About 60 percent of the 17 billion euros ($23.2 billion) of European Commercial Mortgage Backed Securities due to mature by the end of next year could default, according to Standard & Poor’s.
S&P analyzed 187 loans in European CMBS scheduled to mature between January 2010 and September 2011, to see how loan-to-value ratios influenced repayment on maturity, it said in a statement.
“Borrowers repaid most of the maturing loans with LTV ratios up to 70 percent whereas they struggled to repay loans with LTV ratios greater than 70 percent,” Judith O’Driscoll, a credit analyst, said in the statement.
More than 180 loans are scheduled to mature from October 1 of this year and the end of 2012 and three-fifths of those have reported LTV ratios of more than 70 percent, S&P said. About 19 percent of them, with 8.3 billion euros of loans, have LTV ratios of more than 100 percent, the ratings company, a unit of McGraw-Hill Cos., said.
“It’s reasonable to conclude that borrowers may struggle to repay nearly two-thirds of the loans that are scheduled to mature between now and end 2012,” O’Driscoll said. “By the same token, we consider repayment prospects are brighter for the remaining 75 loans that have LTV ratios of 70 percent or less.”