Fitch Eyeing Floating-Rate Deals

Fitch Ratings has expressed concerns about the loans in several floating-rate transactions based on their "alarming real estate fundamentals" and high leverage.The rating agency said the loans are often secured by properties that are in transition or approaching stabilization. Such assets present great rating challenges, Fitch said, because of the current economic environment at the property management level. "The acceptance of imputed revenue and related value at securitization can push investment-grade leverage points in floating-rate transactions beyond appropriate levels," said Joseph Kelly, a Fitch director. The rating agency has seen an increased loss rate for liquidated loans and has had to either downgrade or place on Rating Watch most of the lowest-rated classes in seven of nine floating-rate deals since last year. All of these downgrades were attributed to "unforeseen real market issues," Fitch said.