CMBS Credit Migrations

Abstract

This article presents empirical evidence of credit migrations of commercial mortgage-backed securities (CMBS). The findings support anecdotal accounts that adverse credit migrations have been highly concentrated in CMBS from single-borrower lease-backed deals from 1993 and 1994. Favorable credit migrations, in contrast, are much more evenly distributed across the CMBS universe. CMBS rated by multiple rating agencies are less likely to suffer adverse credit migrations. In contrast to earlier findings in the area of asset-backed securities, the author finds that the presence of Fitch ratings on CMBS is correlated with generally stronger rather than weaker credit performance.