Credit Suisse Said to Edge Back to CMBS After 2011 Retreat
Credit Suisse Group AG (CS), the lender that fired 50 people when it closed its commercial-mortgage bond unit more than 15 months ago, is approaching borrowers with potential terms on new loans that would be packaged into securities.
While Switzerland’s second-biggest bank is seeking to originate larger loans that can be sold off in one deal, it isn’t planning to restart the group that bundled multiple smaller mortgages, according to three people familiar with the talks who asked not to be identified because plans are preliminary.
Credit Suisse is poised to return to the commercial- mortgage bond market after about $10.7 billion in new deals were offered last month, the most since November 2007, according to data compiled by Bank of America Corp. Investors are seeking higher-yielding assets as the Federal Reserve holds its benchmark interest rate between zero and 0.25 percent into a fifth year.
Drew Benson, a spokesman for Credit Suisse (CSGN) in New York, declined to comment.
Bank of America, Morgan Stanley, Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Deutsche Bank AG, Wells Fargo & Co., Royal Bank of Scotland Group Plc and Cantor Fitzgerald LP all offered commercial mortgage bonds in January, according to data compiled by Bloomberg.
UBS AG and Barclays Plc are planning a sale this month, according to a regulatory filing. Even as Switzerland’s biggest bank eliminates 10,000 jobs as it cuts back in fixed-income, UBS has remained committed to CMBS and was the fifth-most active underwriter of the bonds in the U.S. last year, according to Commercial Mortgage Alert.
The types of deals that Credit Suisse is focused on don’t expose lenders’ balance sheets to the same risk as so-called multi-borrower deals. It takes several months to accumulate loans from many landlords, exposing banks to losses if bond values decline in the interim.
The segment is reviving after shutting down in 2008 when credit markets froze. Issuance is forecast to increase by more than 50 percent to as much as $70 billion in 2013, according to Credit Suisse analysts led by Roger Lehman in New York. A record $232 billion of the debt was issued in 2007, Bloomberg data show.
Credit Suisse, which hasn’t issued a commercial-mortgage bond deal since 2008, shuttered the unit dedicated to originating commercial property loans in October 2011 as Europe’s sovereign-debt crisis roiled markets and price declines eroded profit margins on new sales. The bank kept its U.S. division that trades the debt.
Zurich-based Credit Suisse helped pioneer the packaging of loans into commercial-mortgage bonds under Andrew Stone, who left the bank in 1999 after facing losses when Russia defaulted on its debt.
Lenders are issuing the securities with the lowest relative yields since sales revived in 2009. Top-ranked bonds maturing in 10 years are being priced to yield 72 basis points, or 0.72 percentage point, more than the benchmark swap rate, Bloomberg data show. Investors were getting paid as much as 200 basis points more than swaps on similar debt sold in August 2011.
The debt returned 9 percent last year, following a 6.2 percent gain in 2011, according to Bank of America Merrill Lynch’s U.S. Fixed-Rate CMBS index.
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