Big box retailer JC Penney, which is still struggling, currently has the largest tenant exposure in legacy CMBS. This weighed heavily on the performance of CMBS this week, which added more pressure to a market already teetering with uncertainty due to a government shutdown.
Nearly 420 CMBS loans accruing USD34.4 billion were tagged to JCPenney. This was confirmed by research from Morgan Stanley's head of CMBS research Richard Hill.
This amount is double the assessments of JCPenney's exposure. This includes the so-called 'shadow exposure', where the retaller is a tenant at a mall that is in the CMBS deal but is not included in the loan collateral. CMBS is the acronym for commercial mortgage backed securities.
The recent move by JCPenney to raise nearly USD810 million in capital to improve its liquiidity had sparked rumors of possible bankruptcy for the retailer, which at the very least may include store closures. These would have a negative effect on CMBS deals that are collateralized by loans on the chain stores of the company.
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