|Evaluating Additional Debt In CMBS Transactions
NEW YORK--(BUSINESS WIRE)--Jan. 2, 2002--The international ratings agency Fitch recently issued a special report outlining Fitch's methodology for evaluating different types of additional debt in commercial mortgage-backed securitization (CMBS) transactions. Fitch examines the various types of additional debt in greater detail, along with how they are structured and the potential risks involved.
"Added leverage in any form puts greater stress on the cash flow of a property and increases losses in the event of default," said Terry Buquicchio, Senior Vice President, Fitch. "Therefore Fitch adjusts credit enhancement levels accordingly, and in determining the degree to which credit enhancement levels should be increased, evaluates how the additional debt is structured and assesses any control rights held by the additional debt lender or preferred equity investor. "
The new report examines the different types of additional debt, which include permitted indebtedness; preferred equity; partnership, or mezzanine financing; A/B and A/B/C notes; and, second mortgage debt.
"Recent transactions have been proposed that would securitize the additional leverage as part of a larger CMBS transaction, which may or may not include the related senior mortgage," said Buquicchio. Therefore, Fitch's methodology of rating additional debt as CMBS collateral is also discussed.
To view or download a copy of `Evaluating Additional Debt in Commercial Mortgage Transactions', visit Fitch's web site at `www.fitchratings.com' and log onto the `Structured Finance' page under `CMBS'. Then proceed to the `Criteria Reports' section under `Other CMBS Topics'. A copy of the report can also be obtained by contacting Market services at 1-800-853-4824.