Kroll Bond Rating Agency Europe Limited (KBRA) releases a report which examines the impact of the coronavirus (COVID-19) pandemic as it relates to potential rent disruptions among CMBS transactions in Continental Europe.
KBRA has rated six CMBS transactions with loans secured on commercial real estate (CRE) in Continental Europe. As the coronavirus pandemic has developed, European countries have seen a collapse in social and business activity, with governments taking unprecedented steps to protect individuals and businesses from the worst of the economic fallout. In some countries, this has included rules to protect commercial tenants from eviction for nonpayment of rent during the crisis. More generally, it is now likely that many tenants, particularly from the retail sector, will negotiate for outright rent holidays or rent reductions. The likelihood and severity of any shortfalls in rent receipts will largely depend on the underlying property type and the extent of the coronavirus-related shutdown, which will vary by country.
These developments pose the risk that some European CRE loans will experience a failure to pay. However, the willingness and ability of institutional sponsors to make debt service payments will reduce risks at loan level and even if there was a failure to pay, CMBS liquidity facilities should insulate senior classes from the direct effects of nonpayment, while junior classes can defer interest.
As events surrounding the crisis unfold, our thoughts are with the individuals and families who have been affected by the virus.
Click here to view the report.
Related Publications
- Coronavirus (COVID-19): Kanaal CMBS Finance 2019 Retail Exposure
- Coronavirus (COVID-19): Sponsor Support and Structural Features to Insulate UK CMBS From Rent Disruptions
- Coronavirus (COVID-19): Taurus 2019-3 UK DAC and Potential Implications
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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Contacts:
Analytical
John Hogan, Senior Director
+44 208 148 1040
jhogan@kbra.com
Matthew Horner, Director
+353 1 588 1240
mhorner@kbra.com
Yee Cent Wong, Senior Managing Director
+1 (646) 731-2374
ywong@kbra.com
Business Development
Mauricio Noé, Senior Managing Director
+44 208 148 1010
mnoe@kbra.com
