S&P Eyes Floating-Rate CMBS

Standard & Poor's Ratings Services has announced "an intensive review" of floating-rate commercial mortgage-backed securities deals that were issued during the peak real estate years of 2000 and 2001.The deals being reviewed are: COMM 2000-FL2, 2000-FL3, and 2001-FL4; CSFB 2000-FL1 and 2000-FL2; GMAC 2000-FL1; JP Morgan Chase 2001-FL1; LB Series 2000-LLF C7 and Series 2001-LLF C4; and MS Series 2001 XLF. "Particular attention is being given to those loans that utilized A/B financing structures, recognizing the high leverage of many of these loans as well as the transitional nature of the collateral in various instances," S&P said. A growing number of floating-rate and A/B loans have used up their extension options and are maturing in the next two years, and "weak real estate markets could hinder their refinanceability," S&P said. "With interest rates at historic lows, actual floating-rate debt service coverage ratios have generally been strong, at times masking deteriorating property fundamentals." The industry generally views loans with positive DSCRs as having low default risk, so they are unlikely to appear on a servicer's watchlist or show up as specially serviced, S&P said. In such cases, a thorough review of a property's operating performance is needed, the rating agency said. S&P can be found online at http://www.standardandpoors.com.