----- Original Message -----
From: pms
To: lbo-talk at lists.panix.com
Sent: Thursday, April 18, 2002 7:28 PM
Subject: Corporate Welfare or Credit Crunch
US CMBS Market Hit By Terrorism Insur Costs, Canceled Loans
WASHINGTON -(Dow Jones)- Large lenders have either postponed or canceled
more than $7 billion in commercial mortgage loans because they can't get or
can't afford the lofty prices for terrorism insurance, according to a survey
released Thursday by The Bond Market Association.
TBMA estimates that another $36 billion in loans could fall by the wayside
this year if Congress doesn't intervene with some sort of federal backup for
U.S. insurers in the event of a future terrorist strike.
"The potential exists for a major crunch if something is not done," said
Mike Williams, a TBMA vice president.
Large commercial mortgage loans totaled $73.8 billion last year, with $72
billion resold on the secondary markets as commercial mortgage backed
securities.
"The $7 billion in loans on hold or canceled so far this year likely means
$7 billion less in CMBS will be issued in 2002...the actual number of
incomplete deals - and lost CMBS issuance - could be even higher," reads a
summary of the survey.
Williams said that the market is still expecting Congress to do something
this year. The longer the industry goes without adequate terrorism
insurance, the worse it gets for developers seeking financing.
"The lack of terrorism coverage can place the property owner in technical
default on their loans. This could lead rating agencies that monitor the
pools of mortgages underlying CMBS to downgrade the credit quality of the
securities," according to the bond trading group.
The industry is waiting for the Senate to act on legislation that created a
federal insurance program in case there is another large-scale terrorist
attack. The House has passed its own terrorism insurance bill last year.
-By Dawn Kopecki, Dow Jones Newswires; 202-862-6637;
(This story was originally published by Dow Jones Newswires)
Copyright (c) 2002 Dow Jones & Company, Inc.
All Rights Reserved
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