Uh oh. This doesn't sound promising.
Standard & Poor's on Monday said it will make negative pronouncements on U.S. commercial mortgage-backed securities on a "large scale" in coming days after a review of the securities.
The most-recently issued CMBS are "highly susceptible" to downgrades, including top-rated "AAA" issues, after the review that accounted for eroding real estate markets, lack of financing for the assets, and the economic recession.
"We concluded that the ratings on a significant portion of our CMBS portfolio may no longer be appropriate, given our view of the increase in credit risk," S&P said in a statement.
The $700 billion market for U.S. CMBS last year was one of the worst performing bond sectors as the credit crunch raised concerns that aggressively underwritten loans would fail to get refinanced at maturity, and force many borrowers into default. Signs of a weakening economy added to those pressures since CMBS payments are drawn from the revenue off office, retail and apartment buildings, and hotels.