Concerns grow about CRE CDOs carrying below-market rates

04/12/2012 | Wall Street Journal, The

The vast majority, about 80%, of commercial real estate collateralized debt obligations hold floating interest rates, a Deutsche Bank report notes. Many of these rates are below-market, which has bolstered their performance. If borrowers seek new financing, however, these investment vehicles become more risky. "Here is a situation where loans which are inherently riskier are benefiting tremendously from the floating-rate component," according to the bank's research note.

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Wall Street Journal, The

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