Payment hiccups push GBP53m Credit Suisse loan to default

Fri, 29 Aug 2008

The collapse of furniture retailer Ilva has forced a £53m property loan made by Credit Suisse to go into default .

The loan default would be one of the first to be caused by interest payments being threatened by lack of income, rather than loan-to-value covenants being broken because of a drop in property values .

The two tenants of the properties securing the loan - Stobart Group and Innovate Logistics - were forced into administration in July.

As a result, neither tenant has been able to meet rental payments, meaning the companies that service the loans – intermediaries that act as a form of insurance – have been forced to step in to ensure interest has been paid.

The loan default means that owners of the bonds secured by the properties are likely to face losses, and could force Credit Suisse to write down the value of the loan .

The £53m Credit Suisse loan was part of a larger £739m commercial mortgage-backed securities (CMBS) issue called Titan Europe 2007-3, in which 20 loans, backed by 35 properties across Britian, were packaged up and sold to investors as bonds .

According to analysts, the financial market could be hit by more losses for those who have issued commercial mortgages or bought CMBS.
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