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Thrift Banks Bad Loans Rise in August

Thursday, 20 November, 2008

The number of defaulted loans i.e. bad credit loans and loans in special servicing has further increased in a number of Europe, the Middle East and Africa ( Emea) countries, although the overall number of these loans are still low compared with the total number of loans monitored by Moody's Investor Services, a senior executive of the international rating agency said.

Frank Prasse, a Moody's Associate Analyst and co-author of the report, said: "Despite the deteriorating performance of loans over the past quarters and decreasing property market values in Emea, the performance and ratings of Emea CMBS transactions have been relatively stable to date."

In terms of rating performance, Moody's downgraded seven trenches in four Emea Commercial Mortgage-Backed Securities and Multi-family (CMBS) transactions and upgraded not single trenches during the Q3.

During the first three quarters of 2008, Moody's upgraded 11 trenches and downgraded 40 trenches.

However, 32 downgrades resulted from Moody's downgrade of the monoline financial guarantors MBIA Insurance Corporation and Ambac Assurance Corporation in Q2 2008. During Q3 2008, Moody's placed 71 classes of Notes, affecting 26 transactions, on review for possible downgrade.

Going forward, Moody's anticipates a further increase in the number of loans and transactions experiencing adverse issues. It considers that certain transaction types will be more exposed than others to loan performance-related rating sensitivity.

The transactions which depend on loan refinancing in the next years, those which constitute higher-than-average LTV loans, those which are geographically concentrated in certain regions/sectors, those with short lease profiles and/or those which may be sensitive to counter-party rating changes due to the market turmoil, will be more exposed than others.

"In light of the sharp correction taking place in various key Emea CMBS real estate markets, with the weakening of occupational markets, the increased likelihood of tenant defaults and the limited availability of property financing sources, we expect that the rating impact of adverse transaction performance will not be constrained to the most junior Notes and in certain cases the senior Notes might be subject to negative rating migration," said Deniz Yegenaga, Associate Analyst.

Source: http://www.zawya.com/