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Moody's Downgrades $6.2B in CMBS as Part of Review


Last week Moody's Investors Service announced it was mounting an effort to review its ratings on $300 billion in CMBS bonds. It has now downgraded $6.2 billion in bonds as a result of these ongoing efforts.

The ratings agency last year said it expected cumulative losses of 2% on the commercial bonds issued between 2006 and 2008, but it now has increased these loss estimates to 5% on average.

Moody's, which on Monday downgraded 44 classes and affirmed another 27, expects a significant decline in future property cash flows on higher tenant defaults, bankruptcies and a sharp decline in lease-renewal rates.

The affected ratings detailed Monday included 13 downgraded classes worth $2.6 billion for Bank of America Corp. BAC, 17 downgraded classes worth $2 billion for Credit Suisse Group CS and 14 downgraded classes worth $1.6 billion for Bear Stearns Cos., which was sold to J.P. Morgan Chase & Co. JPM last year.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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