Develop a structured approach to assessing the risks and returns of CMBS asset classes.
2010 Early Bird Offer - 2nd person 25% discount.
If you register 8+ weeks before the course date, the 2nd person gets a 25% discount.
*Terms and conditions apply.
Course Objectives
Participants will be equipped to:
- Use a structured approach to evaluate the risk profile of CMBS by assessing the collateral characteristics, the credit enhancement available, and the anticipated cash-flow from the underlying assets
- Understand a default model for CMBS, focusing on the key variables that drive collateral performance and the stress scenarios utilized
- Assess the risks to each tranche in the transaction by unravelling its position in the cash-flow waterfall and the level of any remaining subordination / support
- Identify any risks arising from the servicers’ capabilities and business model
- Discuss implications of current market conditions and government programs on CMBS transactions.
Target Audience
A two-day workshop for investors, regulators, credit risk managers, fund management professionals, servicers and other market participants wanting to expand their knowledge of CMBS in context of the current market environment.
The majority of Fitch Training programmes are offered at an intermediate and advanced level. There are no specific prerequisite courses to attend our programmes, however some topic knowledge maybe required. Please refer to the target audience to see what level of prior knowledge is required for a specific course.
Content
INTRODUCTION
Analytic approach to credit
- A structured, four-step approach to security specific analysis: purpose, payback, risks, and structure
- Applying the approach to CMBS
- Originator motivations and sources of repayment
- Parties to a transaction and their roles.
RISKS TO REPAYMENT
Collateral Analysis
- Key variables which impact the likelihood of default and severity of loss
- Understanding property cash-flow analysis issues
- Reviewing the Fitch CMBS Multiborrower Rating Model: loan by loan analysis
- Applying stresses to default probability and loss severity assumptions
- Impact of correlation
- Assessing large loans
- Deriving final credit enhancement levels by rating category.
Servicer and originator evaluation
- Types of servicers and their roles: primary, master and special
- Servicer creditworthiness: challenges to servicers in the current environment
- Loss mitigation: capabilities, strategy and procedures
- Servicer events of default
- Assessing replacement risk
- Risks related to originators.
STRUCTURE
Credit Enhancement
- Understanding and evaluating different types of credit enhancement
- Comparing support at loan level vs. transaction level.
Note profile
- Waterfall structures: priority of payments
- Unravelling payment flows: sources and applications of funds
- Use of excess spread to create interest-only classes
- Mechanics of loss allocation to investors
- Expected and legal maturity: extension risk
- Anticipated repayment date (ARD) loans
- Considerations when structure includes multifamily loan group
- Available funds cap risk: investor perspective
- Impact of A/B notes on waterfalls.
Structural safeguards
- Establishing, maintaining and monitoring reserve funds
- Access to liquidity and limitations
- Impact of interest shortfalls
- Hedging to mitigate interest rate risks
- Understanding defeasance
- Types of additional debt
- Issues related to pari passu loans
- Loan level covenants.
Legal safeguards
- Isolation of assets - securitization structures survive originator bankruptcy
- Reps and warranties – reliability / risks when the originator is not solvent
- Rights of the controlling class and potential conflicts.
Market conditions
- The state of the commercial market and the impact of the recession
- Illiquidity and the impact on spreads
- Valuation issues
- Resecuritizations
- Impact of government programs: TALF & PPIP.
MONITORING PERFORMANCE
- Surveillance: evaluating and predicting collateral performance
- The role of the servicer in mitigating losses
- Assessing credit enhancement levels in context of recent collateral performance
- Understanding loss allocation and the impact on tranche performance
- Credit trends: assessing rating migration risk.
Workshop Times
Below are typical timings for our courses; upon registration we shall advise you if these have changed.
Breakfast: 8.30am
Course Start: 9.00am
Course End: Between 5.00pm and 5.30pm
Lunch starts between 12.30pm and 1.00pm, and lasts no longer than 1 hour.
Short breaks of 10 - 15 minutes are taken mid morning and mid afternoon.
*Terms and Conditions:
This applies only to two people from the same company registering for the same course on the same dates at the same time. The on-line registration form must be submitted 8+ weeks before the course start date. This offer is only applicable to new registrations, it cannot be applied retrospectively to existing participants and no refunds will be given. It can not be used in conjunction with any other offer.