Wells Fargo & Co. (WFC:US) and Royal Bank of Scotland Group Plc (RBS) plan to sell about $864.9 million of bonds tied to commercial mortgages as Wall Street contends with wider relative yields that can curb profits on new deals.
The transaction is backed by 61 loans on 80 properties across the U.S., according to a person familiar with the offering, who declined to be identified because terms aren’t public. Retail buildings account for more than 57 percent of the pool, the person said.
Lenders hold commercial mortgages for several months before selling them as securities, which means swings in values as they accumulate debt can reduce profit margins and thwart efforts to boost sales. The extra yield investors demand to own top-ranked commercial-mortgage bonds rather than Treasuries climbed 15 basis points to 201 basis points this month as the European debt crisis rattled markets, according to a Barclays Plc index.
Goldman Sachs Group Inc., Citigroup Inc. and Jefferies Group Inc. sold top-ranked debt that matures in 9.19 years to yield 140 basis points more than the benchmark swap rate on May 18, the widest spread of 2012. A basis point is 0.01 percentage point.
Banks have arranged about $10 billion in CMBS offerings this year, compared with $28 billion in 2011, according to data compiled by Bloomberg. Issuance is down from a record $232 billion in 2007.
Forecasts for 2012 issuance range from Wells Fargo’s $25 billion to Credit Suisse Group AG’s projection of as much as $45 billion.
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