Fitch Ratings is warning that recent store-closing announcements by several prominent retailers could put pressure on retail loans in commercial mortgage-backed securities (CMBS) transactions.
While stressing that the general outlook on the retail sector is stable, Fitch Ratings is keeping an eye on store closures by Abercrombie & Fitch, Best Buy, The Gap and Sears.
‘Due to the diverse nature of the CMBS conduit transactions, Fitch Ratings does not expect imminent rating actions on the CMBS bonds based on these store closings, as there is enough diversity and credit enhancement to address any potential performance issues on these loans,’ says the rating agency.
‘Additional store closings are expected to put stress on certain CMBS loans going forward, but ratings actions should be limited, based on the diversity of collateral in the transactions. Tenants at certain locations with co-tenancy clauses may choose to vacate prior to their lease maturities if a more desirable location nearby better suits their needs,’ the firm adds.