Monday, September 21, 2009

European commercial property owners face debt time-bomb

By Anousha Sakoui and Daniel Thomas

European commercial property owners face a wave of complex debt refinancings and restructurings that pose a threat to the sector, according to bankers and industry groups.

Senior bankers and industry representatives in the UK used a meeting with the Bank of England in the summer to highlight the problems caused by billions of pounds worth of debt that needs to be refinanced or has breached banking agreements.

They are particularly concerned about the amount of European debt packaged in complex bonds, known as commercial mortgage-backed securities (CMBS), where restructuring has proved especially difficult and highlighted this issue to the central bank for the first time.

The group, which includes senior bankers and representatives from the British Property Federation, the Royal Institution of Chartered Surveyors and the Investment Property Forum, believes the CMBS market remains important to the property sector.

It discussed whether a central bank guarantee could be used to underpin the debt issued, or whether the real estate investment trust market could be used by banks to offload their loans.

European commercial property owners face debt time-bomb