Last week Moody's Investors Service announced it was mounting an effort to review its ratings on $300 billion in CMBS bonds. It has now downgraded $6.2 billion in bonds as a result of these ongoing efforts.
The ratings agency last year said it expected cumulative losses of 2% on the commercial bonds issued between 2006 and 2008, but it now has increased these loss estimates to 5% on average.
Moody's, which on Monday downgraded 44 classes and affirmed another 27, expects a significant decline in future property cash flows on higher tenant defaults, bankruptcies and a sharp decline in lease-renewal rates.
The affected ratings detailed Monday included 13 downgraded classes worth $2.6 billion for Bank of America Corp. BAC, 17 downgraded classes worth $2 billion for Credit Suisse Group CS and 14 downgraded classes worth $1.6 billion for Bear Stearns Cos., which was sold to J.P. Morgan Chase & Co. JPM last year.