KBRA Releases Research – Coronavirus (COVID-19): CMBS SASB Lodging Loans to Underperform

Kroll Bond Rating Agency (KBRA) releases a report on commercial mortgage-backed securities (CMBS) single asset-single borrower (SASB) transaction performance as the coronavirus pandemic continues to spread and wreak economic havoc.

The U.S. lodging sector is being meaningfully affected owing to containment efforts that have halted business and personal travel, leading to mass cancelations of conferences and large events. Not surprisingly, revenue per available room (RevPAR) declined by almost one-third year-over-year for the week ending March 14, according to global hospitality data provider STR data. RevPAR is expected to fall further in the coming weeks as more states and cities impose restrictive containment measures that curtail both travel and gatherings.

As a result, the KBRA Performance Outlook (KPO) for the loans which serve as collateral for 12 of our 13 rated CMBS SASB lodging transactions have been assigned to Underperform or revised to Underperform from Perform. A KPO is an assessment of Outperform, Perform, or Underperform based on recent and expected collateral performance. KPOs are generally assigned to loans in KBRA rated CMBS transactions approximately one year after securitization at the time of our first annual surveillance review.

As the events unfold over the next few weeks and months, we will continue to reassess our KPOs in conjunction with our rating monitoring effort for these SASB deals. In addition to these transactions, there are approximately $34 billion of lodging loans across KBRA-rated multi-borrower transactions, including conduits, large loan transactions, and commercial real estate collateralized loan obligations. The extent to which negative performance for hospitality loans impacts ratings in such transactions will be determined in conjunction with our ongoing surveillance effort, and will be a function of how significant the loans are to the transactions relative to outstanding credit support.

Click here to view the report.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.

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