Europe Commercial Mortgage Repayments Fell in October, S&P Says

Commercial mortgage borrowers in Europe are struggling to repay loans as declining asset values make it difficult to get new funding, Standard & Poor’s said.

Only five out of 35 loans maturing last month were repaid in full, S&P said in a report based on data from commercial mortgage-backed securities it rates. That compares with 13 loans extended, eight declared in default and three loans held in a so-called standstill.

“Four of the five loans that repaid had reported loan-to- value ratios below 70 percent,” according to S&P analysts including Judith O’Driscoll and Robert Leach. “Seven of the eight loans that defaulted had an LTV ratio greater than 70%.”

Banks create mortgage-backed securities by pooling loans and selling them to investors as notes. The bonds typically allow lenders to raise capital more cheaply than by issuing unsecured debt.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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