Forum Spotlight: IG Bondholders
March 13, 2023
Together, Jane, Rich, and Manish form the “Leadership Working Group” for the IG Bondholders Forums. The group sets the agendas and priorities for the forum, as well as represents investors on CREFC’s Policy Committee.
Key Investment-Grade Bondholders Focus Areas/Goals
- CRE Valuation and CMBS Fundamentals: Increased financing and cap rates continue to reduce borrower equity and increase debt service burdens, leading to a rise in credit concerns.
- Maturity Risk: Given significant rise in floating-rate CMBS exposure and interest rate cap requirements for extension, maturity dates provide a pressure point for a large portion of the SASB universe in this high-rate environment. Investors continue to follow trends in special servicing.
- Liquidity: Availability of bank balance sheet capacity to support bond liquidity and availability of capital to refinance existing loans continue to be of concern to IG investors. New CMBS deal issuance continues to remain sluggish.
- Reporting: Newly developed CRE CLO Annex A is to be released to the market.
Looking ahead, IG investors remain focused on navigating a more challenging environment for fundamentals and valuations. As delinquent and special servicing rates increase, modifications and extensions are bound to impact bond pricing and cash flow timing in the IG part of the stack for certain deals. We remain hopeful that a stabilization and/or drop in interest rates could allow for a resumption in issuance later this year.
Key Policy Issues:
- Addressing a threat to 144A markets (15c2-11): An SEC application of 15c2-11 to fixed income could require public information disclosure on SASB and CRE CLO transactions starting in 2025.
- SEC’s Climate Reporting Rule: The final rule is expected imminently. While the rule will not cover ABS, the framework is expected to be a key standard for all climate reporting in the financial space.
What’s next?: Forum leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.
To join the IG Bondholders Forum, please please register here. For any forum related questions, please contact Kathleen Olin at kolin@crefc.org.