At the beginning of 2007, expectations for CMBS issuance in Europe stood at between €75 billion and €100 billion for the year. The asset class was one of the fastest growing in the region and by the time issuance stalled at mid-year €40 billion of CMBS had been done. But that leaves between €35 billion and €60 billion of planned issuance for the rest of the year hanging in limbo. There were between 20 and 30 deals sitting with the agencies when the crisis hit – deals that presumably have not made much progress since then.
This is a particular problem for European real estate securitization banks because of the time that deals spend in incubation. The time period between origination and securitization can be as little as eight weeks in the US whereas in Europe it is more like six months. Banks in the US are therefore unlikely to have been caught with the kind of inventory levels that European banks have and many had reduced their exposure in February and March last year when real estate jitters in the US first started to bite.
Overhang
Ronan Fox, managing director at Standard & Poor’s, says that €40 billion of European issuance was slated for the last third of 2007 but reckons that 15% of this would have been secured loan or match funded deals – where if the deal is scrapped no loan is written.
