CMBS super seniors 50% subordination

The State of Commercial Finance - Spreads tighten for "super senior" AAA CMBS, but at these yields "15%" the CMBS market will remain closed for new origination and refinance.

Spreads on AAA CMBS tightened substantially last week as two investment banks had launched a pair of resecuritizations involving late-vintage bonds. Those two deals, by Morgan Stanley and Banc of America Securities, respectively, involved the structuring of super-senior AAA bonds with 50 percent subordination. They sold the bonds for higher prices than their prevailing prices due to higher subordination. A junior piece of the re-remic was priced at a yield of 15 percent. The all-in spread would be 675 bp over swaps, according to analysis by Bank of America's CMBS research team. A similar $368 million deal from BofA, saw its senior tranche price at 550 bp over swaps.