JPMorgan Said to Plan CMBS Deal With Sales at Post-Crisis Peak

JPMorgan Chase & Co. (JPM) is marketing $500 million of commercial-mortgage bonds, capping what probably will be the busiest month in the $550 billion market in more than five years.

The lender plans to issue securities linked to 82 properties spanning the U.S. from California to Kentucky, according to a person familiar with the offering who asked not to be identified because terms aren’t public. Hotel loans account for 64.2 percent of the deal, the person said.

Issuance of bonds tied to commercial real estate in April is poised to surpass the $8.3 billion sold in January, which marked the highest monthly volume since December 2007, according to JPMorgan. Volume was $6.9 billion through April 19, the bank said. Investors are reversing course after pulling back amid the glut of offerings, debt analysts at New York-based JPMorgan said in a report last week.

“After some weakness to start the month, pricing spreads have begun to snap back despite the uptick in supply,” the analysts led by Ed Reardon wrote.

Wells Fargo & Co. (WFC) and Royal Bank of Scotland Group Plc sold top-ranked securities maturing in about 10 years to yield 81 basis points, or 0.81 percentage point, more than the benchmark swap rate on April 18, according to data compiled by Bloomberg. That compares with 85 basis points on similar debt issued by the lenders on March 6, the data show.

Risk Demand

Demand for riskier portions of the deals is building. Wells Fargo and RBS sold bonds rated BBB-, the lowest investment-grade ranking, to pay a spread of 310 basis points more than swaps this month, compared with 375 basis points in March, people familiar with the transaction said.

Investors are buying the bonds as the Federal Reserve’s effort to stimulate economic growth by suppressing borrowing costs pushes investors toward riskier assets.

Insurance companies boosted purchases of lower-ranking commercial-mortgage debt this year by nine percentage points, accounting for 33 percent of subordinate debt purchases from new deals, the JPMorgan analysts said in a separate report on April 12.

Issuance of commercial-mortgage bonds is poised to climb 50 percent to $70 billion in 2013, according to Credit Suisse Group AG. Banks have arranged about $28.6 billion in sales this year, Bloomberg data show. A record $232 billion was issued in 2007.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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