Fitch: CREL CDO Woes Up Due to One Loan

Fitch recorded a higher U.S. commercial real estate loan collateralized debt obligation delinquency rate in June that it said stemmed from the maturity default of one participated loan secured by a hotel/condominium development in South Florida. The CREL CDO delinquency index increased to 1.58% during the month from 1.08% the previous month. This is much higher than Fitch's commercial mortgage-backed securities delinquency rate because "the assets securing the loans in a CREL CDO are transitional in nature or highly leveraged," the ratings agency said. "In addition, the CREL DI covers 25 transactions with 340 assets while the CMBS DI covers many more (500) transactions with significantly more (42,000) loans," Fitch said. "As a result, because of the smaller number of loans in the index, one loan can have a big impact on the delinquency percentage," the ratings agency said. The CREL CDO delinquency index includes loans that are 60 days or longer delinquent, matured balloon loans and repurchased assets.