Ginger Ale

The CMBS market is back. At least so they say. An article in the FT (which can be read here), suggests that a first 350 M€ CMBS was placed in the Netherland. That is real news, as the stall of the CMBS market is clearly one of the main concern still out there. It is becoming mainstream wisdom that there is a large debt overhang coming up, which is to a great part linked to CMBS.

The bizarre part of the press release was linked to the fact that the "CMBS" was rated AAA by all the rating agencies. This looks bizarre as usual CMBS are (use to be) made of different tranches with different rating. I was interested in getting a better understanding of the placement and went to the website of the issuer to see if i could gather additional details (the full press release is available here). And I did. The main information being that this deal was placed as one tranche to a single investor...  Being able to place EUR 350 million of debt in the current market IS an acheivment per say, however, not enough to claim that the CMBS market have reopenned.


An investment bank presentation we have receive recently highlights that "The recent issuances of Tesco Property Finance and Sceptre Funding are welcome green shoots which might indicate that the CMBS market is slowly opening up again. Both the Tesco and Sceptre transaction are backed by a single lease held by a highly rated tenant, being Tesco and the UK government, respectively".

This story reminds me of an old French Canada Dry add. For thoses of you who do not speak french, this is what it says:  "It looks like alcohol it taste as alcohol, but it is not alcohol".




The same hold true for theses deals. While all theses transactions are presented as CMBS, and look like CMBS, they are far from representing the CMBS market as it used to be prior to 2007, and unfortunately cannot be taken as (even remote) evidence that the CMBS market is restarting.