CMBS conduit loans rates are declining in concert with the powerful rally in the CMBS market that began in January. Strong demand for CMBS continues based on the results of a $925-million conduit offering led by Wells Fargo and RBS that priced on Friday, March 22. All but one of the investment-grade classes in the Wells-RBS deal priced at or below spread guidance. The benchmark class of the Wells-RBS deal, encompassing $385 million of super-senior bonds, sold with a spread of 105 basis points (BP) over swaps. That was in line with price talk and matched the spread at issuance on equivalent paper from the $1.1-billion conduit deal that Morgan Stanley and Bank of America (BOA) priced a week earlier.
Wells and RBS placed the rest of the super-seniors with spreads 5-10 BP tighter than price guidance. The junior triple-A class priced at the low end of guidance at 140 BP. Similar bonds in the Morgan-BOA deal priced at 155 BP at issuance. The double-A bonds in the Wells-RBS deal priced at 225 BP, down from price talk of 240-250 BP. The single-As went for 350 BP, after being talked at 350-360 BP.
“After the Wells-RBS deal priced, CMBS originators scurried back to their desks to re-price downward existing loan applications,” said Michael D. Sneden, Executive Vice President of ValueXpress. “We received our first sub-300 BP spread quote shortly thereafter. That puts the interest rate at about 5.25% for the CMBS conduit borrower, which is very attractive.”