Is continental casualty liquidating

12 May

We added the loan to the Morningstar Watchlist more than six years ago because of deteriorating net cash flow.

The loan’s February 2012 modification carved out a million B note, which we are modeling as a complete loss.

Debt yields (based on the most recent 12-month net cash flow) among 2016 maturities tell a similar story.

Based on a debt yield of 9.0%, the expected on-time payoff rate is 65.6%, which is in line with Morningstar’s projection based on LTV.

However, the prospects of a rate increase in the first half of 2016 are fading given market volatility.

Nevertheless, Morningstar expects the payoff rate to dip, as many of the loans scheduled to mature in the latter half 2016 remain overleveraged.

The balance of CMBS loans scheduled to mature throughout 2017 continues to shrink, with .98 billion scheduled to mature in 2016 followed by .88 billion in 2017, for a two-year total of 6.85 billion, down 29.5% from 2.48 billion at the beginning of 2015.

Conversely, Morningstar expects loans with healthcare collateral to have a much better payoff rate, as none of the 2016-maturing loans backed by healthcare facilities have LTVs greater than 80.0%.

To keep that in perspective, the .2 million in loans backed by healthcare collateral comprise 0.1% of the balance of maturing loans.

The 5 million Riverchase Galleria loan, the largest loan in Banc of America Commercial Mortgage Trust 2006-6, is an example of a full-term interest-only loan maturing in February 2017.

The loan is backed by a regional mall near Birmingham, Alabama, whose current LTV and debt yield will make it unlikely that the loan will get refinanced.