ECONOMY | Staff Reporter, Japan

Japanese CMBS leads AsiaPac structured finance downgrades

This, as Japan accounts for over 90% of all negative rating actions in the region during 2010, says Fitch.

"Downgrades of Fitch-rated Japanese CMBS resulted from the continued deterioration of property value in the Japanese commercial real estate market, which led to downwards revision to property cash flow, together with short remaining times to maturity of the transactions," said Naoki Saito, Director in Fitch's Asia-Pacific SF team. "The Outlook remains Negative for junior classes, but is now Stable for other classes."

In addition to the expected recovery from the underlying properties, the recovery timing has been a key factor in the analysis of transactions that are closer to maturity. A total of 20 independent Japanese CMBS tranches from 10 transactions were downgraded, but remained unimpaired, during the course of 2010.

Sixteen Japanese CMBS notes became impaired during 2010 as recoveries were not sufficient to redeem the notes in question in full. Approximately 130 independent Japanese CMBS tranches were affirmed during 2010, some 40% of which related to eight transactions backed by highly granular portfolios of multi-family apartments located throughout Japan.

Elsewhere in Japan, two credit-linked ABS transactions were downgraded in 2010, reflecting Fitch's criteria change in relation to hybrid securities. Most Japanese RMBS ratings were affirmed during 2010, with one tranche being upgraded.

More details on rating activity in the region over the period 1998 to 2010 by geography and product, as well as a brief summary of rating actions so far in 2011 and the agency's outlook in key areas for the remainder of the year can be found in the report, entitled '2010 Asia-Pacific Structured Finance Transition and Default Study and H211 Performance Outlook', available on the agency's website 

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