Bloomberg (April 8)
“Almost $1.5 trillion of US commercial real estate debt comes due for repayment before the end of 2025. The big question facing those borrowers is who’s going to lend to them?” Morgan Stanley has estimated “office and retail property valuations could fall as much as 40% from peak to trough, increasing the risk of defaults.” Regional banks are now skittish about lending and “the wall of debt is set to get worse before it gets better.”
Tags: $1.5 trillion, 2025, Borrowers, Commercial real estate, Debt, Defaults, Morgan Stanley, Office, Peak, Regional banks, Repayment, Risk, Skittish, Trough, U.S., Valuations
Sydney Morning Herald (December 6)
“The crisis at the teetering giant Chinese property developer, China Evergrande, appears to be reaching a decisive moment, with the world’s most indebted property company conceding that it may be unable to meet the demand for repayment.”
Tags: China, Crisis, Decisive moment, Evergrande, Indebted, Property developer, Repayment, Teetering, Unable
Euromoney (February Issue)
“New accounting rules requiring banks to take upfront charges against possible losses through the full life of a loan promise damaging pro-cyclicality.” IFRS 9 comes into effect next January. It “will require banks to recognize expected loan losses even before borrowers miss a single interest or principal repayment.” This major change “will hit both reported earnings and capital even if a borrower manages to remain current on debt servicing.” Uncertainty abounds, but it looks like “US and Japanese banks will be subject to their own variant, current expected credit loss (CECL), under US GAAP.”
Tags: Accounting rules, Banks, Borrowers, Capital, CECL, Earnings, GAAP, IFRS 9, Interest, Loan losses, Principal, Repayment, Upfront charges
Euromoney (February Issue)
“The European Central bank’s announcement that 278 eurozone banks repaid €137.2 billion of their long-term refinancing operation (LTRO) borrowings on January 30 was seized upon by the market as supporting evidence for a broad range of contradictory positions….Indeed, there was a general sense of confusion after the ECB’s announcement and very little consensus emerged as to what the repayments actually meant….. Attempting to extrapolate much from the figure could turn out to be a fool’s errand.”
