Oil Prices Rise, But So Do CMBS Loss Estimates

KBRA continues to project high losses for CMBS backed by energy-market properties in North Dakota. (Photo: Bakken.com)

NEW YORK CITY—Oil prices were down about 70% to $30 per barrel in the spring of 2016, and Kroll Bond Rating Agency had identified 38 KBRA Loans of Concern (K-LOCs) among CMBS 2.0 tied to properties in energy-sector markets. What has changed? Crude is now trading at approximately $50 per barrel, and the number of oil-related K-LOCs has more than doubled.

KBRA said Wednesday that it had identified 83 loans across 65 securitized transactions, totaling $1.1 billion, that are in default or have a heightened risk of default. “With the oil glut continuing for an extended period of time, our loss estimates for the oil-related K-LOCs have meaningfully risen since the last report,” increasing to $307.2 million from $162.3 million when the ratings agency last examined this group of CMBS.