Maguire Woes Could Affect $6.3 Billion in CMBS

Moody's Investors Service ratings on 159 classes from 12 commercial mortgage-backed securities transactions worth about $6.3 billion could face downgrades due to uncertainty surrounding Maguire Properties Inc. "Additional material exposure to Maguire loans exists in other CMBS transactions, however Moody's has already accounted for such exposure in previous rating actions," the rating agency added. In other deals, "the smaller relative share of Maguire exposure within each deal does not necessitate the transaction being placed on review at this time as any potential losses are consistent with our current ratings," said Moody's senior vice president Michael Gerdes. Uncertainty about Maguire stems from second quarter earnings that showing the company "continues to experience ongoing levels of high effective leverage, declining operating performance and an inability to cover dividends from operating cash flow," he said. In addition, as part of a reorganization plan to put the company back on track, it has advised the master servicer for six mortgages in CMBS transactions that it would no longer fund cash shortfalls associated with those loans, making it likely that this imminent default would lead to their transfer into special servicing, according to Moody's. "Most Maguire properties are located in California in either Los Angeles or Orange counties, both of which have experienced significant rent and occupancy declines," the rating agency said.