CMBS the new baby in the bond market
The real estate sector which was reeling under the pressure of cash crunch in the last few years has come up with many financial instruments to raise funds. The real estate firms that, otherwise, might not have attracted a strong rating, have managed to pick up around Rs 1,240 crore at a lower cost. This was done by issuing commercial mortgage-backed securities (CMBS).
This is more than half the funds raised by the real estate firms, across instruments, of Rs 2,156 crore in 2014. Hence we can rate this instrument as a successful one. DLF, for instance raised Rs. 525 crore and Rs. 375 crore, respectively through its subsidiaries DLF Emporio and DLF Promenade. This was done at a coupon rate of 10.9 % through the CMBS bonds.
These bonds have a maturity period of 5.5 years; hence the average investor is attracted towards them as the lock-in period is not too high. In 2013, the Delhi-based real estate developer DLF Limited had raised Rs. 750 crore, at a higher coupon of 12.5 % through non-convertible debentures (NCDs).
The standalone credit rating of DLF’s subsidiaries from CRISIL is A and A2+. Hence the risk to the investor is quite low. However the bonds issued through CMBS instrument is rated higher at AA with a stable outlook.
Source- The Financial Express
commercial mortgage-backed securities, DLF Promenade, DLF's subsidiaries, Non-Convertible Debentures, Real estate firms, Real Estate Sector
