford advisers sue the SEC
March 5, 10:52 AM EST
• Third of companies not complying with new tax reporting rule
March 4, 4:25 PM EST
• Regulators aware of problems at First National for six years: audit
March 4, 3:31 PM EST
• Influential advisory group to look at fair-value, off-balance sheet accounting
March 4, 4:16 PM EST
• In a first, NY State hopes to sell bankrupt insurer
March 4, 3:59 PM EST
CRAIN'S BENEFITS OUTLOOK 2009
SPECIAL REPORT
MOST POPULAR
|
MORE ANALYSIS
Crain Financial Group:
InvestmentNews |
Pensions & Investments |
Workforce Management
Copyright ©2010 Crain Communications Inc
All rights reserved.
Privacy Policy |
Terms & Conditions