1.11.13: CMBS Begins 2013 with a Bang

The CMBS bond market began 2013 on a high note: Strong demand for the first conduit offering of the year pushed spreads to a post-crash low.  The benchmark super-senior class of a $1.4-billion conduit offering by Morgan Stanley and Bank of America (BoA) priced at 72 basis points (bp) over swaps on Wednesday, 11 bp inside of the previous low achieved in November 2012.

“Our analysis concluded the quality of the collateral was high,” commented Jim Brett, who handles CMBS credit analysis at ValueXpress.  “In addition, the underwriting metrics were solid in terms of pool LTV (61.3%), net cash flow DSCR (1.80x) and debt yield (10.78%).”

“Many of the classes of the issue were well oversubscribed,” noted Michael D. Sneden, Executive Vice President at ValueXpress.  “We were buyers of the Class B securities, and we only received $1 million of a $5-million order as the Class Bs were 5x oversubscribed.”

The Morgan/BoA offering is backed by 64 mortgages on 123 properties; retail properties represent 37.1% of the collateral pool, followed by office at 21.4%. Hospitality properties were 16.0% of the collateral pool.  The deal’s collateral was contributed by Morgan Stanley (88.9%) and BoA (11.1%).

The longer-dated triple A-rated super-senior classes all priced tighter than guidance. A $135.7-million tranche of 4.9-year bonds priced at 36 bp and $111.6 million of 7.5-year bonds priced at 60 bp over swaps. Meanwhile, $466.3 million of 9.9-year bonds sold at 72 bp. These prices tightened from guidance levels of 37 bp, 65 bp and 75 bp, respectively.  The search for better yields strengthened demand for subordinate CMBS as well.  In addition to the Class B bonds, which priced at 155 bp, 10 bp tighter than guidance, the junior triple A-rated class priced 15 bp tighter than guidance at 100 bp. The Class C bonds also were 15 bp tighter at 200 bp.

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This entry was posted in CMBS, Commercial Mortgage Bonds, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , . Bookmark the permalink.

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