Sector developments and company hires

‘Meaningful’ layoff exposure for TAMI CMBS leases
KBRA has identified 266 US CMBS lease exposures to 45 large companies that have recently announced combined layoffs of 216,905 white-collar employees. The rating agency focused on companies announcing layoffs of at least 1,000 employees from 2022 through mid-March 2023, among the universe of nearly 5,700 office and mixed-use properties in CMBS 2.0 conduit and single asset-single borrower/large loan transactions.

Together, these leases account for 33.3 million square-feet across 245 properties, or an average of 29.6% of the respective property square-footage. The properties secure US$35.4bn of CMBS loans on an allocated property balance basis, equating to approximately 5.6% of the currently outstanding CMBS 2.0 balance.

The analysis reveals that tech, advertising, media and information (TAMI) industries represent a meaningful portion of the layoff companies. Large tech companies - such as Amazon, Google, Meta and Microsoft - account for 18.6 million sf (55.8%) of the exposure.

The largest exposure is to Amazon, representing 38 leases across 33 properties totaling 7.5 million sf of leased space and collateralising US$3.2bn of property allocated loan balance. The largest single lease exposure is to Warner Bros Discovery, which leases 100% of the 1.5 million sf of 30 Hudson Yards, securing a US$1.4bn loan collateralising HY 2019-30HY.

Given the heavy TAMI exposure, the San Francisco, Silicon Valley and Seattle markets represent 15.8 million sf (or 47.5%) of the overall exposure to layoff companies.

In other news…

APAC
K&L Gates has appointed King & Wood Mallesons’ Stuart Broadfoot as a Sydney-based partner in its tax practice. Broadfoot has a background of working on cross-border taxation related to mergers and acquisitions, structured finance, restructurings and project finance.

The new recruit leaves his role as special counsel at KWM, after four years with the firm. He previously worked at Clifford Chance and EY Law Perth - then known as Norton & Smailes.

Prestige steps in to support auto ABS
The deteriorating performance of US subprime auto ABS PART 2022-1 has prompted the sponsor Prestige to make a capital contribution to support the deal. According to JPMorgan securitised products research analysts, Prestige plans a one-time contribution of US$3.1m (equating to 75bp of the original collateral amount) for the 17 April distribution date - covering the March collection period - to help build credit enhancement. In addition, Prestige will continue to forgo its monthly servicing fee – which it began doing in February – through the September collection period or until overcollateralisation is attained, whichever is earlier.

S&P stated that it will not take any rating action on the transaction at this time. However, it noted that while hard credit enhancement has increased from initial levels for 22-1, there has been little to no excess spread remaining after covering losses in recent months and that the lowest rated class E is heavily dependent on excess spread. The rating agency says it will continue to monitor the transaction.