19 March 2016 – by Mike Cobb
Deutsche Bank is on the verge of pulling two CMBS deals valued at more than €500m (£392m).
The Portuguese and Irish bonds have met with a lack of interest from credit markets as pricing remains too wide to attract investors and satisfy Deutsche’s needs.
The Portuguese CMBS, which would have been the first from the region, was pre-marketed as far back as June last year.
Backed by €250m of loans, including one to Baupost on the Dolce Vita Tejo shopping centre in Amadora, Lisbon, the deal initially got caught up in the China crisis of last summer before being tentatively relaunched in the new year.
An Irish CMBS, valued at around €250m and backed by various Irish loans, was also launched in January and was expected to be well received once bond markets recovered.
However, credit markets remained volatile on further bad news from China and poor figures from the EU and the deals have once again been met with a lack of appetite from bond investors.
But not all CMBS deals are failing. Bank of America Merrill Lynch this week successfully got away its €317m German CMBS.
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BAML’s Kingfisher loan-backed Taurus 2016-1 DEU CMBS did suffer from a fall away in pricing, however, with the AAA-rated tranche failing to achieve initial indicated pricing of between 140 and 150bps over Euribor.
The 130bps it finally achieved, though encouraging, was considered to be more indicative of the quality of the underlying German retail assets and the fact that Blackstone is a sponsor than a true sign of recovery in the bond markets.
Deutsche is understood to have considered repricing the Irish CMBS to match the sort of levels that made the BAML deal ultimately successful, but it seems the potential of significant losses on the junior tranches would have made it unpalatable.
The Portuguese CMBS, however, was considered to be too widely priced for such a move to have resulted in anything but a total loss and instead the underlying loan, along with the Irish loans, were put forward for syndication.
Following the decision, both loan pools have received strong interest from the syndication markets and Deutsche Bank will therefore take this exit route in coming weeks.
MIPIM was understood to be a final test for the bonds but the sale is considered to have reached a point of no return and will be formally pulled once the event is over.
